Three Years of Magma Partners

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Francisco, Diego and I first started working on Magma Partners in December 2013, which means we’re just passing our 3rd birthday. We originally planned to invest in 4-6 Chile based companies per year, but quickly found that demand for private capital, high quality mentorship and a bridge to the US market outstripped our modest goal.

We like to be the first check into a startup and invest an average of $50k initially, with the capacity to follow on with $250k more in two niches:

  • B2B companies that serve the Latin American market
  • Startups whose tech team is based in Latin America but whose primary market is the US.

In 2016, we invested in 7 new companies, moved to new offices in Santiago and expanded our presence in Colombia and in the US. We’ve honed our expertise in helping Latin American startups derisk the jump to the US market and have had our first successes helping B2B companies in Latin America negotiate significant deals with legacy companies.

We also focused on building out our networks in Colombia, Mexico and the US. As more of our companies started to expand outside of Chile, it was the logical next step to live up to our promise of helping entrepreneurs with more than just money.

As we turn 3, here’s some of our 2016 stats: Continue reading…

Advice for Investing in Startups

Una version de este post aparece en español con el titulo Lo Que Debes Saber Antes de Invertir en Startups. También fue una charla (video).

As startups and tech investing has gone mainstream with things like AngelList, Shark Tank, The Social Network, the proliferation of accelerators and incubators, and the celebritization of founders and VCs, more money has flowed into the industry.

Most non professional investors interested in startups are starting to dabble in early stage companies as angel investors. Friends often send me deals they’re think about investing in, asking for advice.

Here’s a concrete example of a typical question from a successful entrepreneur friend looking to invest:

I am starting to look at some investments in startups that have proven initial product-market fit and revenue traction with positive gross margins. I have found some great opportunities [and] I am only targeting businesses that meet my personal criteria. My biggest concern is how I should evaluate the businesses from a valuation perspective. Is there any guide suggested on this?

I personally am finding companies that claim to have a higher valuation than my own company which has greater revenues and faster growth rates, etc. So, that puts off a bit of an alarm in my head but I realize it’s normal in the VC world. I don’t really know how to value a VC backed start up.

I decided to share my answer: Continue reading…

My 2016

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Ever since I started writing here, I’ve done a year end post summarizing what I’ve done in the past year. These posts are mostly for me, so that I can look back and remember what I did, what I was thinking and what was important to me each year. Previous versions (2000s200920102011201220132014, 2015). Here’s what I did in 2016.

2016 followed on from 2015’s main two themes: focus and growth. In 2015, I started the process of eliminating distractions from Magma Partners and Andes Property and in 2016 I focused even more. I took Derek Sivers’ mantra of Hell Yeah! or No! that I started to implement at the end of 2015 to heart and said no to things that I wasn’t 100% excited about.

I not only implemented this framework for deciding to invest in new Magma portfolio companies, but also for speaking engagements, events, press opportunities, writing opportunities and more. Along the same lines, Tim Urban’s Your Life in Weeks helped me revalidate that time is my most precious resource. Thanks Derek and Tim.

I spent ~5 months in Chile, ~1 in other Latin American countries and the rest in the US. 6 months is the most I’ve spent in the US since 2010. It was good to be back more than a few months per year and I really enjoyed getting back to doing more business in the US. It was also great to see my family and friends more than I have for the past few years. My Mom finished a book project she’d been working on for multiple years and I was happy to be able to help her get it designed, edited and printed. Continue reading…

Tech Will Allow a Family to Live Well on $3500 per Year

So far, I’ve talked about some of the downsides of the massive change from AI and path dependency:

I wrote about how being compensated for our data might be a way out. But what about some other potential good news?

“Competing Without Software Is Like Competing Without Electricity” – Naval Ravikant

As technology impacts every industry and becomes as ubiquitous as electricity, we will see the vast majority of industries behave like the computer and software industries do: getting better each year, while deflating in price.

As Sam Altman, the head of YCombinator puts it: Continue reading…