Member: TPG Growth / The Rise Fund
Executive: Angel Uribe, Partner, TPG Growth
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LAVCA spoke with Angel Uribe, Partner at TPG Growth, about the fund’s exposure to Latin America to date and the trend of tech-enabled services and products continuing to grow in sectors like education, financial services and healthcare. Uribe also talked about how Latin America represents an important opportunity for The Rise Fund given the region’s development potential and how collinearity between investment success and impact is key.
Latin America represents an important opportunity for The Rise Fund given its development potential but also broader sectoral trends taking place in the region: a focus on education and digital literacy, a proliferation of mobile technology and regional and national efforts to expand clean energy.
LAVCA: Please provide some background on TPG Growth What is TPG’s strategy and how has it evolved over time?
Angel Uribe: Incubated in a family office, started and headquartered in Forth Worth and San Francisco, TPG now has more than US$104 billion under management with investment and operational professionals in 17 offices around the world.
TPG Growth was founded in 2004 and is part of the global TPG platform. The TPG growth platform has US$13.4 billion under management. We are a global investor with a differentiated approach to middle-market investing. We take a thematic approach to sourcing and empower our teams to work across geographies, sectors and deal types. Our strategy is based around pursuing sectors where the team has deep expertise and a distinct investment angle. This strategy enables us to shift across developed and developing markets depending on the risks and reward, optimizing for the best investments across the portfolio with a degree of agnosticism about geography. We look for industries which are being disrupted, harnessing those moments of change and unlocking opportunity for companies with new and unique business models
TPG Growth partners with companies across all stages of their growth cycle, from incubating businesses, to traditional growth equity investing, to global expansion. We also have a strong track record of leveraging our business building toolkit to help growth-stage companies scale.
LAVCA: What has been TPG Growth’s exposure to Latin America to date? What markets and sectors have you invested in?
Angel Uribe: TPG Growth has always pursued opportunities to support outstanding entrepreneurs, with unique business models aiming to solve structural needs and problems in their respective markets. Our first investment in Latam was Azul Linhas Aereas, which became one of largest airlines in Brazil, then Resultados Digitais, the leading marketing automation platform for SMBs in the region and finally, Digital House, a leading education platform providing coding and digital skills in Brazil and Argentina.
TPG Growth has invested in some of the most successful technology companies globally. How do you see TPG Growth’s portfolio expanding into Latin America?
Angel Uribe: Today, Latin America is already one of the largest and fastest growing markets for some of our global consumer technology businesses such as Uber, AirBnB and Spotify. We Expect this trend to continue as the penetration of tech-enabled services and products continues to grow in sectors like Education, Financial Services and Healthcare; all of which are sectors of focus for TPG Growth and The Rise Fund.
Today, Latin America is already one of the largest and fastest growing markets for some of our global consumer technology businesses such as Uber, AirBnB and Spotify.
LAVCA: Some of TPG Growth’s commitments in Latin America have been in partnership with The Rise Fund. How are those investments a convergence of each fund’s strategies?
Angel Uribe: The Rise Fund is able to leverage the broader knowledge of TPG – more than 100 business building and investing professionals are focused on TPG Growth and The Rise Fund. In addition, the experience that TPG has gained investing in and building growth businesses around the world can be leveraged as the fund evaluates opportunities for Rise. Ultimately, the premise of The Rise Fund is to invest in businesses where core products and services create positive impact, and if the business grows that impact grows. That means supporting businesses and entrepreneurs as they seek out growth is crucial across both fund’s strategies. Collinearity between investment success and impact is key.
Collinearity between investment success and impact is key.
LAVCA: In 2016, TPG raised US$2b for The Rise Fund. What was the target and hypothesis behind the fund and how does that manifest in the context of Latin America?
Angel Uribe: The Rise Fund was founded by a group of experienced investors with a deep personal and professional commitment to driving social and environmental progress. As an organization, we are building on the lessons learned and groundwork laid by years of work from fellow impact investors. We are also bringing the same investing rigor, diligence and experience building innovative businesses that TPG brings to every one of its commercial funds. Rise was created with the belief that businesses could create growth alongside positive impact – and that you could achieve performance alongside that social and environmental impact. Latin America represents an important opportunity for The Rise Fund given its development potential but also broader sectoral trends taking place in the region: a focus on education and digital literacy, a proliferation of mobile technology and regional and national efforts to expand clean energy. Rise is able to leverage TPG’s broader national experience as a technology and energy investor to capitalize on those trends and their potential to create impact.
LAVCA: There is a perception by some that impact investors do not seek the same returns as traditional private capital investors. How has The Rise Fund challenged that stereotype?
Angel Uribe: The Rise Fund is committed to the notion that impact and returns can exist alongside one another, and when a business’ core products and services create positive impact, the growth of a business will help expand that impact. There are numerous examples within our portfolio where a business creates impact as a result of what they do every day – whether it is installation of distributed solar panel technology in India, low cost consumer financial products or responsive learning technology here in the United States, or digital skills education in Brazil and Argentina.
LAVCA: How is The Rise Fund a reflection of demand from LPs? Did LPs committed to TPG’s other funds contribute to the Rise Fund?
Angel Uribe: There is an increasing demand for impact from investors, and The Rise Fund was one of the first scaled impact investment funds to attract support from institutional LPs.
LAVCA: How does The Rise Fund measure impact? What types of metrics do your LPs require?
Angel Uribe: Measurement of impact is one of the core elements of Rise, and builds on years of work done by the impact investing field. We use research and evidence to understand the direct link between a company’s core products or services – solar panels installed or farmers served, for example – and economic and environmental outcomes those products and services produce – reduction on CO2 emissions or higher potential income. We factor in positive and negatives to ultimately arrive at a net social or environmental value of the company’s products. By linking those two things directly using peer reviewed third party research, we can understand how growth can drive increasing impact, and identify the most promising opportunities at the front end of the investing process, helping us better direct investment towards solutions that work.
We are also committed to making these tools more broadly available to the market, which is why we launched Y Analytics earlier this year, to give other investors and capital allocators the ability to access what we have learned.
LAVCA: There were a number of elections in Latin America last year. What opportunities and challenges can new leadership create in specific markets, sectors, and strategies?
Angel Uribe: Latin American markets are underpenetrated in nearly every sector, which creates great opportunities for growth investors like TPG Growth and Rise. We believe one of the main challenges for the new leadership is to remove obstacles that stifle vigorous growth, as we see in other thriving emerging economies as China, India and SEA in general. Remedies for decreasing that delta over time include simplification of tax codes, improving the efficacy of education programs, establishing broader fiscal discipline, developing a healthy entrepreneurship ecosystem and finally tackling corruption, violence and inequality. What is encouraging is that these are all core themes in political agendas in most Latin American countries after recent elections.
Latin American markets are underpenetrated in nearly every sector, which creates great opportunities for growth investors like TPG Growth and Rise.
LAVCA: What is the exit environment like in Latin America for your portfolio – how do you generate exits and liquidity for your investors?
Angel Uribe: Helping entrepreneurs and executive teams grow and build great companies gives us the flexibility to monetize investments despite macro cycles. Azul is a great example. Despite the negative macroeconomic backdrop, it grew through the great Brazilian recession and completed its IPO in early 2017 and listed on the NYSE. We believe that both Resultados Digitais and Digital House are also unique companies in their spaces and should follow a similar path.
LAVCA: Why did you join LAVCA?
Angel Uribe: LAVCA was one of the pioneers in creating a community of investors in Latin America. We value the data it collects, the diverse set of members and the events it coordinates. We are happy to be part of the community.