Red Points has entered profitability. This was announced this Tuesday by the president and CEO of the technology company fighting piracy, counterfeiting, and online fraud, Laura Urquizu, who placed the entry into positive cash flow in this month of September 2023. According to the executive, this is a very relevant goal, as it will contribute to achieving the objective of the Barcelona-based startup: "to be a world leader in the protection of online fraud associated with fake products." "When you are cash flow positive, you own your future," emphasized Urquizu, who expects to close the year with a turnover exceeding 30 million euros.
In a meeting organized by Tech Barcelona, Urquizu highlighted the change in mindset that has occurred in startups as a consequence of the upward evolution of the CPI and sharp interest rate hikes, which have forced investors to recalculate their investments and be much more demanding in valuations and expected returns. "Until a year and a half ago, no one talked about profitability. Considering profitability in a startup was something tacky, like old-fashioned... the only goal was growth and raising more and more money. Now calculations are done differently, there has been a slowdown in valuations, which forces a rethinking of the entire ecosystem," the executive noted.
According to Urquizu, this correction has begun "to put things in their place" and allows for the realization that "a startup is nothing more than an experiment, so some work and others don't." "At some point, however, you have to stop being an experiment: you have to make money for your shareholders and to secure the future of the company," she explained. "In April 2022, at Red Points, we started managing things differently, measuring the profitability of every euro we invested, and today, I can already say that we are profitable, which makes me very happy. I feel very proud of the journey Red Points has made since I joined nine years ago, because we provide value to clients and because we are now a company that can finance itself," Urquizu pointed out.
"At some point you have to stop being an experiment: you have to make money for your shareholders and to secure the future of the company"When he took the reins of Red Points in 2014, he found a company "without a penny in the bank," a staff of only ten employees, and very few clients, so he went several months without being able to collect a salary. Today,Red Points has a staff of 280 people ---one hundred dedicated to technology and product development--- and offices in Barcelona, New York, Salt Lake City, and Beijing,with accelerated double-digit growth resulting from the fact that counterfeits, fake websites and profiles, and online fraud continue to grow, which is why more and more companies of all sizes are demanding their services.
The initial idea of Red Points was to eliminate illegal content on the internet and fight online piracy. However, with the arrival of Urquizu, the company pivoted, or rather broadened, its scope of action by also focusing on pursuing counterfeits ---one of its major clients is the merchandising division of Real Madrid---, that is, from the digital world it also moved to the physical. "That was our first great success", recalls the businesswoman, who points out that another key was to think from day one "in a global world" and not only target large companies, but especially small ones, which today make up 50% of their client portfolio.
"Spain was never the priority market, now it is, but we started globally, so when we reached 50 employees, we already had 20 nationalities in the company. Our official language has always been English," she says. The expansion of the field of activity and the commitment to improving its technology has been a constant at Red Points, which has extended to new business verticals ---one of the most emerging today is the fintech sector--- and now not only fights against pirate content download websites, but also detects fake commercial websites, fraudulent mobile applications, fake videos or fake profiles on social networks. "It's crazy how many fake websites pretend to be the real one and sell counterfeit products. Everything has become very sophisticated and, now, with artificial intelligence, don't even get me started", she testifies.
This "effective," according to Urquizu, technological platform is marketed through a software as a service (SaaS), that is, with contracts with companies that, recurrently, are victims of illegal replicas and online fraud. The use of this software for the detection and deactivation of fraud translates into the payment of a monthly fee to Red Points, with annual fees of between 30,000 and 50,000 euros in the case of small and medium-sized companies. At this point, he has also proudly explained that today 70% of clients come to them without having to go looking for them, a privileged reality that is the result of a decade of hard work and a "great effort" in building a "first-class" marketing department that is also supported by tools such as Google Ads and LinkedIn. In client acquisition, the generation of relevant online content through their blog and webinars is also fundamental.
Corporate and technological headquarters in Barcelona
Red Points' corporate headquarters are located in Barcelona, on Berlin Street, from where all technological and product development is also centralized. In parallel, the commercial and business development part is distributed between the Catalan capital and the United States, a country where functions are divided between the New York and Salt Lake City offices depending on the type of client. The Beijing branch, which is located in ACCIÓ's offices, has operational rather than commercial purposes, linked to the firewall imposed by Chinese regulation on the use of the Internet. The Asian market is still a pending subject for Red Points, although Urquizu points out that countries such as India, Japan, Australia, Korea, and Indonesia already constitute 8% of their client base.
Red Points closed its last financing round in November 2022, when it raised an additional 20 million euros in an operation led by the venture capital fund Iris and in which investors who had already participated in previous rounds, such as Sumit Partners and Eight Roads, also took part. Since 2014, when Urquizu managed to close a small round with business angels in just eight days, the company has raised more than 76 million, in Series A, B, C, and C extension rounds. "For now, we've stayed there. The fact of making money allows you to decide whether you want to raise more investment or not to go faster or slower; you no longer have that pressure to raise more money no matter what," she states. In her opinion, profitability cannot be demanded from a startup that has just been born, but "it's time to start demonstrating that you can be profitable from Series B onwards. Profitability shows you that the business model you have developed is viable," she explained to an audience primarily composed of young entrepreneurs.
For Urquizu, in emerging companies "nothing is easy," so it is vital that "execution is impeccable." "The companies that succeed are those that have made more hits than mistakes," she affirms, although she acknowledges that one always learns from mistakes, which must be recognized and known how to redirect in time. "I cannot stand elephants under the rug. They are not going to disappear by hiding them. When you have a problem, solve it as quickly as possible and in an effective way; don't hide it. Not letting time pass has always worked very well for me," she considered.
Succeeding and being able to choose financial partners
Another piece of advice: getting the financial partners right. "With an investor, who becomes your partner, you have to get along, no matter what," she warns. In this regard, she assures that she has always looked for Red Points "investors with whom I can understand each other, that is, people with whom I would go for a coffee and with whom I share the same values." "I have been fortunate to be able to choose among many candidates. I have rejected names with a spectacular pedigree in the United States because I knew I wouldn't get along well with that person on the board. It is very necessary to have a super-aligned board, and, for that, it helps a lot to have the right people. I can say that, fortunately, Red Points has a very cohesive board that has always supported me to the death. My experience has always been good," she highlights, after pointing out that the tech company has a gender-balanced board, made up of three women and three men, a rare bird in the sector.
"Fortunately, Red Points has a very cohesive board that has always supported me to the death. My experience has always been good"Member of the board of directors of the Cercle d'Economia and considered asone of the most prominent women in the Spanish technology sector, Urquizu also feels proud of the human team she has at Red Points, a quality that is key, for example, in attracting and retaining talent. "We have a CTO, Juan Galdeano, who is incredible; people are very happy to work with him, because he allows them to learn a lot. We also have to pay competitive salaries, but there is another outstanding factor: the project itself. At Red Points, we are dedicated to the fight against online fraud; we are a company with a purpose. Red Points' purpose attracts a lot", Urquizu concluded.
The executive regrets that the technology sector "continues to be a man's world," a situation she largely attributes to the fact that "it is extremely difficult for women to want to pursue technical careers." "We have a fundamental problem, but, fortunately, there are more and more women in the sector," she assures. She has also recently been able to confirm that there are still investors who penalize companies led by women. "I have invested as a business angel in a woman's startup after seeing how many men had told her that she was not capable of leading the company. I have contributed my grain of sand by telling her that she can do it. It's sad, but it happens," she reflected sadly.
"We have a fundamental problem, but, fortunately, there are more and more women in the sector"Laura Urquizu began her professional career in the consulting sector, in areas linked to digital transformation and process automation. His first professional achievements came at the former Caja Navarra, where he was offered the project to lead Eurecan,one of the first seed capital funds born in Spain. He faced the challenge without ever having heard of seed capital or what a startup. The success of this fund, endowed with 60 million and which invested instartupstechnological events in Barcelona and Madrid made her "fall in love with entrepreneurship and the entrepreneurial ecosystem," so she no longer wanted to continue working in banking. "I got the bug and moved to the other side," she recalls. After almost three years linked to Grupo Inspirit, founded by Didac Lee, "I left everything and started at Red Points." A bet that has clearly proven successful.