Entrepreneurial success stories: Ericsson acquires Genaker
We interviewed its founder and CEO, Miquel Teixidor.
On October 7, 2020 we started the first B-Talks program, where successful entrepreneurs who have sold their companies share their experiences and anecdotes with the aim of helping new entrepreneurs and inspiring them to move forward.
In this first session, we were pleased to have Miquel Teixidor, founder in 2003 of the company Genaker (recently acquired by Ericsson). Miquel had a nice interview with Luis I. Cortés, executive at Red Hat, partner at Bcombinator, business angel and advisor. Genaker develops advanced group critical communications solutions, based on real time IP multimedia as push-to-talk, and has commercial operations in more than 15 countries around the world.
Miquel offered us a fascinating session, starting with his startup, his business model, financing, what were his best decisions, the process of selling his company, and even if at some point it crossed his mind to throw in the towel.
"What you plan to do on the first day never happens," explains Teixidor. Genaker was born with eight employees who decided to create a consulting and application development company. It was 2003 and with the mobiles of that time, it was only possible to send SMS. "We had a super innovative company and we mistakenly thought that this was prehistoric," he says.
Change of business model
Moving from executing service-based projects to developing your own product became your destiny. "Either we did this or we died. We decided to continue", says Miquel. The word reinvention and flexibility is in the entrepreneur's DNA. Genaker's team saw that the challenge of developing a project-based company was difficult to scale and required constantly starting from scratch, so they decided to focus on creating a product.
"We had already started doing projects like walkie-talkie (push-to-talk), but using the smartphones. We were ahead of the market and at that time I didn't think that the future could be that," says Miquel.
Genake’sr team did a series of brainstormings to know what they were good at and how to leverage their strengths. "We saw that push-to-talk was a present and future technology that could replace the critical mobile communications used by the public administration: police, firemen and the critical industries: energy companies, paper, transport".
These sectors needed group communications that were in real time. "This has become a standard that is being adopted in the market, which is the future and present of telecommunications".
"We've been lucky, but we've also worked hard since day one. Genaker obtained public support in Catalonia through ACCIÓ and La Salle, then they moved to a state level (Ministry of Industry) and in the last years to a European level.
"What is investment in development we have almost always achieved through public funds and the sales we manage to make (the sales part did not start until 2014). In subsequent years, thanks to being able to show the company's balance sheets, we have also had access to loans from traditional banks with good conditions," says Teixidor.
Genaker did not turn to venture capital, although many times they thought they had to: "As we were in a startup and you have so many fronts every day, we were never convinced to present a business plan that could convince a venture capital in the early years. We were dedicated to making projects and it is very complicated to climb. At the product level we made a credible business plan, but we had strengths and weaknesses and one of the weaknesses was not following the plan and seeing what happened day by day," he says.
The last chance they had was in 2014 when they applied for the first project at European level and received one million three hundred thousand euros. "That was our last push that allowed us to make the rest of the way to the sale".
Tips for innovative companies that want to apply for grants
Miquel claims to be a firm believer in grants and acknowledges that without them he could not have moved forward. "If you think you have a differential technology it is because you have worked on it, to ask for grants you have to do the same", advises Miquel.
"People who have resources do a lot of networking, we did zero. We introduced ourselves to each other in the open". In the case of Miquel and his team, they have gone through this path when they were older, so "experience is a degree", he acknowledges. "We have relied on people who could help us, you always have to go hand in hand with someone who is an expert".
On the other hand, it assures that the most basic thing is to know how to explain your project very well. "The writing itself, the way you write it, that everything makes sense. Let there be no inconsistencies," he warns.
In addition, he says that when you apply for a grant of this type, you are asked to tell what you are going to do, why you think your product/service has a place in the market and how you are going to finance it. "You have to have very clear ideas, know how to always respond very well to the script and dedicate time to it," he insists.
Teixidor also says that although his technology was very important, "what they are going to look at most at the time of the decision is the team behind the project, and whether it is capable of developing and executing what you have described". And he continues, "because in the end the resources can be obtained from anywhere and the clients come out looking for them. But if the team is not able to do what you have said... For me it's the most important thing", Miquel remarks.
Keys to success in the work team
Miquel confesses that in 18 years they have not had any serious problems, and that the relationship with the team was based on trust and few discussions. "Those of us who have been in charge, have been complementary, and when one was in low hours there was another who helped. In general we have had quite motivated people".
Even though it is normal that along the years, with crisis in between, there were changes, there were also incorporations and rotations that allowed each person to search inside the company what he really wanted. "I think it is very good that there are rotations, because at every moment the needs are changing and you have to adapt," he explains.
How to get through a crisis
Teixidor assures that there were moments of real scarcity of funds and remembers Brother Daniel de La Salle, when he told him: "If you do things as you should do them, sometimes with sweat and tears, when you reach the precipice the hand of God always comes". Miquel admits that on more than one occasion, at the last breath, a window was opened that allowed Genaker to overcome the hole.
He also points out that in those moments when he thought about throwing in the towel, there was always someone who encouraged him to continue and gave him an impulse to finish the problem solved. "Some companies have to give up, but others have given up early, and many would have reached their goal if they had waited a little longer. And he emphasizes that the presence of an external person, a trusted consultant, in those hard moments knew how to encourage him. And he finishes: "In difficult times you will go from dying, to dying of success".
The best decisions
The founder of Genaker admits that one of his best decisions was to ask for European support and to bet on the product. And although he confesses that at the beginning he didn't believe it completely, when they managed to develop their vision and long term objectives, they found an alignment between reality and their expectations and saw that, finally, they had achieved it. "Believing, not giving up, persisting in what you are doing" is one of the keys to success, according to Teixidor.
Genaker's sales process to Ericsson
The founder admits that his case was unusual. Genaker began to grow very quickly and it would not have been possible to keep up with that pace if there had not been a sale or merger.
For the application they had developed to work properly, it was essential to connect to 4G and 5G networks, so it was ideal to reach an agreement with a company that was dedicated to networks.
Once again, the experience was a degree. Their network in the telecommunications sector made it easy for them to contact various companies until they reached Ericsson. Although Genaker was looking for only one partner and the relationship was initially a supplier/customer one, Ericsson saw an opportunity. The multinational bet on this market and on Genaker's product, and proposed to distribute the solution globally.
In late 2018 and early 2019, Ericsson won major contracts in the United States and increased the need to better control the product provided by Genaker. Although Teixidor's intention was not to sell at first, the startup also saw an opportunity to approach Ericsson.
The first part was the letter of intent (LOI), where the buyer made them an indicative offer, conditioned on the fulfillment of a series of criteria. This initial phase of negotiation and signing of the letter lasted about three to four months.
The second step was due diligence, which is the process of gathering and disclosing relevant and reliable information about the buyer, which would be comparable to a comprehensive audit of all aspects of the company. In this phase, Ericsson required very detailed information from the company, involving legal and financial advisors. For Genaker, this was a very laborious process that lasted four months, and put a lot of time pressure on its team, much more limited than that of the multinational.
The total process took about nine months, after which the agreement was closed in March 2020, when Genaker became 100% part of Ericsson.
The day after
Currently Genaker's team is moving to Ericsson's offices and Miquel Teixidor has become Senior Advisor at Ericsson. "It is an honor that Genaker becomes the base of Ericsson's global MC-PTT (critical communication) offering. Together we will leverage the best of both companies, and we are excited about this opportunity to offer customers around the world our state-of-the-art solution.