The valley of despair
I know this sounds like a cliché, however, almost 10 months ago I did the unthinkable. I quit my job, said my goodbyes and moved from Germany to Caracas, Venezuela. Yes, that is right: VENEZUELA. Home sweet home.
This is the story about how my entrepreneurial journey has gone so far and a small glimpse into what doing business in Venezuela really is like.
PHASE I: Uninformed Optimism
Although it does not look so bad in the picture, last time I checked, almost 7 million Venezuelans had moved out of the country. That is “out” not “to”. I had decided to move to one of the most corrupt and unsafest countries in the world. A place where ordinary people are on a daily struggle (or “lucha”) to make ends meet. But all I could think about was the underlying potential that the country has to offer. Venezuela has the largest proven oil reserves in the world, it is a tourist paradise, and for better or worse, it has missed out on the last 15 years of technological and business-related development. Venezuela’s GDP used to be 450 billion USD. Today it is estimated to surround 50–70 billion USD. I needed to be part of that recovery. My plan sounded simple, move back early, and be one of the first ones on the ground when things start to go up again.
And with that brave step, I started my entrepreneurial career in one of the most challenging countries in the world. I had a plethora of ideas and a cofounder with whom I thought we could succeed in any business venture we decided to focus on.
However, nothing went according to plan. Just a few days after being back home my partner struck me with the following bomb: “Hey man we need to talk…”. Oh f*ck. “I got an excellent job offer, and I decided to take it”. My reply went more or less like this: “Man if you think that is the right step for you, go ahead. I can totally understand. However, we did not come here to employ ourselves, just keep that in mind.” Internally, on the other hand, my thoughts went more in the direction of: “Ohhh f*ck, now what? Where am I going to find someone to build a business with? I moved back, because I thought we where building something together!”.
To found a company with a good friend is one thing, but to found a company completely on your own is a completely different one *anxiety strikes*. But like in the movies, a long-lost cousin appeared and asked me to come and work with him at the coworking office he was about to move to: Wave Tech Hub (picture below).
This was probably the best decision I have made so far. The hub is not only a brilliant melting pot where top-notch startups find a place to network and get their message out. It is also the place where I met amazing human beings who made my transition into the Venezuelan way of doing business a little easier.
PHASE 2: Informed Pessimism
And it was here that my entrepreneurial “Teufelskreis” began. Alex Hormozi describes it in a beautiful way. Entrepreneurs go through 5 phases, in the first phase “uninformed optimism” we decide to start a new business venture based on the limited information we possess. The second phase becomes “informed pessimism”, this is the phase we start realizing “why nobody had done this before”, and we start realizing what the problems and issues of our idea actually are. This phase very quickly transitions to the third phase, “the valley of despair”. This is the moment when we are not able to see our way out and start considering other options. Maybe that AI idea was not so bad after all, or hey! Jaime also has this cool startup idea, why not join him?
This is the make-or-break moment, if you decide to go ahead and push through, you enter the fourth phase “informed optimism”, and you start grasping the full image and understanding how to manage your market. And then you enter the final phase “achievement of the goal”.
But if you decide to try out something new again, you enter the entrepreneurial “Teufelskreis”. Doomed to repeat the same mistake again and again.
And this is a lesson everybody knows and tells you about! FOCUS! FOCUS! Do not give up! However, I believe entrepreneurs are particularly likely to be affected by this change in focus. In the end, we are intrigued by different business ideas and easily fall in love with the potential of shaping a new world through whatever crazy idea we just got in the shower, at the bar, or a friend just told us about.
This way I was able to find myself in 2 (almost 3) founding teams in the brief span of 3 months.
The first idea was simple, at PENSATII we wanted to copy what HYGH Tech was doing in Berlin and put a screen on every single bakery, convenience store, and hairdresser in Caracas and sell the screen time as marketing spots. In a span of just 4 weeks, I had a team of partners, a cofounder, and a business plan. However, we quickly came to realize, that the substitute competition was tough, online marketing impressions were just way too cheap, and on the other hand, we started seeing a downturn in the Venezuelan economy which undoubtedly would bring marketing expenditure cuts with it. Oh! And we cannot forget the Venezuelan bureaucracy. Every single one of the marketing spots had to be previously approved by the local government.
So very quickly I moved on to the next BIG thing: AI! At ZASS we wanted to challenge Microsoft Copilot and offer you CHAT-GPT for your data. It was an amazing idea just at the right time, in a matter of days, we already had interested investors. However, we struggled to deliver a tangible solution in the months that we worked on the project. It was a little chicken and egg conundrum. We needed money to focus full-time on the idea, but we also needed to develop a better prototype to be able to raise cash fast in a very competitive environment. Moreover, everybody had different projects going on at the same time, it was a fully remote startup, and somehow we had lost the impulse. Thus, at the moment things seemed most difficult, we decided to bury the project instead of pushing through.
PHASE 3: Valley of Despair
Lucky for me, at that time the family business started showing some promising signs, with old customers knocking on the door again. So quicker than Taylor Swift changes partners, I joined the family business. A company founded by my grandfather, which at some point had more than 30 employees and sales representatives and was present in every important industrial hub of the country. We represent German companies in Venezuela and commercialize their products in the country. I am talking about really good German engineering products, valves, engines, heat exchangers, grinding and cutting discs, and the like. It is not as glamorous as AI or marketing. But hey! We do not choose our family, right?
If I thought, founding a new business was tough, entering a 60-year-old family business is even tougher. You get all the responsibility of being an entrepreneur but you also have to deal with your immediate family being your boss. Like all other businesses in Venezuela, we were hit pretty badly by the economic crisis. However, the core team prevailed, and the values that had set us apart and made us prevail were still intact: Loyalty, perseverance, and high quality.
Nevertheless, like anywhere, there is still room for improvement. And it is only normal that is it the responsibility of the new generation to bring the needed innovation to the table.
Analyzing our current processes I realized how horribly bureaucratic and costly operating in Venezuela actually is. My friends in the Hub always laughed while I complained, but I am going to name a few examples of the ridiculous laws I encountered.
Contribuyentes especiales: Big businesses (in Venezuela anybody making more than 10.000 USD is a big business) are designated special contributors and are obliged to retain 75% of the VAT of all the purchases they make. Moreover, they have to report and pay VAT tax on a biweekly basis. (just wtf?)
ISLR (impuesto sobre la renta) adelantado (1%): Contribuyentes especiales also have to pay 1% of their sales (top-line) on a biweekly basis as part of an advance on their end-of-the-year-taxes. Sorry, I thought I paid taxes on profit when I made a profit.
IGTF: You have to pay 3% taxes if you perform a transaction in any currency that is not the bolivar. This tax is not deductible as an expense.
IGTF on withdrawals: If you withdraw any non-bolivar FIAT from your bank, you pay 3% taxes. However, if you go out and pay anything with that FIAT, you would pay 3% IGFT again. That means that if I take out dollars and use them, it costs me 6%!
And now the cherry on the top, VAT when importing: This one was the most complicated to grasp, but let us give it a try. Whatever, object you import or sell, you have to pay 16% VAT TAX. So far so good. However, because most/all of our clients are contribuyentes especiales and retain 75% of the VAT, we miss a part of that VAT in our cash flow.
Oh and I almost forgot, we have almost 400% inflation so far this year.
I welcome you to my Valley of Despair. After only 3 months in the family business, I was beginning to grasp the utterly complicated landscape we were facing. Moreover, sanctions were inhibiting us from transferring money abroad, our current banks did not have enough foreign FIAT available to pay our suppliers, and we did not have bank accounts abroad to receive payments from customers in FIAT. No bank abroad wanted to do business with a Venezuelan company. It was simply a mess. And I started thinking, do I really need to get through all of this? I could just get a new job, move back to Europe, and enjoy a more relaxed, less anxious lifestyle.
But honestly, am I going to quit again? It would be the 4th time in less than a year! There is no way. Coincidently, my brother sent me Hormozi’s video. And it made me think. For the first time, I was aware that I was going through the valley of despair again.
Thus, I started changing my perspective on the problems I was going through. And that made me start visualizing the future. How will the company look like when I am out of the valley of despair? What steps do I need to take, to get out of here? And thus the anxiety diminished and the problems and the market got clearer.
PHASE 4: Informed Optimism
I think, now I realize what entrepreneurship is really about. It is about grinding, day in and day out. It is tough, it is risky, it makes you vulnerable, and it is just a lot of work. Just listen to what Jensen Huang, founder of NVIDIA, has to say about founding a company.
But funny enough, I think I am destined for this. Taking responsibility, making decisions, and acting on the ideas I believe are right, is the only way I want to work. And I believe my own company, even if my dad is my boss, is the best way to live this through. It is probably the steepest learning curve in life and I am very grateful for the opportunities I have had this year.
Nevertheless, I finally understand an old Venezuelan saying. When you ask somebody on the street how they are, a lot of the times they will reply: “Bueno aquí vamos, en la lucha”. Which roughly translates to: “Well, here I am, still fighting”. And that is the essence of all, you wake up and fight every day. Sometimes you win, sometimes you lose, but you still wake up the next day to fight another battle and solve another problem.
I now know the direction we are heading to, the challenges we still need to overcome, and how we are going to overcome them, one battle at a time.
PHASE 5: Achievement of the Goal
Nevertheless, I still disagree with Hormozi’s last phase “Achievement of the Goal”. I do not think there will ever be a final PHASE 5. Moreover, I believe the whole cycle will repeat itself again and again. Leaving the entrepreneur in the eternal “lucha” to overcome adversity.
I guess I could also just buy a bike and travel through the world right?
