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.
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.
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.
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!
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 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.
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.