Member: Aurus Capital
Executive: Victor Aguilera, Managing Partner, Aurus Capital
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LAVCA recently spoke with Víctor Aguilera, Managing Partner of Aurus Capital, about the opportunity for industrial tech and impact in Latin America.
We saw a trend around these technologies creating massive value when applied to industries in which Latin America specializes (mining, food, etc.)….. the sector is aligned with worldwide challenges such as global warming, waste generation, water scarcity, vehicle electrification, and food demand.
Aguilera also talks about the perception around SoftBank’s uptick in commitments to the region and how important impact and sustainable investing is for Aurus.
Impact is central for us. The industries we partner with (mining, food, and energy) have a huge footprint in terms of CO2, NOx and other harmful gas emissions, particle emissions, waste generation, fossil energy use, water use, impact to communities, flora and fauna, etc. We believe that these challenges will be solved with new technologies.
LAVCA: Please give some background on Aurus.
Victor Aguilera: Aurus was founded in 2009, one of the pioneer VC firms in Chile. As of today, we have USD 130 M AUM. Our two first VC funds started operations each of USD 32M in 2010. Aurus Ventures I had an investment strategy focused on IT with 14 investments, and Aurus Ventures II had an investment strategy focused on healthcare with 9 investments. Both funds are currently in the disinvesting period, expecting to be closed by Q4 2021.
For Aurus Ventures III, we expanded the investment strategy to industrial-tech + impact, aiming to leverage key industries in which Chile and other Latin American countries offer huge opportunities and have international recognition at global scale. Aurus Ventures III is USD 65 M (the largest fund in Chile), and it is in the investment period (last March the portfolio was closed with 13 companies).
We are currently organizing Fund IV, which will continue with the industrial-tech + impact strategy expanding our operations to Peru and Colombia and targeting USD 100 M. We expect to have this new fund up and running by Q1 2020.
LAVCA: What stages do you target when investing in Latin America? How has the strategy evolved over time as the market (especially tech investments) have evolved?
Victor Aguilera: We target Series A or B with initial tickets of USD 2-3 M, we usually reserve 200% in order to continue supporting the portfolio during follow-on rounds.
The strategy was expanded in 2015 to include industrial tech + impact, specifically industrial data, smart operations, energy-tech, water-tech, environmental-tech, nanotech and advanced materials, industrial biotech, and advanced production processes.
We saw a trend around these technologies for creating massive value when applied to industries in which Latin America specializes “we play local” (mining, food, etc.). We believe that this trend is being confirmed and is 100% aligned with global trends and challenges such as global warming, waste generation, water scarcity, vehicle electrification, food demand, etc.
LAVCA: Have there been any challenges finding later stage investors for this market for follow-on investments in your portfolio companies?
Victor Aguilera: For the portfolio companies of Aurus I and II it was a challenge. One of the reasons we expanded our strategy is precisely this issue. For the portfolio companies of Aurus III it has been much easier to attract other investors willing to join the rounds.
LAVCA: How do you perceive SoftBank’s increased participation and commitment to Latin America?
Victor Aguilera: I’m positive that it is very good news for the region. We are always looking to attract new investors into Latin America. No doubt new players coming in is better for everyone; the portfolio companies, the local VCs, the local LPs, etc. Also, it’ll be helpful to educate and motivate local LPs to target VC. It’ll also help the industry to mature faster. We have not co-invested with SoftBank yet, as we have done with other large Japanese corporations. Hopefully we get the opportunity to in the near future.
LAVCA: How important is co-investing for your portfolio? Who have you co-invested with? Do you seek out local or international co-investors (or both) and why?
Victor Aguilera: It is critical. We strongly believe that VC is a syndicated business. We put a lot of effort to identifying potential partners to co-invest with, especially investors that could bring more smart-money into the companies, complementing us with experience, know-how, networks and capabilities on the ground. We seek both local and international investors.
We have co-invested with investors such as Prelude Ventures, Khosla Ventures, Caterpillar Ventures, Mitsubishi Ventures, the Scottish Investment Bank, Catalyst, among others.
LAVCA: Talk about the healthcare and in particular the biotech industry in Latin America? What makes the region an interesting market for this sector? What portfolio companies do you have in this sector?
Victor Aguilera: Within Latin America, there is very limited access to venture capital for healthcare and biotech startups. However, there is top notch basic science development at universities and research institutions. This creates an interesting investment opportunity for those who are bold enough to pioneer investing in a basically untapped local sector.
Within this space we’ve invested in several companies including, Andes Biotechnologies, Algenis, Levita Magnetics, and Echopixel.
LAVCA: Tell us about your recent Series A investment in Aguamarina. How and when did you invest and what role have you played in supporting the company’s growth?
Victor Aguilera: Aguamarina is a Chilean industrial-biotech company with several solutions that are applicable in the mining industry, solving environmental and safety problems which involved billions of dollars every year worldwide.
The team is outstanding. They were developing bacteria and the associated manufacturing processes and conducting on-site trials for many years in order to engineer and validate their solution ultimately securing their first contracts with large mining operations in Chile.
The Series A is essentially for commercial scaling and internationalization into Peru, Canada, Australia and other mining districts. We are actively supporting the company in accessing clients in all these markets using our networks. We co-invested with Khosla and Catalyst.
LAVCA: What is the mining tech industry like in Chile? With recent commitments to Scarab and TI Mining, have you seen more companies in this sector seeking investors? What is the ideal exit path for the mining/mining tech sector?
Victor Aguilera: The mining industry is one of the most important industries in Chile and in other countries like Peru and Colombia as well. It is a business which involves billions of dollars in assets to do high-precision work in order to separate the ore from the waste at a massive scale. The fact is that for the world to go digital and for the global economy to be sustainable, you will need every day more copper, lithium, etc.
The industry faces many challenges, that’s why it is integrating advanced technologies at a higher speed compared to other industries in Latin America, including autonomous vehicles, AI, IoT, big data, robotics, new materials, energy storage, alternative fuels, etc. All these represent billion dollars opportunities for startups.
Exits are expected to be mostly M&A transactions with strategic and PE investors, although in our portfolio we have a couple of IPO candidates.
LAVCA: How important are impact and sustainable investments for Aurus? What is the opportunity like for global investors looking in the region for these types of opportunities?
Victor Aguilera: Impact is central for us. The industries we partner with (mining, food and energy) have a huge footprint in terms of CO2, NOx and other harmful gas emissions, particle emissions, waste generation, fossil energy use, water use, impact to communities, flora and fauna, etc. We believe that these challenges will be solved with new technologies. We try to align our portfolio with SDGs as much as possible, including gender parity, and we constantly track these KPIs. We are very proud of the results obtained so far.
LAVCA: Why did you join LAVCA?
Victor Aguilera: We joined LAVCA for many reasons being the most important ones, getting best practices, networking with potential LPs, co-investors and exit candidates, dealflow, and industry data.