"The Case for Venture in Latin America" was the theme of my presentation at this year's LAVCA annual conference in New York. I am sharing the slides here with the hope that they can help VCs, founders, and LPs to make the case for why "LatAm does it best" when it comes to creating world-class technology companies. Please repost and share the love.
The pitch is simple, and uses data to refute some of the classic objections we often hear (depicted in the memes in the slides - trust me, it was funnier live):
1. Successful Latin American companies were forged in a challenging business environment; they are stronger and more resilient precisely because they have had to overcome such adversity as tax complexity, high cost of capital, lacking infrastructure, and talent scarcity
2. Companies that win in Latin America historically have won for longer (more resilient market caps) and have also won bigger (higher market share and returns than comparable peers in the US)
3. Tech (globally) shows concentration of returns and value in the winners. When you compound tech (sector) concentration with LatAm (geographic) concentration you magnify the opportunity and results of tech winners in LatAm (or "market dynamics trump market size" as we posit). This has given rise to the Triumphant Three - the triad of LatAm tech companies that are the world's best in what they do: Mercado Libre (commerce+finance+logistics+ads), Nubank (digital bank+financial services), and iFood (food delivery+restaurant ecosystem). (More data on these in Atlantico's annual digital report)
4. We are seeing LatAm companies expand globally, with a number of unicorns showing global traction (Wildlife Studios in gaming, Wellhub in wellness, Hotmart in digital content / creator platform, and CloudWalk, Inc. in payments)
5. Established tried and true paths to liquidity as companies go public in both the US and local stock markets and exit via billion-dollar acquisitions. Latin America has delivered more billion-dollar exits and created more market cap than other emerging economies like India and Southeast Asia despite historically having less than 1/10th the level of venture capital
6. LatAm venture portfolios reflect the tech company success stories outlined above. Over the last decade, LatAm venture funds have significantly outperformed global venture benchmarks (Cambridge Associates, Burgiss) and over-indexed on funds in the global top quintile as well as global top quartile (24% of LatAm funds perform in the global top quintile, and 52% in the global top quartile). If we filter for just DPI (distributed capital), the story also holds (10% in global top quintile and 43% in global top quartile)
7. Investments in venture capital have also outperformed investments in historically high-yielding fixed income (CDI in Brazil), the local stock market, as well as the S&P500.
Finally, we go through reasons to remain optimistic in the future. We welcome your questions and comments. Enjoy!
Love this! Definitely a must-read!