As we have grown, our team has become larger and more distributed. For monthly all-hands meetings, our nine-person team comes online from the US, Mexico, Colombia, and Chile, and we depend on Google Cloud for these collaborations.
We were pleased to be featured in a recent Google Cloud case study about how we use the entire G Suite to meet with hundreds of entrepreneurs and investors across Latin America and Asia every year. These tools allow us to centralize information for our distributed team, coordinate meetings, collate critical data, and help startups make the connections they need to grow.
“The vast majority of startups in Latam do not fail for lack of money but lack of contacts and experienced people who constantly provide feedback, which has been fostered by G Suite,” said Managing Partner, Nathan Lustig.
G Suite provides us with the infrastructure we need to support over 53 startups in nine countries across the region. To learn more about our Google Cloud case study, click here.
I am a first-generation US citizen, born to parents raised in Ireland. My two brothers and I have lived in Pennsylvania, on the East Coast of the US, our whole lives. As I enter my final year at Susquehanna University, I am studying International Business and Marketing.
Through a unique funding opportunity with our business school, I was selected alongside six of my classmates to spend my summer gaining cross-cultural work experience abroad leading into the final year of university. As I set off to choose a country, and a job, I knew I wanted to travel to a Latin American country and my passion for entrepreneurship along with my love of the outdoors pushed Chile to the top of my list.
Nathan Lustig’s Crossing Borders podcast served as the perfect tool to teach me about the startup industry in Latin America. I listened to the thirty most recent episodes and looked for overarching themes that stuck out to me. By listening to so many different thought leaders in LatAm tech and entrepreneurship, I have begun to understand the Do’s and Don’ts of Latin America’s startup ecosystem:
You are not supposed to! It is better to admit that you do not have the answer than to fake it and risk being caught in a lie or a moment of over-confidence.
In Episode 64, when Komal Dadlani interviews Nathan on how to raise venture capital with Magma Partners, Nathan brings up this point while discussing “the best types of entrepreneurs.” Nathan mentions a personal experience where he was asked by a board member if he was aware of a particular company, supposedly in his industry. Nathan admitted he had never heard of this mysterious competitor. This company turned out to be completely made up and the question was a mere test of honesty. Admitting when you don’t know something is the right thing to do.
Many of Nathan’s guests spoke about the importance of failing and all that it taught them. In Episode 67, Brian York of Liftit admitted that one of his biggest faults when starting his first company was that he “tried to get too involved in things that [he’s] just not good at.” When he began to allow his team to take over where he was weakest, the company started growing.
Similarly, Maricel Saenz, CEO of NextBiotics advised in Episode 76, “the worst attempt is the one that you never do”. It’s very easy to see where there is opportunity and reach out to people that can help you seize it.
Cory Siskind, founder of Base Operations, emphasized this point, saying: “People, especially women, need to be less risk-averse and just go-for-it. There is a 90-something percent change that it won’t work but you never know what can happen, don’t overthink it. You won’t regret trying.”
Maricel Saenz of NextBiotics noted that she and her co-founder are opposites: man/woman, introvert/extrovert, scientist/businesswoman, but these differences are what makes them work together so well. Where one member of a team falls short, others can pick up the pieces. Teams should be dynamic and efficient, which all begins with knowing your strengths and weaknesses and recognizing that flaws are not only acceptable, but inevitable.
In Episode 61, Carlos Moyses, the CEO of iFood, stated simply: “You don’t do anything by yourself. You really need to build a team, a strong team.” This team needs to be committed to the mutually-understood goals and purpose of the business.
While business teams should have a common goal, they also need diversity. Jackie Hyland, of A55, made a poignant statement in Episode 69: “Diversity in general is just so good for business. And it’s great for the long term health of a project or business.”
Similarly, in Episode 70, Eugenio Perea reflects on a moment of realization when he was in a board meeting: “I looked down the table and I realized over 50% of our employees were left handed. And I’m left handed. And I hired all of them”. This moment was when he decided to hire someone to take charge of Human Resources; Perea knew diversity in thought on a team is an integral part of success.
Connections are everything, and you should make a conscious effort to make friends everywhere and enemies nowhere. It is impossible to predict who will help you and when.
Nathan notes in Episode 64: you always need to “close the circle.” If Magma Partners, or anyone, rejects you, always respond to that rejection email. One day you could have another business idea or even just need some advice and if you burn that bridge, there’s no turning back to ask for help on the other side.
If you make an effort to treat every interaction like a ‘good first impression’ you will never need to worry about a bad one. Push yourself to attend everything you can and take every opportunity to expand your network. Marta Forero, Co-Founder of UBits, travelled to Silicon Valley to participate in Y Combinator and notes that the people she met were the most important part of the whole journey.
Komal Dadlani noted of choosing investors: “I want his network, not his net worth.” Investors should provide much more than just money. When making decisions about investors looking to come on-board she asks herself: “Do I want them to call me on the good days and the bad days? Am I willing to have breakfast and dinner with this person constantly? Will I have the guts and courage to tell them when I have a problem/be transparent with them?” Dadlani continued to add, “My Silicon Valley investor, I met in 2014, and he didn’t invest until 2016. It took 2 years of relationship building.”
Nathan noted in his conversation with Maricel Saenz: “be willing to get over some of the shame of being told no and the possibility of your attempt going cold” when trying to reach out to someone new. The simple act of asking someone to grab a coffee with you and start a conversation could make all the difference.
The very nature of having an entrepreneurial mindset means you are willing to explore uncertain grounds. This thought process is both admirable and imperative for the future of any startup. As Peter Thiel states as the opening line of Zero to One: “Every moment in business happens only once.” Seize opportunities when they show up and never be afraid to be the first to reach out.
What I have concluded from listening to Crossing Borders is that there will always be people willing to help. Accept the fact that you do not know everything, make a conscious, daily effort to build a respectable network, and surround your startup with the right people to facilitate its growth.
Ciara Middleton is an intern at Magma Partners and a senior at Susquehanna University in Pennsylvania.
Parallel18 is a government-backed accelerator program founded by Sebastian Vidal to help promote entrepreneurship in Puerto Rico. The program seeks to turn the island into an international hub for tech innovation, and has received applications from startups from more than 48 different countries.
‘Mentored’ is an educational program for Latin American entrepreneurs, where Parallel18 visiting mentors share their knowledge, experiences, and advice.
Our Managing Partner, Nathan Lustig, recently presented on Parallel18’s ‘Mentored’ series to talk about Latin America’s ecosystem. Here’s what to expect from this episode:
Check out the video above for the full episode to hear Nathan’s take on why Latin America’s ecosystem is at an inflection point!
After an active 2018, we’ve continued to push forward in 2019. Since our last update, we’ve invested in 4 new companies from four different countries, including Base Operations. We’ve also continued to expand our team and the services that we’re helping to provide in the Latin American ecosystem.
We now support 51 companies in our portfolio, which now sell $29M+ each year, have raised $46M in follow-on funding, and employ more than 600 people worldwide. Our growing team provides diverse experiences and networks to our portfolio, including support in marketing, PR, DevOps, sales, and international expansion strategies and covers geographies like Chile, USA, Mexico, Colombia and China. We’re excited to further support the startups in our portfolio as they continue grow!
Check out the following overview of news from our fund and our portfolio for Q1 2019.Continue Reading
In eight years of working in the Latin American startup ecosystem, we’ve seen a lot of term sheets. A term sheet is the document that defines the relationship between a startup and its investors, including potentially-confusing legal clauses surrounding valuation, preferred stock, vesting, and investment instruments. Despite the best of intentions, VCs often provide startups with term sheets that do not properly align incentives for a successful investment relationship.
In the worst of cases, we’ve seen term sheets that are abusive or exploitative to the entrepreneur, or deals that look more like private equity than venture capital. These issues generally arise from lack of experience, rather than bad will, but they can kill a startup before the deal is even signed.
Financing can be a sensitive topic, but transparency is always the best policy. Entrepreneurs shouldn’t feel they have to analyze their term sheets in a vacuum. Magma Partners is dedicated to developing a healthy startup ecosystem in Latin America. We will review any term sheet you have, at any stage, and give you feedback for free.
What is a term sheet?
A term sheet is a blueprint for your future relationship with your investor. If you think of your relationship with VC as a marriage, a term sheet is your premarital agreement.
What does a term sheet include?
As Brad Feld and Jason Mendelson said in their book Venture Deals (our top recommended VC book), every term sheet consists of two kinds of terms: economic terms that decide the return investors will get in a liquidity event, and control terms that allow investors to exercise control over a business or veto certain decisions the company can make.
What can potentially go wrong?
Couples can split up. So do VC and founders. And getting the term sheet wrong may lead you to lose control over your own startup if things go sour with your VC. Yet many entrepreneurs don’t focus on the term sheet because they lack fundraising experience, guidance from seasoned mentors, or a reliable lawyer who understands the needs of a startup.
Leveraging our experience to support entrepreneurs
Magma Partners has seen hundreds of term sheets from Latin America, the US and China since we got started in 2014. We have often reviewed term sheets for entrepreneurs outside of our portfolio to support the ecosystem. We can recognize a term sheet that exploits entrepreneurs and establish unfair terms for the VC. We’ve seen entrepreneurs make mistakes that are totally avoidable. We have decided to offer our experience to help entrepreneurs build better companies and better relationships with venture capitalists.
Why are we doing this?
Our mission is to help startups grow to their full potential, but we can’t possibly invest in every single startup. Instead, we are giving back by trying to build a transparent startup ecosystem. We cannot achieve this goal without advocating for healthy relationships between investors and startups. Our term sheet review will help startups avoid investment traps so investors’ and startups’ interests are aligned from the start. We believe in paying it forward and this is one way we do it.
Questions about your term sheet?
Please send us a message through this form with any questions you have about your term sheets. We will happy to provide you feedback that we think best represents your interest.
Our Managing Partner, Nathan Lustig, recently appeared on Parallel 18’s “Mentored” Series to provide tips and advice to startups and VCs operating in the Latin American ecosystem. Here’s what to expect from the episode:
To hear all of Nathan’s advice for startups and VCs, check out the video above for the full episode!
What do startups and corporations need to know about each other? Our Managing Partner, Nathan Lustig, was recently in Mexico City for the 29th Annual Consejo Empresarial de America Latina (CEAL) to talk about just that issue. The event united business people, investors, entrepreneurs, and politicians to talk about how to support tech, innovation, and business across Latin America, from Mexico to Chile.
Distinguished guests included Mexico’s President-Elect, Andres Manuel Lopez Obrador, exiled Venezuelan politician, Antonio Ledezma, and Ex-President of Colombia, Oscar Naranjo. These presenters spoke of regional alliances and improved international ties, including with China, to help support Latin America’s budding ecosystem. There is a clear, and well-recognized need, for governments and corporations to lend their support to the private investors and actors in the tech ecosystem.
“Big corporations in Latin America are beginning to feel the threat from startups and are looking to partner, support, and innovate alongside smaller tech companies. For example, in retail, we have seen a spate of acquisitions – such as Walmart and Cornershop, and Falabella and Linio – that point to the fact that corporations are seeing startups as potential collaborators and competitors,” said our Managing Partner, Nathan Lustig. “This change is an opportunity for startups and corporations alike to learn from each other and improve services for their customers.”
Several Magma portfolio companies had the opportunity to present at the event, including Omnibank (previously Portal Finance), Workep, BrainHi, and Albo. These startups were among 25 companies chosen from across Latin America to present for the politicians, executives, and angel investors who attended the event.
Diego Caicedo, CEO of Omnibank, said of the event:
“We work with a lot of traditional businesses, like investment banks, who are just beginning to see opportunities in working with startups. This event was an opportunity for us to meet some of the most important actors in Latin America’s private sector and understand how we could work together.”
Nathan was invited to speak on the Venture Capital panel at the event alongside other regional VCs like Federico Antoni of ALL VP, Sebastian Vidal of Parallel18, and Hector Sepulveda of Mountain Nazca. The panel was moderated by Nicolas Kogan, Puerto Rico’s CEAL president.
“Startups can learn a lot from traditional business-people – and vice versa. This event allows startups and founders to interact with major players in their industry and learn from their experience, and for traditional business owners to explore potential partnerships with people who are innovating in their industry. It is a great place for fostering collaboration,” said Nicolas Kogan about the CEAL event.
We were thrilled and honored to be invited to present at the event, and to be able to support our companies that were able to join, as well. CEAL was an incredible way to bring together all the biggest actors in Latin American business, from politicians to first-time founders, and discuss the future of the region.
The relationship between Latin America and China intensified over the past three months. Tencent invested US$180M in Nubank, Ant Financial invested millions in Stone Co’s IPO, and Beijing agreed to swap over US$18B in yuan for Argentine pesos.
China’s relationship with Chile has grown, as well, as the Magma Partners China office has spoken at monthly events about investment in Latin America. During the past three months, Magma China co-hosted a seminar during a visit from Roberto Ampuero, Chile’s Minister of Foreign Affairs and presented at two significant events to increase people’s awareness of Latin America as an investment destination.
Here’s how Magma has promoted Sino-Latin American investment in three events over the past three months.
Roberto Ampuero, Minister of Foreign Affairs of Chile, visited China after being invited by China’s Minister of Foreign Affairs, Yi Wang. During his three day trip, Mr. Ampuero presented during a seminar entitled “Chile, the Latin-American Center of Entrepreneurship and Venture Capital” at Kr Space’s Zhongguancun Community at Beijing. Magma Partners collaborated with ProChile and Kr Space to co-host the event and generate more awareness of Chile in China. The event also included a presentation from Chris Martin, Vice President of Mobike’s International Expansion Department, who explained why Mobike is interested in LatAm and why they picked Santiago as Mobike’s first Latin American destination. Mobike has just landed at Chile this year and is planning to expand to other countries in the region over the next couple of years.
Chile’s stable economy and business-friendly government make it an interesting destination for Chinese investors. As Ampuero stated at the event, “Chinese enterprises are welcome to come to Latin America. Chile can offer varied talents. We encourage people to invest in Chile, to start a business here, and to talk to our younger generations to get to know the country better. Thus we build a bridge between Chile and China.”
On Oct.30, The China-Latin America and Caribbean Investment Exchange (CLACIE), hosted their annual conference in Beijing, China, sponsored by IDB. This invite-only event gathered 125 people who are involved in the China-LatAm investment relationship who would discuss Chinese-Latin American cooperation across several industries..
Jie Hao, Magma’s Chinese partner, presented at the tech forum as a panel speaker and shared his insights on the emerging LatAm tech ecosystem as a Chinese investor. “Early-stage startups from Latin America are unlikely to find funding in China, even if they visit many times, if all they do is do roadshows, so far Chinese funds have invested into companies in their B, or C round, with early stage being out of scope”
Two days later, on November 1st, the 4th Chile Week officially kicked off in Beijing. InvestChile organizes this event once yearly to promote understanding of Chile in China. The event unites big names from Chile to present before a Chinese audience; Former President Eduardo Frei Ruiz-Tagle spoke alongside Chilean Ambassador to China, Luis Schmidt, Chinese Ambassador to Chile, Bu Xu, and Minister of Foreign Affairs, Roberto Ampuero. Jie once again spoke on a panel about the tech and financial connections between China and Chile.
During Chile Week, Chile officially signed and joined the Belt & Road initiative, China’s development strategy meant to boost multilateral connections, trade, and investments. According to InvestChile, this strategic connection positions Chile as the main hub for Chinese companies operating in LatAm and offers financial backup services to companies of both countries that assists with creating stronger tech innovation.
Recently, the ties between China and LatAm have been growing stronger. Unlike in the past, not just the construction industry is receiving backing from the Chinese government. China’s private investors and companies have begun backing Latin American startups. China’s startups see Latin America as a potential market for their fintech solutions. The two regions grow closer with each coming month.
Our partner, Jie Hao believes there is a significant opportunity for Latin American entrepreneurs to visit China to learn about the Chinese startup ecosystem and see if they can apply the Chinese innovation experience to Latin America. “Chinese startups are already far advanced and under extreme competition. Latin America entrepreneurs will learn the best business models, the best technology, how their peers can survive in China, how to raise funds etc.”
Early this year, Magma Partners partnered with 36Kr and launched the first ever Sino-LatAm accelerator worldwide. So far we have hosted a series of events at embassies of latam countries in Beijing and Kr Spaces as part of our efforts to promote awareness of LatAm in China. We are watching China’s growing interest in Latin America and believe that China will have a strong influence in the region’s startup ecosystem over the next few years..
Last month, Nathan Lustig gave a talk at the Peru Venture Capital Conference about the Latin American entrepreneurial ecosystem and how Magma is working to support startups in the region. In this talk, he shared how he started Magma Partners in 2014 and how it has progressed so far.
We believe that Latin America is at its inflection point. In the past few years, more US and European entrepreneurs have come to Latin America to develop their startups. At the same time, he has witnessed an emergence of Latin American founders that are striving for their ambitions.
Yet the infrastructure for entrepreneurship in Latin America is not yet fully developed. Magma has been working hard to push the ecosystem forward with entrepreneur-friendly deals, that try to break down invisible barriers of class, gender, and race that still exist in this region.
Magma has recently started to build more pillars for the ecosystem by creating partnerships and content that support the region. Noting the growing influence of China in Latin America, Magma and their Chinese partner, 36Kr, launched the first Sino-Latin American accelerator in the world. Nathan produces a podcast called Crossing Borders where he interviews Latin American entrepreneurs who have interesting stories that rarely reach an English-speaking audience. Magma also created LatAm List, a Latin American TechCrunch that shares regional startup news in English.
To view the whole talk please click here.