(MIF/FOMIN) “The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, has approved a USD 3.1 MM in technical assistance for the project “Platform for Catalyzing Early Stage Investment”, a regional project that will support the creation and development of 20 angel networks in Latin America and the Caribbean Countries. Read more
(AS/COA) Madeleine Kir Ferry Johnson
AS/COA hosted a forum on venture capital and entrepreneurship in Latin America, in collaboration with LAVCA and the LAB Miami. A panel of entrepreneurs and investors addressed the growing number of new companies receiving funding in the region, the importance of connections between U.S. investors and Latin American companies, and the challenges to fostering a more sophisticated ecosystem for venture capital in the region. Read more
By Boris Hirmas
April 29, 2012 – Venture capital has begun playing an increasing role in fueling the Latin American region’s entrepreneurial endeavors.
In its 2011 Scorecard, the Latin American Venture Capital Association estimated that funding for venture capital and private equity deals in Latin America more than doubled from 2009 to 2010, topping $8.1 billion. Of the 12 nations in the region evaluated by the association, Chile, Brazil and Mexico respectively scored highest on a range of criteria that define a favorable investment climate, including political, legal, regulatory, tax and other risk measures.
Latin America (including Central America, Mexico and the Caribbean) is a diverse, dynamic market of nearly 600 million people, almost twice the U.S. and Canadian populations. While the region’s $5.3 trillion 2010 GDP is just a third of those countries’ combined GDP, prospects for the area’s economic growth are bright, due to booming commodity exports and a rising middle class.
A United Nations study revealed that the number of Latin Americans considered “poor” declined from 44 percent of the population in 2002 to 32 percent in 2010. In effect, the region’s market for middle-class consumption grew by 70 million people in just eight years.
For all that progress, Latin American venture capital investing lags behind countries such as the U.S., Europe, Israel and other major economies. That’s partly due to the need for continued entrepreneurship support from governments, financial institutions and regulatory authorities. More fundamentally, however, Latin America’s traditionally risk-adverse business culture must change its mindset to accept failure not as shameful defeat but as the price of eventual success.
Fortunately for the region, signs of entrepreneurship are growing. In a keynote speech at the Americas Venture Capital Conference in Miami last November, serial entrepreneur Wences Casares said that today, when he speaks before university-level business classes in Latin America, the number of students interested in starting their own companies is the highest he’s ever seen.
“Fifteen years ago,” he said, “everyone preferred working for large multinational companies or their governments.”
As founder of two successful online businesses in Latin America, Casares also noted that technology allows startups to flourish with much less capital than more traditional brick-and-mortar businesses. What’s more, Internet-based startups can transcend national boundaries in Latin America, effectively creating pan-regional markets where none existed before.
The Latin American Venture Capital Association has noted that the number of Latin America technology deals funded in the first half of 2011 rose 133 percent versus the year prior to nearly a third of all funded deals, far ahead of any other sector.
Miami serves Latin America as a wellspring of Angel and venture capital funding, thanks to a large expatriate community from the region that understands its history, traditions, culture, challenges and, above all, its potential. Miami’s Angel and venture capital community has much more of a pan-regional view of Latin America’s markets and cross-border business opportunities than in-country investors.
Given this broader perspective, Miami’s Angel and venture capital community can provide Latin American startups with a more nurturing entrepreneurial environment and encouragement that’s free of any national parochialisms that could hinder a new enterprise. For instance, a new venture in Chile aiming to quickly expand to other Latin American countries may receive pushback from its local Chilean investors.
The Miami Angel and venture capital community can also act as intermediaries with venture capitalists in Silicon Valley and elsewhere, providing introductions to Latin American entrepreneurs — along with guidance about navigating the region’s challenging business environment.
That guidance can be vital to winning support in the United States. Latin American entrepreneurs who have traveled to Silicon Valley to pitch venture capitalism there, report a general lack of knowledge about the region. Certainly that’s partly due to the overwhelming number of deals from within the Silicon Valley and elsewhere, where political, legal and regulatory risks are known and stable. After all, venture investing inherently involves high risks, so why add unknowns to the mix?
The answer to that question: Any Latin American entrepreneur making it past the seed stage has already met major challenges posed by their still-maturing Latin American business environment and that entrepreneur has a much greater chances of success. As that environment continues to mature, with risks better known and stabilized, the region itself will become ever more attractive to venture capitalist investments.
Ariel Muslera, Regional Advisor at LAVCA, recently participated on a panel at Buenos Aires Futura, an event organized by the city government of Buenos Aires to facilitate discussions about the growing importance of technology and innovation. Panels explored topics ranging from the impact of technology on social interaction and economic development to opportunities for education and entrepreneurs.
Ariel, along with panelists Diego May (Junar), Inaki Berenguer (Pixable), Fernando Martinez Lafuente (CIC Consulting Informatico) and Alejandro Marshad (Endeavor), led a lively conversation about Innovation, Entrepreneurs and Economic Development, noting that as the playing field levels between emerging and developed economies, there is immense opportunity for entrepreneurship to be a bigger driver of economic development in Latin America.
“The challenge is to be able to think big and not limit the potential of a startup because of short term needs. For that, it is fundamental to grow the early stage VC ecosystem in Latin America, so that companies can focus on developing compelling products instead of paying next month’s rent,” said Muslera.
The panelists also agreed that the single, most valuable thing a startup team can show to a potential investor is a cohesive, complementary team that not only has a vision but, more importantly, has the skills and the experience to successfully execute that vision.
To view videos from the event, please click here.
By Renzo Dasso
June 2, 2011—SANTIAGO (MarketWatch) Lack of entrepreneurship has prompted the venture capital industry to hold back from investing in Latin America more aggressively, venture capital investment firm New Enterprise Associates General Manager Patrick Kerins said Thursday. As the venture capital industry shrinks in the U.S. and Europe, venture capitalists are increasingly looking at Latin America as the next region that could offer high-growth potential.
However, young Latin American entrepreneurs “need to be bitten by the bug and start creating big, fast-growth companies,” NEA’s Kerins said. If this condition is met, he added, Latin America could be the next avenue of growth for NEA.
“Brazil is starting to become a popular place to go…We don’t have a particular strategy for Chile yet…but we are in the early stages,” Kerins told Dow Jones Newswires in an interview. The firm plans to enter the region by creating a small portfolio consisting of three to four expansion-stage companies operating in the information technology industry.
NEA would look into companies that offer Internet and cellphone-based services and products, like in other more developed emerging market economies such as India and China.
In China, the number of middle class families using mobile phones to place orders for household products is growing exponentially, Kerins said. Latin America is “very, very early” in this regard, he said, but once it decides to enter the Latin American Market, NEA will invest in the Internet, media, telecommunications firms, and the financial technology industry, all of which have high-growth potential, according to the executive.
NEA has $11 billion in capital and operates in three continents in the information technology, medical science and energy technology industries.
This article and interview was a result of Patrick Kerins’ participation in the 2011 LAVCA Chile Private Equity & Venture Capital Forum. For more information on the event, click here.