Note: A version of this article originally appeared in Inc with the title How to Raise Venture Capital if You’re Outside the United States and on Nathan Lustig’s blog.
Over the past three years, I’ve been working with 30+ companies that have their bases across Latin America build their businesses. Many of these companies are really US companies that just happen to have a tech and sales team in Latin America and want to raise capital in the US. Others are Latin America B2B companies that would love to raise money in the US, but have found hard sledding.
When I first got started, I didn’t realize how hard it would be to find investors to follow in on our companies and our strategies were all wrong. In 2015, I got on a plane to California with Adrian Fisher, the founder of PropertySimple, to take his company to the US market. He’d build an amazing product, similar to Zillow, but in Chile, and 1000+ real estate agents using his product and millions of people using PropiedadFacil to find properties.
As more Magma companies start to do business in Mexico, I’ve started to learn more about the Mexican entrepreneurial ecosystem. I wrote a guide to the Mexican VC ecosystem that I hope helps entrepreneurs looking for funding in Mexico have a roadmap of Mexican funds. From the post:
Mexico is the most interesting startup ecosystem in Latin America. It’s interesting because:
- Population (125m, Mexico City has more people than Chile)
- Biggest Latin American economy leads to startups servicing local market
- Proximity to the US leads to more global vision from entrepreneurs
- US companies with their tech back offices in Mexico
- US funds with presence in Mexico
There are three important cities for tech in Mexico, although there is activity in many other cities, too.
We’re exicted to announce that Monica Avila Forrero is now our head of operations in Colombia. Colombia has become an important country for Magma and our startups. Over the past two years, we’ve made one investment in Colombia and many of our portfolio companies are operating there. I wrote a longer post on my blog about why we’re excited to get to know the Colombia entrepreneurial ecosystem even more:
I’m excited to welcome Mónica Ávila Forero to Magma to lead our Colombia team. Mónica, based in Bogota, has worked in the entrepreneurial ecosystem from all sides for the past 15 years: she’s started her own startups, worked with Ventures, a private NGO to build the Colombia ecosystem, and has worked closely with and mentored Colombia entrepreneurs, helping them figure out their business models, connect with potential investors and scale their businesses. I’m really excited to work with Mónica to help entrepreneurs in the Colombian market!
We’re really excited to announce that we’ve invested in Jooycar, a usage based car insurance service (UBI) that charges customers for how much and how well they drive. I wrote a more detailed post on why we invested in Jooycar and are interested in this space on my personal blog. Some highlights:
One of the biggest opportunities in Latin America is unlocking the potential in legacy industries that haven’t been disrupted yet. Insurance is one of the biggest. Many Latin American insurance products are extremely expensive compared to people’s income and compared to more developed markets. There haven’t been many new entrants into the market yet.
That’s why I’m excited to announce our investment in Jooycar, a usage based car insurance service (UBI) that charges customers for how much and how well they drive. Drivers using the Jooycar system are saving up to 30% per month on their premiums and improve their driving behavior, because they can see how well they’re driving: how often they’re speeding, turning sharply, slamming on the brakes or driving erratically.
Jooycar’s founders, Maria Paz Gillet Martin, Emilio Figueroa Torres and Mario Ugemach Marin are serial entrepreneurs who also have significant experience working with large companies. They’ve been amazing to work with so far and I’m extremely excited to work with them as they expand across Latin America in 2017.
As more Magma companies start to do business in Peru, we’ve gotten more experience learning about the Peruvian entrepreneurial ecosystem. I decided to publish a short overview of the Peruvian Venture Capital Ecosystem in hopes that it will help entrepreneurs doing business in Peru. Special thanks to Greg Mitchell, Managing Director at Angel Ventures Peru, who provided much of the research for this post. Thanks Greg! From the link:
Angel Ventures, a Mexico-based VC, has a local presence in Peru through its Angel Ventures Peru branch office. Angel Ventures Peru has sourced deals from Latin America for the regional fund, but the fund has yet to make an investment in a Peru-based company.
The Peruvian government, through the Ministry of Production has a program to support local incubators and accelerators.
Endeavor – Endeavor is a global organization that promotes high impact entrepreneurs. It arrived in Peru three years ago and has been a leader developing the ecosystem.
Wayra – Wayra Peru is part of the investment arm of Telefonica. They invest in startups generally with $50k + $25k of services for 5-10% equity on convertible notes. They prefer technology companies that can be Telefonica clients or have products that can integrate into its other solutions.
I wrote my monthly column in the Chilean daily El Mercurio about some of the interesting startups from Latin America that are starting to do business in the US. An excerpt from the English translation here (full English and Spanish versions:
A few weeks ago, COPEC, a Chilean convenience store and gasoline service station chain, acquired Delek, a US convenience store and gas station chain with 348 US locations for $535MM. COPEC has operations in Mexico, Colombia, Peru, Ecuador and Panama, but this is their first foray into the US market. It’s an important step for Chile because it shows that both big companies and startups alike shouldn’t be scared of the US market. In fact, they should view the US market as a big opportunity to expand outside of their home markets.
For way too long, when Chilean companies large and small have wanted to expand out of Chile, they’d look at Peru, Colombia and maybe Mexico. But we’re recently seeing a big change, both by startups and by big companies like COPEC.
It’s important to show Chileans that they shouldn’t be scared of the largest market in the world and that there are opportunities to diversify outside of Latin America. At Magma, we’ve seen a multitude of entrepreneurs pitch and many of them are scared of the US. They think that the market’s too big. That it’s too competitive. That all of the problems are solved in the US and that’s its difficult to compete from Chile. In reality, it’s a lack of confidence.
I wrote a blog post on my personal blog about how to identify and retain Latin American talent for your startups. It’s a bit different than recruiting in the US and I figured that the things I’ve learned running Magma for 2+ years would be helpful to other startups. Some highlights:
One of a founder’s most important duties is Identifying and recruiting top talent. Finding and convincing the best people to work for your startup can be the difference between success and failure. There are hundredsofgreatresources on how to find great talent in the US, but Latin America is very different. US strategies don’t usually work in Latin America.
Recruiting for startups in the US is difficult because the market is extremely competitive and well developed. But it can be easier because many people want to work at a startup because “startups are cool.” Sometimes they even pay well.
Many US workers choose a mission driven company that aims to change the world, or a company that offers workers the opportunity to work on interesting problems, rather than the company that pays the most or has the highest brand recognition. Additionally, structural advantages like recruiters and well developed stock options plans showcase startup opportunities and push more people to take a risk with a startup.
In Latin America, it’s different. It can be difficult to recruit for startups, but not because of competition from other startups.
Read the rest of the post, How to Identify and Recruit Latin American Talent on my blog.
I wrote a blog post on my personal blog highlighting some of the top Latin American startups from the region. From the link:
When I meet with US and European entrepreneurs and investors, they frequently want to know what startups are doing well in Latin America.
There are generally three types of startups that generally do well:
1. Latin America based startups solving problems for Latin American market
2. Startups that target the US/European market and have a Latin American back office
3. Brazilian startups that generally target the Brazilian market
Each niche has their own pros and cons, but at Magma, we invest in a subset of the first niche: B2B startups that are based in Latin America and serve Latin American companies and the second niche: startups that target the US/European market, but have their back office in Latin America.
I’ll leave Brazil’s burgeoning startup scene aside for now and focus on some of the most interesting startups I’m seeing in Spanish speaking Latin America. Post in the comments if there’s a startup you think I should include.
Read the rest of the post to see a list of top Latin American startups.
I wrote a guide to Chilean Venture Capital on my personal blog that I hope is helpful to entrepreneurs looking to startup in Chile. From the post:
Lots of entrepreneurs ask me about Chilean investors and venture capital firms. Here’s my list that I usually send them. Hopefully it’s helpful.
Magma Partners – We’re the only fully private investment fund in Chile. We invest early stage and like to be first investors into companies. We’ll do initial investments of $25-$75k and can follow on with up to $250,000 per company. We like two niches: B2B businesses in Latin America and companies that have their back office in Latin America, but whose primary market is in the US or Europe. 26 investments in 2.5 years. $5m fund. Presence in Colombia, Mexico, USA.
The Chilean government, via CORFO, offers venture capital funds incentives to invest in Chile. For every $1 funds invest, CORFO can match an additional $2 or $3 with low interest debt that they forgive if you fail, but you must repay if you’re successful. Here’s the full fund list across all industries. These are the more startup focused funds.
Read the full overview of the chilean investment ecosystem on my blog.