Aug 5, 2010
Last June Iker Marcaide graduated from MIT with an MBA degree from the Sloan School of Management. His graduation present? Traveling to Barcelona to collect €20,000 for winning the HIT Global Entrepreneurship Competition as part of the HIT Barcelona World Innovation Summit and having his young company peerTransfer named the most promising early-stage startup by a panel of judges from such respected investors as Kleiner Perkins Caufield & Byers, the Mayfield Fund, CMEA Capital, Highland Capital Partners, and Flagship Ventures.
Iker’s idea for peerTransfer was born in his hurdles of trying to pay his tuition even before his set foot at MIT. Let’s hear Iker’s story, his thoughts on the important industry he is attacking, and his insights on starting a company out of school.
MITER: Tell us about peerTransfer and how you got it started.
Iker Marcaide: In 2007 I had to relocate from Spain to the UK and experienced for the first time just how cumbersome and costly it was to send money from one country to another. Then I moved from London to the US to go to MIT and transferring money was even worse: my tuition, which was going to be paid by my sponsor, got lost somewhere between the two continents for something like 2 months, painfully forcing me to have countless emails exchanged between MIT, the sponsoring foundation and myself. So I said to myself, “There must be better way of doing this.”
At MIT I also met people that were returning to the UK after studying at MIT and needed to send their money back. And I thought, “Well, this is kind of silly, we both are paying these fees and getting bad exchange rates when instead we can just avoid the flow of money internationally by reconciling our opposite flows.” That´s how the idea of peerTransfer was born – essentially, as a new kind of money transfer network that saves money for its members.
MITER: This is really amazing how the very experience of actually traveling to MIT and to another country planted the idea in your mind…
Iker Marcaide: True! The idea really clicked with me because I had personal insights into the problem. Plus, this was a real pain for customers and my value to them would be clearly visible – save $300 when sending $10,000 by just spending 5 minutes in our website. Also important, I felt the project was disruptive enough and wasn’t just a slight increment that’s difficult to sell.
MITER: And after this initial stark, how did you decide to finally move forward with peerTransfer?
Iker Marcaide: I think you can start a business in three ways: You can look at the macro level, the trends and context and figure out what specific product or service you can fit in there that makes sense. Second, you can develop an incredible technology and then figure out where it would add value. Or, you can start from a specific customer problem, as in my case, and then determine whether enough people share this problem, so you are able to make a business out of it.
I went out and talked with a ton of people, which made it clear to me that the pain indeed was there. So then I began figuring out how I could build a business around it. I met with people from the industry who knew more than I did, which was very useful (some of them ended up in my advisory board) and I also did a lot of reading, documentation and interviews to get up to speed. This led to a point where I had figured out the economics of the business – I knew I could profitably add value to my customers. That created for me a point of no return.
MITER: Certainly, international money transfer is a big trend in our day and age of globalization. What other trends do you think are helping your startup? In essence, how is this market changing today that’s giving you an opportunity to build peerTransfer into an impactful company?
Iker Marcaide: I think with the current financial crisis people are somewhat more cash-conscious and are willing to try new things that will save them money. We do not sell investments. We basically say that if you come to our website instead of going to your bank to do international wires, you will save a lot of money, today.
MITER: You incubated peerTransfer at MIT. In your view, what are some of the best practices for starting a company while you’re in school?
Iker Marcaide: With so many international students, MIT was the perfect place to start peerTransfer. I also think that being in school creates a very low risk scenario to take on new projects. It is like the clock is not ticking until you graduate; you have ample room to try out new things. Just looking at the number of startups out of MIT Sloan this year – 40! – can you imagine just how many projects were actually explored but not taken forward?! Hopefully, you as a student can take part in some of these entrepreneurial projects (as part of the New Enterprises class or the MIT 100K competition, for example) and see if it gets you excited enough to move forward. There are people that graduate and do not take regular jobs but still do not have a solid start-up idea in process. Others, like me, just use the time at MIT Sloan to get an idea off the ground. As I have heard Bill Aulet say, the goal is to have you come out of MIT with some momentum or “escape velocity,” as he calls it, so your company is more likely to succeed.
MITER: Did you take the New Enterprises class or participate in the MIT 100k competition?
Iker Marcaide: Yes, but peerTransfer wasn’t even the best project in the New Enterprises class. However, the class helped us improve it. We weren’t also the best project in the MIT 100k competition, but it helped us improve and now we have just won a prestigious global entrepreneurship competition and were named as “most promising start-up in the world”. I doubt that we could have achieved that without the suffering and disappointments from the earlier steps that made us rework our business and reach some “aha moments”. What’s really important is not what you achieve at each step, but how each step helps you take the project to the next level.
MITER: On the flip side, what’s difficult about starting a company while in school?
Iker Marcaide: To get things done someone has to actually do them. This is something that I have developed a great appreciation for with peerTransfer. This sounds silly, but it means that you need to make trade-offs and sacrifices. In my case, I was doing two full-time master’s degrees (MBA plus M.S. within the Leaders for Global Operations program) and was starting peerTransfer. That left me unable to do many other things. In the end you can be at MIT Sloan or anywhere else but no one is going to do the work for you. The MIT Entrepreneurship Center is fantastic and gives a lot of support but it is still you to make your project thrive or die.
Then, something else to take into consideration is that people might have different expectations out of projects done together. For instance, many teams at the 100K actually do not turn into companies or keep the same founding team. First of all, choosing the right co-founder is not the result of just having a coffee together. It is much, much more than that, and the 100k helps to love or hate your team mates, which is good to learn soon. Then, there is the question of who owns the company when there is, in fact, no company. Having clear expectations stated upfront clears some of these issues.
MITER: What’s next for peerTransfer?
Iker Marcaide: We are still very early on our very long journey. Our short term plans revolve around establishing our European office to be operational over there (right now we are only operational in the US), making the company financially stronger, which will enable us to expand the team with some key hires (we expect to hire around 8-10 people in the next 6 months), and establishing some key partners who will use our product.