I’ve been in Latin America for a little over eight years, first going to Chile in 2010. I spent the first five in Santiago, Chile, first going through Start-Up Chile, starting Andes Property and then cofounding Magma Partners. Since 2015, I’ve split my time between Colombia, Mexico, Chile and the US, and have been able to spend time in Argentina, Brazil, Peru, Bolivia and more, as we expanded Magma Partners across the region. I’ve truly been a nomad. I haven’t spent more than 6 weeks in a row in any location since I started this odyssey.
During my 8 years in Latin America, I’ve learned about culture, doing business and the opportunities available to both local and foreign investors. I’ve been writing about Latin America since 2010 and having conversations with top entrepreneurs and investors on the Crossing Borders Podcast since 2017.
Crossing Borders: A Venture Capitalist’s Guide to Doing Business in Latin America is a way to share what I’ve learned, along with these amazing entrepreneurs’ stories. My goal is to help foreigners and locals interested in pursuing business in Latin America get a jump start on their research. I also want help the Latin American entrepreneurs covered in this book share their stories more broadly.
In the US, most people gloss over payment processing because almost everyone has a credit card, Paypal account, or another simple way to pay. Developers use Stripe and can process in seconds. For consumers, Amazon even created one-click purchasing for some customers and physical buttons that automatically reorder your favorite products.
In China, paying is even easier; almost everyone uses Wechat or Alipay to scan QR codes and pay for everything automatically without ever taking out their wallet.
Startups have filled almost every niche in the payments industry, providing solutions for any vendor. Need to pay someone for something you bought in an online shop? PayPal can help. Setting up online payments for your business? Try Stripe. Want to compensate your roommate for your half of the gas bill? Venmo can help you do that.
We tend to take these solutions, as well as more traditional payment systems such as credit cards, for granted in the US. Only 6.5% of households in the US don’t have a bank account, although 18.7% of households are considered underbanked. If someone in the US wants to sign up for a Netflix account or buy a t-shirt online, they enter their credit or debit card information, and that’s it.
In Latin America, completing an online transaction is not so simple.
In the startup world, success always attracts copycats and competitors. As a result of past successes, Latin America’s food delivery industry is one of the most competitive in the world. Brazil’s iFood, a subsidiary of tech giant Movile, became one of the biggest players in the Latin American startup ecosystem, raising US$500M from Naspers and other international investors, in what many consider to be the largest round in Latin American startup history. iFood is growing incredibly quickly, registering 390,000 daily deliveries, a 109% increase from 2017. iFood’s CEO, Carlos Moyses, recently appeared on my Crossing Borders podcast to talk about the growth of Brazil’s biggest delivery company.
Rewinding back to the early 2010s, food delivery in Latin America had its first peak long before the region truly went digital. Latin America’s food delivery hit the news because Delivery Hero, a German food delivery conglomerate, secured international reach through a spate of acquisitions in the region.
In many ways, these deals spurred the next generation of entrepreneurs in the food delivery space and created many of the most popular apps Latin Americans use today.
Food delivery fits into a trend that is shifting Latin American shopping patterns online. When PedidosYa was founded in 2009 in Uruguay by Alvaro Garcia, Ariel Burschtin, and Ruben Sosenke, just 27% of Latin America’s population had Internet access.
Today, 66% of Latin Americans have Internet access, and in Argentina, Chile, Brazil, Ecuador, Paraguay, and Uruguay, more than 70% of people are Internet users.
Venture capital, especially in Latin America, can often seem like a black box where founders have very little access to information about what happens on the inside of the firm. I’ve gotten so many questions about how to apply, when do it, pitfalls to avoid and so many more.
On the last episode of Crossing Borders, I interviewed Komal Dadlani, CEO and cofounder of Lab4U. One of her conditions for the podcast was that she could then turn the microphone around on me and ask all the questions she wanted to know about venture capital…of course I said yes! It was a great to share what we’ve learned in five years of VC and share how to best raise venture capital form Magma Partners. This episode is a combination of the questions Komal asked me and the most common questions I get via email, Twitter, Facebook, and LinkedIn.
As Komal wondered, many entrepreneurs ask themselves how VCs analyze companies that they are considering for investment, and why they choose to invest in a specific companies. Others are curious about dilution, deal structure, or even the operations of the Magma team.
This episode was an opportunity to answer those questions. If one person asked, then at least ten people were probably thinking the same thing. Check out this episode to hear me answer Komal’s questions and delve into the most common questions I get on social media.