Over the past five years, Amazon has slowly expanded into Latin America, testing the waters in Brazil, Argentina, Chile, and Mexico.
Despite the Seattle-based giant’s explosive success in the United States, Amazon has not yet made inroads as quickly in most of Latin America.
Part of the challenge is that Latin America already has its own e-commerce giant: MercadoLibre.
Founded in 1999 by Hernan Kazah and Marcos Galperin in Buenos Aires, Argentina, MercadoLibre is now the e-commerce site of choice in Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, Ecuador, Guatemala, Honduras, Peru, Panama, Uruguay, and Venezuela.
In Latin America, 47% of online shoppers buy on MercadoLibre while only 17% use Amazon. In Mexico, where Amazon offers similar services to the US, 38% of online shoppers still use MercadoLibre while just 21% use Amazon.
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: (more…)