Eike made seven mistakes that every entrepreneur should avoid.

By Felipe Moreno, StartSe Eike Batista has finally been arrested. This doesn't end the entrepreneur's long and winding journey, but it adds another chapter to one of the most sensational stories in Brazil in recent years.

I've been following him for years. Before embarking on this world of startups, I worked for years at InfoMoney, where I covered Eike. Until I wrote a book about him., recounting the rise and fall of the richest man in Brazil.

I believe he's right to say he was a hostage of public power, driven to commit the irregularities he committed. I don't think it's right, but honestly, I see his side. If he makes a good confession and helps clean up Brazil and create a better environment, I think we can forgive him for this crime.

There are others, though. Eike is an example of taking various risks, of investing. But he ended up falling in love with himself. The best thing for Brazil is for him to pay for his crimes, reinvent himself as an honest person, take risks and prosper.

Here are 7 things Eike did that you, as an entrepreneur, shouldn't emulate.

1 - Selling PowerPoints

Eike had ambitious plans to build the largest business group in Brazil, creating a mini-Petrobras, a mini-Vale, a gigantic port, and an energy company. The problem, however, is that in his hands, all of this remained just plans. In the financial market, there's a joke that not even Bill Gates made as much money with PowerPoint as Eike.

Eike raised billions of reais on the stock exchange (OGX alone raised R$ 6,7 billion), but failed to deliver on his promises. He suffered greatly from investor pressure and even stated that he shouldn't have gone public, keeping his companies for himself or qualified investors for longer.

If he had gone public with the companies already generating revenue and projects underway, his financial gain would have been greater. And the capital raised would have allowed him to build a stronger and more stable group. Raising capital prematurely destroyed his reputation.

Entrepreneurs need investment to make their ventures a reality. But they need to do so ethically and seriously. Few investors who don't know you will bet on your startup when it's just an idea. They need something concrete. Otherwise, investor pressure will create problems, as it did for Eike.

And that's what this course is for. Invest ClassTo help startups raise money in the most effective way possible, at the right time, in a way that strengthens both the startup and the entrepreneur – as well as generating money for the investor. Be sure to check it out.

2 – Poor communication with investors

Once his companies went public, he failed to communicate effectively with the market. His companies emphasized all the good things that happened and concealed all the bad things that occurred. This created a large bubble in the national capital market which, when it burst, ended up harming many people financially.

There was even a lie involved: Eike went so far as to publicly promise to buy US$1 billion worth of OGX shares, paying R$6,30 for each one – when the stock market value was close to R$1 per share. He never signed the contract for this transaction, and when the company requested the money, he simply fired the company's director.

3 – Looking only at the most optimistic estimates

Perhaps Eike's biggest mistake as an entrepreneur was believing too much in his most optimistic projections and not exercising the slightest caution or having a plan B. When it comes to oil wells, estimates are usually very different from one another. He only listened to the highest estimates.

And he made plans based on these estimates. A well, for example, could contain 102 million barrels of oil or 2 billion. Guess which number Eike touted to the entire market?

The problem was that when something went wrong, companies weren't prepared. Someone would be "responsible" for that "failure," and that person would usually be ostracized within the company. This contributed significantly to increased employee turnover.

Plans had already been made in case everything went according to plan, and the costs reflected this optimism. The first sign that something might go wrong triggered a massive snowball effect that ultimately buried the EBX group.

4 – Create the “champions of the last week”

Eike Batista's key associates changed considerably in recent years. This was due to one reason: Eike used to "fall in love" with an executive and idolize him for a while, until bad news came and he was replaced by another champion of the previous week. He would choose another and repeat this cycle.

This denotes an extreme lack of understanding of business vision and immaturity in dealing with people, a problem that can affect any leader. Without stability (of mood) and unity among the people who make the business, it is difficult for anything to prosper.

Eike was chairman of the board of the companies, but in day-to-day operations he was in an awkward situation: he was too close for a chairman – making too many decisions – but too far away for a CEO. Because of the "last week's champions" policy, almost no company had stability in its technical staff.

5 – It didn't have an "MVP"

Another problem is that Eike built his business group on a premise that, while valid on paper, had not been validated: the idea that one company would support another within the group. It's a classic planning mistake to start big. Your mistake can simply be too big if you don't validate the idea beforehand.

And since everything depended on the most optimistic projections, the "360º" idea promised by Eike – in which each company would take care of the other – failed. The lack of oil at OGX weakened the demand for OSX (shipyard), which had to revise its contracts with LLX (manager of the port of Açu), which reduced expectations for contracting energy from MPX.

What was an "excellent" idea of ​​each company supporting the other didn't translate to the real economy of Eike Batista. It would have been wiser to create small operations, MVPs, for each company first and then scale them according to their success. But he wanted to run several projects simultaneously in each one and ended up not executing any well.

It would have been much less costly and would have allowed Eike to reposition the ship if necessary, pivoting a company if needed. Every entrepreneur must know how to validate their idea. It's one of the pillars of the course. Startup from A to ZThis is what we promote here at StartSe so that novice entrepreneurs, which was not the case for Eike Batista, can escape the main challenges of this world and build winning businesses.

6 – To give the feeling of “abandoning ship”

When companies are in trouble, the entrepreneur is expected to be the first to be there seeking solutions, fighting to keep the ship from sinking. Eike, however, did not. He apparently began abandoning ship before it even sank.

He made large stock sales before bad news that would drive down the price of his companies (sales for which he was accused of insider trading), made statements that didn't go down well (he even asked Bank of America to buy one of his companies if they thought it was worth that much), and even expressed a "desire to pass OGX on to creditors" at the end. All of this was fueled by a major conflict of interest.

7 – Creating a vicious cycle of money destruction

In the end, the worst thing Eike did was devise a grand scheme to destroy investors' money. The billions invested in his companies were lost, and many businesses were simply sold off to survive (this is the case with the logistics companies LLX and MPX).

Eike gave the illusion of being the most financially successful man in Brazil for a time. But it was also one of the most resounding failure stories in Brazilian capitalism (however much of it a crony capitalism...). It's a sad story that can teach valuable lessons to entrepreneurs who fully understand it.

Whether he committed crimes or not, the biggest loser is him, who, with $1 billion in his account before his stock market adventure began, could have had a very comfortable life. He made the (correct) trade-off of investing and trying to generate more wealth, but unfortunately, he went down the wrong path and ended up heavily indebted and imprisoned.