It is no secret that the Latin American entrepreneurial scene has been booming during the last few years. Many tech experts have written about the region’s exploding growth (TechCrunch, Sequoia and Andreessen Horowitz) and major VC funds have entered or redoubled their focus on the region. According to CB Insights data, startups in the region raised $9.3 billion during the first half of 2021 – double the investment in all of 2020. This is a monumental figure for the region.
All these factors drove a group of LBS students(1) to organize the first LBS LatAm PE/VC Conference that took place this past month. During the conference (co-hosted by the LBS Latin America Club and the LBS PE/VC Club) a select group of 40 LBS students had the opportunity to engage with top-tier VC funds leading the LatAm transformation. Together with Noemi Walzebuck MBA 2023, we had the honor of hosting meetings with prominent investors such as 500 Startups, Softbank Latin American Fund, Kaszek and QED. These meetings gave us incredible new insights and lessons learned that we thought would be worthwhile to share with the LBS community (and with anyone interested in VC and Latam in general).
Read on below to learn more about the key ideas and trends that we discussed with our guests.
Didier Queiroz, Partner at 500 Startups
Didier shared how he believes that nowadays – even in LatAm – venture capital and general knowledge on how investments are made are just a commodity (e.g 500 Startups has an amazing blog covering most topics). Funds that are serious about supporting their portfolio companies need to bring much more value to the table than just funding. 500 Startups is amongst the most successful accelerator programs in LatAm. Its differentiating factors are early support to entrepreneurs, an accelerator program to catapult early-stage ventures to the next phase of their growth, and tailored help in fine-tuning unit economics and optimizing business models for rapid scale.
Juan Franck, Principal at Softbank Latin American Fund
When Softbank raised its first fund focused purely on LatAm in 2019, there were not many doubts that the firm would be able to find talented entrepreneurs in the region. They acknowledged, however, that the capital markets were shallower than other parts of the world, which would present both a challenge and an opportunity. Softbank’s investment team is working side-by-side with its portfolio companies and regulators to break this impasse and to enable many LatAm entrepreneurs to have improved access to either local or international capital markets.
In terms of market dynamics, Juan also commented how in Softbank’s view an important phenomenon driving Venture Capital returns in LatAm is inclusion. When compared to other regions, the vast majority of the population in LatAm is underserved in almost every category of consumption. Many Latin American small & medium-sized businesses (SMBs) also do not have ample software solutions at their disposal compared to growing enterprises in other regions. These factors have slowed productivity. In this sense, Latin American tech entrepreneurs are building and bringing more opportunities for everyone else in the region.
Santiago Fossatti, Partner at Kaszek
There are many things that have changed since Kaszek started backing LatAm entrepreneurs in 2011, but one thing that has not changed (and will not change) is how Kaszek has focused on looking for real fundamentals behind the start-ups they support. According to Santiago, a clear path to profitability and strong unit economics are key to enhancing a sustainable industry in the region, especially in LatAm where economic downturns happen with more frequency than in developed countries.
Santiago welcomes the interest of international funds in the region but notes that LatAm entrepreneurs need to adapt global business models to LatAm’s unique challenges. Investors also need to think out of the box and tailor investments to local needs. In line with this principle, Kaszek, together with Mercado Libre, recently launched the first SPAC focused on supporting Latin American technology companies.
Ana Cristina Gadala-Maria, Principal at QED
LBS students also had the opportunity to deep-dive into the LatAm fintech scene with Ana Cristina Gadala-Maria, QED’s Principal and head of its LatAm seed-stage fund, Fontes. In the last two years, fintech has represented more than 50% of the total venture capital investment in the region. Ana Cristina explained why QED believes that financial services in LatAm are ripe for disruption. Factors driving this disruption include historical asset concentration, high profitability within the financial services industry coupled with traditionally poor customer experience, a cash-based economy with few incumbents encouraging the transition to digital payments, and an overall underbanked population. She also spoke about the vertical categories that have received more attention within the fintech industry such as lending, payments and banking and which she predicts will lead to a new wave of innovation: business services, insurance, investing, and infrastructure.
(1) The LBS LatAm PE/VC Conference was organised by Daniela Lascurrain, Diego Canales, Alejandro Restrepo, Martin Girarldo, Jose de la Calle, Noemi Walzebuck and Jose Manquez.
About the authors:
Jose is an MBA2022 student highly interested in Venture Capital and Fintech. Jose is an active member of LBS LatAm and PEVC Clubs having also co-organized the 2022 London VC Trek and the 2021 LatAm VC panel.
Noemi, is an MBA2023 student originally from Brazil & Germany interested in all things fintech, banking-as-a-service, and SMB technology. Noemi is an active member of the LBS PEVC club and also serves as the Skills Lead within the LBS Entrepreneurship Club.