Author: Nathan Lustig

Magma Values and Mental Models: How We Think About Successful Startups

When we invest in a startup, we’re in it for the long haul. It’s seven years on average, but we’re hoping to create lifelong relationships with the people we support, even if the startup that we’re supporting you on does not work out.

One of the biggest predictors of success that we’ve seen so far is working with founders that share our values. When evaluating an investment, we spend time sharing our values and listening to the values that the founders and their team bring to the table.

We’ve decided to share our core values, along with some of the mental models that we and the best entrepreneurs in our portfolio have used to be successful. We didn’t come up with most of these, but these are the ones that have worked for us.

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Magma Manifesto: Latin America’s Inflection Point

Talent is evenly distributed, but opportunity isn’t. It’s a powerful idea that most Latin Americans innately know to be true.

From Patagonia to Mexico, Colombia to Brazil, we see talented, hardworking, people who haven’t been able to make the most of their talents because of poorly run education systems, under investment and low social mobility.

We can blame governments, corruption, elites, colonization, foreign interference. All deserve some blame.

But smartphones and access to the internet changed everything.

Today, almost everyone can access all the world’s knowledge right from their pocket. We can learn whatever we want without asking gatekeepers for permission. We can change the course of our lives.

That’s not to say it’s easy. There are still massive structural problems that deny millions access to opportunity, but technology – and those who build it – are helping millions more access opportunities to better their lives. And that of their children.

Technology’s created Latin American inflection point. As we’re more connected than ever, Latin Americans is taking a huge step forward and start to make up for lost time.

That huge step starts with you. Whether you’re an entrepreneur, working at a startup or using the internet to make you and your community better, we’re excited to join you in helping make Latin America a better place.

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Crossing Borders: A Venture Capitalists Guide to Doing Business in Latin America

If you love our Managing Partner Nathan Lustig’s blog, you’re in luck. Nathan has just released his latest book, Crossing Borders: A Venture Capitalist’s Guide to Doing Business in Latin Americadetailing his experience living and working in Latin America for the past eight years. This book is the third in a series of books that Nathan has written to help entrepreneurs, investors, and foreigners figure out how to live – or start a business – in Chile.

Crossing Borders, which gets its name from Nathan’s podcast, expands on our experience in Chile to provide a wider look at entrepreneurship across Latin America. It also includes stories from 33+ entrepreneurs and investors from around the region. This book is not the end-all-be-all for working in Latin America, but it is a great jumping off point for anyone working in the region or considering a job in Latin America.

What can you expect from Crossing Borders?

Nathan’s new book starts with an overview of Latin America with sections of key industries like venture capital, blockchain, and fintech, as well as trends that have appeared over the past few years in the region. Expect to find chapters about finding a job and living in major tech hubs in Latin America and an overview of top startups in the region.

Nathan’s new book features detailed chapters on each of Latin America’s most prominent tech hubs, including Brazil, Mexico, Argentina, Colombia, and of course, Chile. He also dives into less developed ecosystems like Uruguay, Puerto Rico, Paraguay, Panama, Peru, Ecuador, and Bolivia, as well as emerging regions like Central America and the Caribbean.

Each chapter features interviews with local entrepreneurs, investors, and government actors who have appeared on Nathan’s podcast. These chapters are peppered with commentary from Nathan’s personal experience living in and traveling to the countries in the book.

Expect to dive deeper into each of Latin America’s top tech hubs and to find out Nathan’s analysis and predictions for the Latin American startup ecosystem as a whole. Our goal is to help you get a feel for each country and give you an idea of who you might want to contact if you’re thinking of living, working and doing business in each country.

Who is this book for?

Crossing Borders is for anyone who is interested in living and/or working in Latin America, or even for those who have lived just in one country and want to learn more about the rest of the region. There is something in the book for every reader, from foreign entrepreneurs to investors, to university students and government officials who want to learn more about innovation in Latin America.

Why the Crossing Borders book?

Many people in the US have a biased image of Latin America. Reports of violence, political instability, and corruption generally penetrate much deeper than the stories about innovation and economic growth. Latin America is not a monolithic region, nor is it a poor one. Despite entrenched inequality, Latin America is producing startups with global impact. However, since most of their stories get shared only in the Spanish or Portuguese speaking press, US investors and entrepreneurs are unaware of the potential of these growing markets.

Crossing Borders: A Venture Capitalist’s Guide to Doing Business in Latin America is a way for us to share these stories and Nathan’s personal experience to help foreigners and locals interested in pursuing business in Latin America. Check out interviews with Cornershop CEO Daniel Undurraga, Jooycar founder Maria Paz Gillet, Uala CEO Pierpaolo Barbieri, Movile CEO Fabricio Bloisi, Start-Up Chile’s previous Executive Director Rocio Fonseca, Parallel 18 Directo Sebastian Vidal, GroupRaise’s Devin Baptiste, Kevin Valdez and Sean Park, Magma China’s Jie Hao, Gricha CEO Alba Rodriguez, Omnibnk CEO Diego Caicedo, Abartys Health’s Lauren Cascio, David Lloyd from Intern Group, David Assael and David Basulto from Archdaily, CargoX’s Federico Vega, Psafe’s Marco DeMello, Brian Requarth, Santiago Zavala from 500 Startups, Antonio Nunes from Mercadoni, Patricio Williams Becu, Alejandro Freund from YaEsta, Jose Caya Cayasso, Carlos Jordan, and many more.

Purchase Crossing Borders the book on Amazon!

Connect With Nathan

Crossing Borders Podcast: Nathan’s Blog, iTunes, YouTube

Magma Partners: Our 2018

2018 was an expansion year for Magma Partners. We started on a high note, closing our Fund II with backing from LPs in Chile, Colombia, Argentina, China and the US in January. We’re part of the movement that made 2018 the year people started to take Latin American tech seriously.

We added amazing people to our team across Latin America, China and the US, bringing us to seven full time and 10 part time team members. We have people on the ground in San Francisco, NYC, Austin, Beijing, Mexico, Chile, Colombia and Peru. Francisco supports Magma teams with Latin American connections, providing a link to top Latin American businesses that can make companies.

JT, Pedro, Sophia, Alejandra, Angel have been amazing additions to the full time team and are helping us build the support system for the entrepreneurs we’ve been lucky enough to be able to support. Pedro, Paolo, Eugenio, Codie, Neil and Pierre make up the amazing support team that allows us to have the reach we need. Our LPs in Latin America, China and the US are also a crucial support system, both in connections and advice, but also in follow on funding. Our LPs have invested and additional $5.5M into Magma portfolio companies this year, giving us the ability to help companies as they scale.

Angel Andraca, Sophia Wood, Pedro Pablo del Campo, Alejandra Dugarte, JT Li, Magma Team, Santiago, Chile

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Jooycar raises US$3M from HCS Capital

Jooycar is bringing the Usage-Based Insurance model to Latin America. Through a small device that plugs into your car, Jooycar has access to each vehicle’s usage metrics, which individuals and insurance companies can view through an app or on their online platform. Jooycar was founded by Maria Paz Gillet, Emilio Figueroa, and Mario Ungemach, a Chilean-Mexican team with years of startup and innovation experience under their belts.

Jooycar recently received US$3M in follow-on investment from HCS Capital, an investment fund based in Miami. Alex Horvitz and Luis Felipe San Martin, CEO and Managing Partner of HCS Capital, respectively, led the investment. We have invested in Jooycar twice as Magma since 2016 and are excited to add HCS as a coinvestor. Jooycar will use the investment from HCS to improve their platform and reach one million connected cars across Chile, Colombia, Peru, Brazil, and Mexico by 2021.

Jooycar is a perfect example of our investment thesis in action, as a startup that was founded in Chile that is now headed to the US. As a part of the investment, Jooycar will move its headquarters to the US to enter that market more smoothly. They have also added Rodrigo Labbe, ex Head of Marketing at DirecTV Chile, as new CEO, while Maria Paz will act as Chief Innovation Officer.

Maria Paz is a serial entrepreneur who started her career by building Chile’s first e-commerce platform. She went on to innovate within Cencosud, one of Chile’s largest retail brands, before leaving the company to found Jooycar. We have loved working with Maria Paz and watching her build Jooycar alongside her team. You can learn more about her story on Nathan Lustig’s podcast or in this article for Forbes about Jooycar.

Magma Partners invests in Chilean sports-streaming startup, Fanatiz

Fanatiz lets you keep up with Latin American football leagues from anywhere in the world. The service currently offers coverage of the Libertadores and Sudamericana Cups, and soccer leagues from Argentina, Brazil, Chile, Mexico, and Peru.

Founded in Chile in 2017, Fanatiz has its headquarters in Miami, while maintaining most of its operations in Chile. The startup also has offices in Spain and Argentina. We recently invested an undisclosed sum in Fanatiz to help the startup grow globally.

“We’re really excited to partner with Magma Partners as we continue our path of rapid growth and market expansion. With clients in over 100 countries, we place special value in Magma Partners’ vision and support for Latin American companies growing on the global stage,” said Fanatiz co-founder and CEO, Matias Rivera.

“Fanatiz embodies our commitment to helping Latin American startups tackle the US and international market,” said Managing Partner, Nathan Lustig.

The Fanatiz team was also selected by 500 Startups to participate in their Miami Growth program, alongside nine other startups from the US and Latin America.

After a little over one year in business, Fanatiz already has customers across the globe, including Pope Francis. The startup made the news last year when it provided the Pope with access to their app so he could follow his team, San Lorenzo, from the Vatican.

Expect to hear more about this dynamic startup in our quarterly updates!

Nathan Lustig’s Interview with Pedro Varas, CEO and Co-Founder of FounderList

Last month, I had Pedro Varas, the CEO of FounderList, interview me in Spanish on three topics: my personal journey, my view on the entrepreneurship ecosystem in Latin America, and vesting. You can watch the three trailers and find the links to the full interviews below. I hope you enjoy the videos.

Part 1. My Story

I was born and raised in Wisconsin. It wasn’t clear at first that I would follow the path to entrepreneurship since I studied political science in college. Then, in my freshman year, I couldn’t get season tickets for our football team,which upset me because I had been looking forward to the games quite a lot. I tried all means to find a ticket, and that is how I found out about a book exchange website at my university. I ended up buying the site with a friend and brought it to 175,000 users across  10 universities. After selling the site to another company, I started my second company, Entrustet, which aimed to resolve the issues of managing digital assets when someone died. This startup took me down South to join the pilot round of StartUp Chile, where my course changed. I eventually started my current career as a venture capitalist that bridges US and LatAm.

To view the complete interview please click here.

I also did a podcast in which Devin Baptiste from GroupRaise interviewed me in English. Check that out here if you are interested in knowing more details.

 

Part 2. Why Startups Fail

In this part, I talked about the startup ecosystems in LatAm, what will make an investor say no, why most startups fail, how I view the wage gap between US and LatAm, and which industries are the most promising for the region. When I first arrived in Chile, I saw there were many opportunities to improve the way business is done here. Following my entrepreneurial instincts, I stayed and became an investor. Fast forward to 2018, and things have improved a lot, yet there are still many opportunities. As the startup ecosystem continues developing, the time to invest in Latin America  is now. At the end of this interview, I recommend a daily practice to help every entrepreneur-to-be identify problems and create solutions.

 

To view the complete interview please click here.

 

Part 3. Vesting

Vesting is an important concept that many founders fail to understand. At Magma, we have rejected some good companies because they have founders who had left the company a long time ago but still owned a big share of the company. This is not fair to the founders who stayed and actually worked to make the company survive. In this video, you will find out what vesting is, why it is important, the difference between founder vesting and employee vesting, when to have an employee option pool and some cases.

To view the complete interview please click here.

Portal Finance secures US$200M partnership with BTG Pactual

Portal Finance originally came to Magma Partners in 2017 when the startup won our regional fintech competition. We provided them with US$50K of pre-seed funding when they were just “four guys in a closet,” as founder and CEO, Diego Caicedo puts it. Today, Portal Finance employs 70 people across Chile and Colombia and has issued over 700 loans to small businesses in the region. Portal Finance is an invoice-backed finance company that streamlines access to capital for small- and medium-sized businesses in Latin America.

Portal Finance uses electronic invoices to provide information to factoring companies to help them make faster and less-risky decisions about giving loans to small companies. This system means small businesses get loans quicker, and at lower rates than before.

Small businesses in Latin America often struggle to get credit because banks view them as a risky investment. Currently, supply chain financing and factoring are the only alternative financing options that 90% of small- and medium- sized enterprises around the world are able to access, and interest rates are typically 20% – 50% per year. Portal Finance gathers critical data from electronic invoices to evaluate and price a loan within just ten minutes, helping factoring companies, corporations, and their suppliers.  It was their unique approach to critical financing that brought us to invest in the company last year.

Magma Partners recently made a follow-on investment in Portal Finance through our Fund II, leading a US$1.6M round that will help the fintech startup reach profitability. Now valued at over US$60M, Portal Finance is one of the fastest-growing and most-dynamic startups in our portfolio.

“We believe that Latin America is a global leader in the factoring industry and the most developed market,” said Nathan Lustig, Magma’s Managing Partner, “and as the industry matures, new technology like Portal Finance’s will be needed in more developed markets, such as the United States.”

The partnership with BTG Pactual is a particularly exciting one, as Diego Caicedo notes it is the largest investment to date of a financial services firm in a Latin American fintech startup. Last year, Portal Finance launched a US$5M pilot program with BTG to test the possibility of creating a small business lending program through the investment bank. Today, Portal Finance officially announced a further US$200M partnership with BTG Pactual to continue developing their loan program.

“To build Portal Finance we had to connect a lot of dots and establish trust among many industry players, primarily the alternative assets team at BTG with whom we had a shared vision. By securing this milestone partnership with BTG Pactual, we can scale and execute our vision of transforming how SMEs finance their working capital needs across the region,”  said Diego Caicedo, CEO of Portal Finance.

This news was also recently covered in TechCrunch and on LatAm List.

Kr Magma Space Events in China

In January we launched the Sin0-Latin America Accelerator with Kr Space, one of the largest coworking spaces in China. We created initiative with Kr Space to help Latin Americans understand how they can leverage the Chinese market and for Chinese entrepreneurs and investors to better understand how they can do business in Latin America.

Since then, we’ve created monthly events with Kr Space to highlight individual countries and opportunities available to entrepreneurs and investors in each country. We’ve held events at Kr Space in Shanghai and Beijing, and at Latin American Embassies in Beijing. Here’s an overview of the Kr-Magma Space events in China so far this year.

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Magma Partners at the Santiago Google Cloud Summit

Last week, Magma Partners was invited to participate at the Santiago Google Cloud Summit, which brought together startups, investors and executives from some of Chile’s biggest companies to learn about the future of cloud technology. The summit had sessions on everything from machine learning to drone technology and showed Google’s commitment to empowering Latin American entrepreneurs and businesses.

We are thrilled to see the world’s biggest tech companies, like Google, seeing the value of Latin American entrepreneurship and helping these startups reach the US market.

We spoke to around 300 executives, entrepreneurs, and developers who were attending the event and approached us to learn more about what Magma does. The Summit brought together over a thousand people throughout the day, proving just how much of an impact Google is having on Chile’s tech ecosystem. It is hard to find a company of any size that does not use at least one Google product. We advise our portfolio companies to use Google Cloud products, including Google Drive, to manage information across remote teams and keep backups of important documents.

The event offered Magma an opportunity to engage with the enthusiastic tech community in Santiago, and to see the diversity of that group. The attendees ranged from top executives at companies like Cencosud and LATAM Airlines to young, eager entrepreneurs, all of whom were there to learn about cutting-edge technologies. In our conversations, we learned about dozens of new initiatives cropping up across the region and several intrepid attendees inquired about investing in startups alongside us through FounderList.

We are grateful to Google for organizing the event to support the development of entrepreneurship and tech innovation in Santiago, and for inviting us to attend! It was great to see the energy and enthusiasm of the participants as they took on challenging new topics in technology. We look forward to continuing to work alongside Google to promote and support Latin American entrepreneurship in the future.

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