Capria Ventures just reached a first close for Capria Global South Fund II, its second flagship fund with a USD100m target to invest in startups across the Global South, with regions including Latin America, India, Southeast Asia, Africa and the Middle East.
Notable institutional investors and FOs in Capria’s second fund include OIP Investment Trust, Gates Ventures, Crystal Springs Foundation, Sall Family Foundation and the Brakeman Family Trust.
LAVCA interviewed Senior Partner Susana Garcia-Robles on Capria’s fundraising strategy and selection of institutional partners, as well as its investment thesis differentiators for its second vehicle including generative AI and climate tech.
LAVCA: Capria’s second fund will make particular emphasis on partnering with companies that incorporate Generate AI (GAI) into their core business model. Where do you see the biggest opportunity in Latin America for GAI broadly, and are there any particular cases that you feel excited about?
Garcia-Robles: Generative AI is the most profound advance in technological impact on society since the introduction of the iPhone in 2007. I’d argue that in a fairly small number of years, generative AI will have as much or more impact in society than the introduction of the Mosaic Browser, 30 years ago this year. As technologists, operators, and investors, my partners and I could not be more excited to be a part of this sea change.
Latin America is a region with significant opportunities for GAI applications in various industries, such as healthcare, education, finance, transportation, and agriculture. In healthcare, for example, GAI could help improve patient outcomes by analyzing medical data, detecting diseases at an early stage, and developing personalized treatment plans.
We are in the process of screening our entire portfolio – ~50 companies managed directly across three funds – to categorize them as either “AI+”, “AI?”, or “AI-”. I include a question mark in the middle category since I believe nothing is neutral to AI – it just may not be clear yet whether the company is more likely to come out on top or be negatively impacted by the recent developments. We are also now looking at every new opportunity through a “generative AI lens”, first to make our own assessment, and then to see if the founders are looking far enough down the road to know how to create value through AI rather than being roadkilled by those who do it better.
There are several exciting companies in Latin America that are currently applying GAI or have the potential to do so. Some specific examples that I am excited about include Brazilian startup Cortex, using GAI to analyze social media data to help companies better understand their customers and improve their marketing strategies, Mexican company Xertica, using GAI to help businesses automate processes, improve customer service, and analyze data to make better decisions, and Brazilian agtech ZoomAgri, using advanced AI to quickly grade commodity grain transactions, ensuring growers and buyers get fair prices.
LAVCA: Capria has partnered with notable institutional investors and FOs – from Gates Ventures to the Brakeman Family Trust. How are these investors thinking about allocations in VC in a global context and how can regional GPs better speak to their expectations and concerns in their own fundraising process?
Garcia-Robles: The Global South represents a unique opportunity for those who want to invest where growth is, as evidenced by the 2.7b internet and 980m mobile payment users and a large domestic demand for local solutions fueling innovation in the region. In addition, these geographies saw more capital inflows during 2021 and 2022 than in the past decade combined, and 70% of global GDP growth is expected to come from emerging markets within the next three years.
We seek investors who are attracted by our thesis to invest in exceptional founders who are less known and connected – but not less talented – than their peers in the Global North. Capria acts as that connector among regions and sectors. Our investors have been active in the Global South for years and understand the opportunities that these regions offer, including healthy valuations, plenty of local innovation, and huge potential expansion within their region of origin and beyond.
LAVCA: We have seen several funds in Latin America grow from country-specific investment theses to having a region-wide focus. Capria was born as a global fund. What cross-border learnings from Fund I are you looking forward to applying to Fund II, and do you have any specific examples of how this cross-regional visibility has helped your portfolio?
Garcia-Robles: Capria actually started in India, and when demand from other regions came knocking, expanded to the rest of the Global South! Cross-regional visibility is for sure our differentiator. We enable founders and investors to connect with their peers in other markets so they can benefit from learnings in different geographies, study trajectories of similar companies and understand the types of exits available, since they are not in direct competition.
I joined Capria in March 2020, and I wanted to take all my learnings of having grown an industry in Latin America and apply them to other regions. I saw during the deployment of Fund I how similar these regions are – with the same opportunities and challenges for local resilient founders who are innovators and visionaries.
One lesson learned from Fund I is that we are in a unique position to help founders be on top of trends and evolving situations at their onset. For example, take the pandemic that “arrived” in different regions with different intensities and timing. We were helping our founders to review and to pivot their business models way before they really saw the effects of the pandemic, so we helped them to be ahead of the game compared to some of their peers.
We had a similar experience when the fundraising environment cooled down. The Capria partners have experienced plenty of crises and knew that the effervescence of 2021 wasn’t going to last and it was only the end of a bullish cycle. So we began helping founders focus on fundamentals and keeping cash for 18-24 months. While everybody is now talking about the importance of “going back to basics”, sometimes messages arrive too late in emerging markets. Capria’s involvement is crucial for these messages to be delivered and be ahead of others.
LAVCA: What is currently the biggest challenge to strengthening the pipeline of attractive companies tackling climate issues in Latin America?
Garcia-Robles: The biggest challenge is moving away from asset-heavy companies – or companies with exclusive focus on carbon credits and reduction of emissions – to asset-light companies, while figuring out how to embed the climate component across several sectors (e.g., agtech, foodtech, mining, fishing, water, etc.). Capria will focus on solutions that are asset-light and operate in some of our target sectors.
Another challenge is that many of these investments take a longer time than a typical VC investment, so they are not attractive for investors expecting to exit a company in a 5-7 year horizon.
Finally, the limited availability of technical expertise and infrastructure to support the development and deployment of new technologies and solutions comes as another barrier. This is particularly true in rural areas, where many communities lack access to reliable energy sources or sustainable farming practices.