Executive Briefing: The Venture Industry Evolves

As LAVCA’s research team tracks down deals closed in 1H2014 to produce data on investment activity, we are carefully monitoring the evolution of the early stage space – the number of seed, venture and growth equity deals has been expanding since LAVCA started collecting data in 2008, with local and international fund managers backing the region’s tech entrepreneurs.

The venture ecosystem has been developing rapidly in Brazil over the last five years, with the initial wave of accelerators and demo-days giving way to a more consolidated base of investors collaborating on deals and rounds. This may translate into less new Brazilian deals getting done, but also into deeper operational and commercial involvement from investors with their existing portfolio companies.

In a related trend, we have seen examples of consolidation among some of the early e-commerce plays (including Bebe Store’s recent acquisition of Baby.com.br), and in Brazil and other markets, a number of acquisitions by international firms (Eventbrite, Priceline) of relatively early stage venture backed tech companies.

Outside of Brazil, some of the newer venture markets are still in a cycle of rapid new fund formation. In Mexico in particular, ambitious new government programs and public funding for venture investors has contributed to outsized expectations, not least by newly-minted entrepreneurs, and a jump in valuations. The government sponsored INADEM (national entrepreneur institute) has approved funding for 19 new accelerators and early stage funds over the last year, but veteran players in Mexico are understandably dubious as to how this influx of unproven investors will affect the market.

Across the region, while government sponsored programs and development finance institutions still play an important role in funding first time venture investors, HNWIs and family offices from the region are joining international funds of funds as limited partners in some of Latin America’s best established venture firms. Looking back to 2013, it was a record year for new capital committed to VC funds in Latin America, with over US$700m flowing into 20+ vehicles, representing a 30% increase from 2012.

LAVCA is expanding its early stage platform to support the larger universe of venture players, and we have some great partner organizations to help us in that endeavor. This year we signed an important agreement with the Omidyar Network, the philanthropic investment firm launched by the founder of eBay, for programs in Brazil, Mexico, Colombia and New York; Silicon Valley Bank will be active alongside ON, continuing the collaboration we initiated in 2012. LAVCA’s legacy relationship with FOMIN, the private sector division of the Inter-American Development Bank, includes some new areas of cooperation as FOMIN focuses on initiatives including angel networks and women entrepreneurs.

The association’s Venture Capital Council, which is chaired by board member Hernan Kazah, is helping to set priorities for where LAVCA can add value through new programs. High on the list is evangelizing and educating potential new limited partners, particularly HNWI and family offices. Raising the profile of some of Latin America’s most successful venture backed companies to global audiences (including financial and strategic investors in the US and Europe) is also a core mission. Finally we are also promoting practical exchanges and shared learning among players in each of the main markets, across the region, and with veterans in developed venture markets.

LAVCA staff is also on the move to interact on the ground with this growing community. Former Senior Research Associate Claudia Piza Torres recently transitioned to a new role as Manager of Venture Capital Programs. She will split her time between New York City and São Paulo and work directly with LAVCA’s VC advisors Ariel Muslera, based in Argentina, and Lindsay Walsh, based in Mexico.

As a reminder, LAVCA will host the Venture Investors New York Summit at the Tribeca Rooftop on October 2, 2014. This private program, a part of LAVCA Week 2014, is designed to connect the growing community of start-up investors in Latin America with US and global VCs, tech/internet companies and entrepreneurs. Registration for The Venture Investors New York Summit is subject to approval.

Stay tuned for other programs and products as we explore ways to best serve the venture community in Latin America.