Our Magma Summit last week was a success! Mexico City welcomed everyone with open arms, lots of rain, and a festive spirit just in time for Dia de Los Muertos.
As we’ve expanded from only investing in Chile in 2014 to supporting a regional portfolio of 65 startups based in 12 countries, we wanted to recreate the support network startups, LPs and team members that spent time in our Chile office have. We’re building a distributed community across Latin America, the US, and Asia, which means in-person time is even more important.
We kicked off the Summit with tacos and drinks at the Timberland Terrace, overlooking Mexico City’s Plaza de la Republica. Although the rain threatened to keep us off the beautiful rooftop, we were able to bond over dozens of tacos al pastor and a bit of mezcal before the business started on Tuesday morning.
Our first presenter was a Magma Partners investor and executive coach, who explained lessons learned from his experience working with large banks and technology companies to make sure founders don’t turn their potential unicorn into a donkey. Key takeaways:
To round out the morning, Nathan Lustig interviewed two of our LPs about what made them so interested in investing in Latin America, besides the upside. Both investors made heavy emphasis on the potential to solve real problems in the region, such as banking, payments, and insurance, as well as the strength of tech teams that are being overlooked by competition in Silicon Valley.
After a hearty lunch, we enjoyed an afternoon of small group discussions about what we’ve learned over the past year, especially focusing on how we face failure. These conversations, moderated by Nathan and Pedro, allowed us to connect more deeply and open communications about topics that are often challenging and very personal for entrepreneurs.
We ended the first night at Petanca, where we played a tournament of the local Mexican sport while enjoying local tortas and beers, sponsored by AWS. As almost everyone in the room was an entrepreneur, the game got a bit competitive, but it was all in good fun!
Our second morning started with a lively discussion between Nathan and Sebastian Castro, co-founder of Kushki Pagos, an end-to-end payment system that is helping Latin America process payments online. While Latin America is one of the fastest-growing regions in the world for e-commerce, online payments are still clunky, slow, and inaccurate, which is bad for business. Sebastian explained how Kushki quickly integrates with companies and banks to allow them to accept online payments and boost their business.
In the second panel of the day, TechCrunch’s Anna Escher moderated a conversation between Diego Caicedo, CEO of OmniBnk, Alejandro Guizar, CEO of Billpocket, and Lina Peña, investor at Elevar Equity about How to Raise a Series A in Latin America. Many companies in Latin America are struggling to bridge the gap between early-stage investment and growth-stage deals. Diego and Alejandro have recently raised Series A funding from investors in the US and Latin America and explained what it takes to scale, and to explain to investors how they will scale in Latin America. Lina provided the investor’s perspective, highlighting benchmarks that she looks for in Latin American startups, as well as companies in India, where Elevar invests in fintech.
Next, we heard from Rebus’ Juliana Villalba, Inevent’s Pedro Goes, UBits’ Julian Melo, and MiPos’ Orlando Espinoza about their experience in accelerator programs in the US including Quake in New York and Y Combinator in San Francisco. This light-hearted panel discussed misunderstandings between Latin American entrepreneurs and their US investors and clients. Takeaways:
Our final discussion of the morning revolved around China’s influence in Latin America as explained by Magma’s Jiating “JT” Li and Jie Hao. JT moved to Chile two years ago to work for Magma and still cannot open a bank account, an experience that felt the polar opposite of her cashless life in China. Takeaways: Latin American banks are bureaucratic and charge people to keep, transfer, or spend their money. This business model is ripe for disruption.
Meanwhile, Jie explained how China developed from a poor country into one of the wealthiest and most technologically advanced in fifty years, with lessons for Latin America to draw from along the way. Our takeaway: educating and attracting talent is key to innovation.
After lunch, we enjoyed a speed dating session where our investors and entrepreneurs could interact in small groups and connect personally. These sessions allowed us all to meet 5-6 new people in a more personal and natural setting to generate discussion and networking opportunities.
We closed our final night with dinner and drinks. The atmosphere was bubbly and excited about new opportunities that our discussions had brought to light!
Over the next few days, we spent time with entrepreneurs and investors working and seeing the sights in and around Mexico City. Magma Summit was the first time our entire team was all together in the same room at the same time, and it was the first time that many entrepreneurs had met each other, even if they were from the same city. We’re excited about what we’re building together with the entrepreneurs we support, our LPs, and the people who are supporting Latin American entrepreneurs!
Q3 was headlined by 7 investments, including 2 follow ons into existing portfolio companies. We did our first investment in Brazil, deepened investments in Mexico and other regions in Latin America.
Latin American tech is on fire in 2019, headlined by Softbank’s continued disruption of the market, having invested in 16 deals in the past 16 weeks. This is pushing big funds like Goldman Sachs, Credit Suisse, Riverwood, Temasek, a16z, Sequoia and more to invest more quickly in order to get into deals. You can read more about these headline deals in our new monthly series in TechCrunch, written by Magma’s Sophia Wood.
InEvent – Brazil/USA. CRM for Corporate Events. Our first investment in Brazil and is a SaaS with a Brazilian tech team targeting the US market.
MiPos – Ecuador/Mexico. Point of Sale system for restaurants in Latin America. With the proliferation of Rappi, Uber Eats, Domicilios, and other online ordering systems, restaurants have a tablet for each service. MiPos integrates it all.
Treble.ai – Colombia/USA. Mobile first customer service for ecommerce.
Marqii – US/Chile. SaaS for US-based restaurants to automatically update their menus and pricing on all online ordering websites.
Magma Events 2019
Lendit – Dec 4-5, Miami. The premier fintech conference in the US gets a Latin American edition.
WeXchange – Nov 14-16, Asunción. The IDB is leading a conference for women entrepreneurs.
Pedro Pablo travels to Israel to meet entrepreneurs and investors
Our Partner, Pedro Pablo, recently traveled to Tel Aviv to meet local stakeholders and get to know the thriving local ecosystem.
Nathan Lustig attends YCombinator Demo Day
Our Managing Partner, Nate, traveled to San Francisco last month to participate in YCombinator’s Summer 2019 Demo Day, where he met Latin American companies. Every year more Latin American startups participate in this prestigious program (16 this batch!). We have previously invested 10 YC companies, including in Ubits and BrainHi who also participated in previous batches.
JT and Sophia were mentors at Village Capital’s Finance Forward program in Santiago
Our Principals, JT and Sophia, were invited to act as mentors for fintech startups from across Latin America in a workshop on Investment Readiness for Village Capital’s first Finance Forward program. The program offers workshops in four Latin American cities, as well as opportunities for financing at the end of the program for the top startups. Sophia and JT met with several startups from Mexico, Brazil, Chile, and Colombia during the event to help them prepare to meet with investors.
OmniBnk opens office in Mexico
OmniBnk continues to be one of our top-performing companies, expanding into the Mexican market with our Venture Partner, Eugenio Perea, as Country Manager. They announced their expansion into the Colombian market in May 2019 and continued to grow in Q3 this year.
Magma Google Case Study + Ciara Middleton’s Lessons Learned
We published our case study on how we use Google Cloud to facilitate remote work at Magma Partners and how we collaborate with our startups across borders. We depend on GSuite for everything from investment documents to pitch decks and we cover all this work in the case study.
We also published an article written by our intern, Ciara Middleton, who joined us in June/July 2019 to help out the content team. She listened to over 20 podcast episodes and turned the lessons she learned into a blog post to help entrepreneurs learn from the experiences of others. Read more about Ciara’s tips here.
Crossing Borders Podcast Highlights
We had a very busy few months on the podcast – thanks to Angel and Josefina for working so hard on making this program possible. Here were a few of the guests we had this quarter:
New Articles on Nathan Lustig’s Blog
We published a few more deep dives on Latin American industries and trends this quarter.
If you want to get in touch with Magma Partners, you can reach us here. Thanks for reading!
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.
In Q1, we built out our Mexico team, did four new investments and our portfolio companies continued to be successful. Q2 2019 buildings on Q1, with 4 new investments, two in Colombia and two Mexico, headlined by Dataplor and Vozy. We spent time in Mexico, Colombia, Ecuador, Chile, US and Argentina during Q2.
We also had our first exit out of our second fund, with Kushki
Pagos’ acquisition of Chile’s QVO to expand into the Chilean market. Magma portfolio companies have received $65M in follow on funding from funds like Accel, Kaszek, YC, Techstars and more, and sell $35M+ each year.
Kushki Pagos acquired QVO, Magma’s first exit out of Fund II
Magma invested in QVO, a Stripe clone for Chile, in late 2018. We met Kushki Pagos, a Stripe clone for Colombia, Ecuador and Mexico around the same time and help make this deal possible, investing in Kushki in conjunction with the acquisition.
2. Sophia wrote What the VC Landscape is Really Like for Women Entrepreneurs in Latin America
Sophia’s article covered the day to day of being a female founder in the region and the experience of Juliana Villalba, Marta Forero, Maite Muñiz, Maria Paz Gillet and many more entrepreneurs in her Crunchbase article.Continue Reading
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.Continue Reading
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.
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.