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.
Rebus is an event app builder driven by artificial intelligence that is designed to boost attendee engagement and event revenue. In events managed by Rebus, event organizers experienced an average boost in revenue of up to 45% through Rebus’ ancillary sales techniques.
Rebus works by creating individually tailored app experiences for event attendees based on the content of the event, uploaded into Rebus by the event organizers. The organizers can create an app without programming in around three minutes.
Magma Partners invested in Rebus’ Seed round alongside Quake Capital Partners.
Rebus’ technology identifies up to one million new Ancillary Revenue opportunities for each event it manages, helping companies to reach more customers and build their businesses.
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.
CryptoMkt is one of Latin America’s fastest-growing cryptocurrency exchange platforms. Using blockchain technology, CryptoMkt helps people to exchange bitcoin for national currencies across Latin America.
CryptoMkt has a crypto-wallet and exchange through an online platform and app, making it possible to transfer currencies rapidly and at a much lower cost than any cross-border services available today. CryptoMkt currently has more than 150,000 users with around $70B in transactions through the platform.
Magma Partners invested CryptoMkt alongside ConsenSys Ventures in a $600K Seed round to support the growth of their wallet in Chile and the region.
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.
Albo is a Mexican neobank that offers online banking services to 100,000 customers across Mexico. Through a mobile app, Albo is helping more Mexicans to manage their money by providing a bank account, a Global Mastercard, and access to online transfers.
The neobank was founded in Mexico City by Angel Sahagun in 2016. Considering the boom in investment in Latin American neobanks like Nubank, Uala, and Neon, Albo could become Mexico’s leading neobank.
Albo is on a mission to provide the 75% of Mexicans who are currently unbanked with access to online banking services, promoting financial inclusion in one of Latin America’s most complex markets.
BrainHi is a client communications system designed to make customer services in medical offices more effective and customer-friendly. Through artificial intelligence, clients are able to organize appointments and consults via private instant messaging rather than the time consuming traditional call-center systems.
The startup aims to revolutionize customer services and communication by creating a more personalized and interactive method of organizing appointments and managing clients.
BrainHi was founded in 2018 by Emanuel Oquendo and Israel Figueroa Fontanez in Puerto Rico. Magma Partners invested in BrainHi in their Seed stage alongside Venture University and VU Venture Partners.
I’ve been writing a series of blog posts about doing business in different Latin American countries. You can read the entire blog post about Doing Business in Ecuador on my blog. From the link:
Ecuador is a geographically small, Andean country rich in history and home to 16.1 million people, which makes it nearly the same size as Chile by population. The capital city, Quito, is officially recognized as a world heritage site by the United Nations. In recent years, Ecuador has transformed into a much more stable place to do business with one of the best performing economies in Latin America.
With relatively easy access to the US, many companies are coming to Ecuador to take advantage of its excellent trade routes, sometimes friendly trade agreements, and dynamic workforce. The minimum wage raised to $375 USD this year, ranking as one of the highest in South America. Ecuador’s close proximity to bordering countries, Colombia and Peru, make it a prime location for trade and a source for cheaper materials.
Read the rest of Doing Business in Ecuador.
Episode 23 of Crossing Borders Podcast with Psafe’s founder Marco DeMello, a Brazil mobile security company that’s raised more than $90M in venture capital to create a profitable business.