The greatness and struggle of learning the hard way

While some measure the importance of individuals by the size of their enemies, the reality is that one can also judge it by the number of bankruptcies or simply by how many times they've attempted to make something work and refused to give up, no matter the odds. -Oh, I see you coming, Ramón. Is this about sales psychology ? No, it's not. We're going to talk about my personal epic fails in startups and businesses.

Shhhhh....(those that I used to share only with my wife and parents)

Yes, some fail more than others, but everyone fails. That's the reality. Don't let the fancy financing rounds or the exits ruin your dreams, because you won't raise rounds or exit a company if you don't fail a lot (or a couple of times)!

My first BIG fail:

In 2007, during my tenure as the founder of South Sun Properties, I had a German customer interested in purchasing a €3,500,000 house in Mallorca (Santa Ponça). The seller was also German.

Once all was agreed upon, we were at the notary signing the deal when, in the midst of it, the seller said to the buyer, 'You'll get the keys in three weeks after I'm done with the move.' The buyer replied, 'My holiday starts in two weeks; I need to be there by then.' The seller didn't seem pleased upon hearing that and insisted on needing three weeks. The buyer retorted, 'I'm not spending almost 4 million to wait for you to move slowly. I want my new house by then, and there's no more discussion.' And then BOOM: the seller said, 'Okay, then I won't sell my house,' and he stood up and left the room.

I tried everything, from arranging for two moving companies simultaneously to speeding up the process by offering a week's holiday at the best hotel in Mallorca to the buyer. I even offered to cover the moving expenses from my commission. Nothing worked, and the deal was lost due to a clash of pride! I was devastated because I had nearly €150k in my hands, only to see it fall apart right in front of me. What did I learn? Always review and go through a checklist with both customers before proceeding with any purchase.

That was the small fail; the big one is yet to come. As I gained more experience with home deals, I also wanted to exert more control over the market. The way to do it was to make option payments on homes for sale. What does this mean? It means that when a house goes up for sale, you agree with the owner to PAY for the exclusive rights to sell it within a period of time. You charge as much as you think you can over the owner's desired price. If you don't sell it within that time, you lose your rights. The magic is simple: if somebody says 'I want one million for my house,' your commission in a normal situation would be 5% (50k). If you believe you can sell it for 1.2 million, you could end up making 200k minus the cost of exclusivity, which varies depending on time and the amount. For a house of 1M€ at that time, it was around 2k-3k per month.

I had a meeting with the bank, and they said I could borrow approximately 200k as a credit line, in total and in stages. So basically, first, I would borrow 50k, then another 50k, maybe return 45k in the middle, and ask them again, etc. What today we could call in the startup ecosystem "CAAS" (credit as a service)! It worked pretty well for 8 months until the 15th of September 2008. Remember what happened that day? Lehman Brothers crashed, along with the entire credit swaps ecosystem. I was worried, so I went to the bank, and they said, 'Ahhh, don't worry; that's in America, and it won't happen here at all.' I believed it, and month after month, the sales pace slowed down until one day, all the option contracts I had in place expired, I was technically bankrupt.

What did that mean?

1- Nobody was buying homes due to the panic event.

2- The housing market was plummeting because there were too many new and old houses (so I couldn't sell at a higher price to justify buying the exclusive rights to any property).

3- The banks started to withhold loans to buyers.

4- The economy shrank.

5- People started losing their jobs.

6- People started not having money to pay loans, credit lines, credit cards, and BOOM, the disaster hit Europe.

What happened to me?

Well, I was 21, almost 22, and I experienced my first bankruptcy. I couldn't pay the bank the 200k, plus other associated costs and expenses due to the event. Now, take a deep breath and read it again. For goodness' sake, I was just a child!!! Looking back today, I'm really proud that I learned how the world really works at a very early age. It took me almost 8 years to get back on my feet (Totally) But in the middle build several businesses too, be aware of this articles because I will tell every single experience here :)

Where did all the money go?

Credit swaps played a significant role in the turmoil that rocked global markets. Imagine this: You have a friend who promises to cover your losses if your investment goes sour. In return, you pay them a fee. That's essentially how credit swaps worked. They were financial agreements where one party agreed to compensate another if a specific financial instrument, like a mortgage-backed security, defaulted.

Initially, these credit swaps seemed like a good idea. They offered a form of insurance against potential losses. However, when the housing market collapsed, and mortgage defaults surged, the true extent of the problem emerged. Suddenly, those who had issued credit swaps found themselves on the hook for billions of dollars in losses.

The complexity and interconnectedness of these credit swaps magnified the crisis. Institutions that had invested heavily in mortgage-backed securities, relying on credit swaps to mitigate risk, found themselves facing massive losses without adequate protection.

There was only a few people who made money that day in history of mankind, the most popular one was Michael Burry , he made 100MM $ for himself, and another 700MM$ for his customers, predicting the crash.

In the end, the financial crisis of 2008 served as a stark reminder of the dangers of overly complex financial instruments and the importance of understanding the risks involved in financial markets. So please, be careful with your choices, practice risk management, and try to validate your ideas without a heavy dependence on external credit. But above all, never risk (financially) your personal name for any project, this by the way doesn't mean I'm not guilty, we are all guilty of all our actions.

Thanks for reading! now you know me a bit more for real, no Linkedin announcements and happy news only.

wwww.ramoncrespi.com / ramon@ramoncrespi.com