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La Escuela del Sur #2: “Think Global, Act Local”

La Escuela del Sur is a series of columns by Juan Pablo Cappello, Co-Founder of PAG.law, as a part of our partnership to promote Latin American entrepreneurs.

La Escuela del Sur: How to Avoid Latin American Founders’ Most Common Mistakes

The Uruguayan artist and philosopher Joaquin Torres-Garcia in the 1930s took a world map, turned it on its head and placed Latin America in the center of the world.  In so doing, he created the “Escuela del Sur”(School of the South) movement with the tagline “Nuestro norte es el Sur”(Our destination is the South).

Joaquin Torres-Garcia understood that Latin America couldn’t continue to look “North” for inspiration and ideas.  He was challenging Latin Americans to think of themselves as being at the center of a dynamic, effervescent ecosystem full of great ideas, without having to rely on North American norms.  

In the Latin America’s TechnoLatino ecosystem we need to take inspiration from Joaquin Torres-Garcia. We need to realize that we have great companies and great investors.  We are capable of building a self-sustaining tech ecosystem that can address the issues that people face in Latin America.

This editorial is part of a series of articles for the collaboration between PAG and LatAm List. If you missed the last article, please find Mistake #1 here.

Mistake #2:  “Think Global, But Act Local

For the Latin tech entrepreneur the hardest truth to accept is: “There is not one person in Silicon Valley whose sole job responsibility is to find great investment opportunities in Latin America.”  

This fact reminds me of a famous short story by the writer Stephan Cran: “The man said to the Universe, ‘Sir, I exist.” However,” replied the universe, ‘The fact has not created in me a sense of obligation.:”  

It is as if Latin entrepreneurs keep going to Silicon Valley, knocking on doors, and saying “Sir, I exist” and the answer most of the time from VCs is “Congratulations on existing.  That fact doesn’t instill in me any sense of obligation.”

Of course, there are a few individuals and funds open to investing in businesses that have proven themselves in Latin America and are ready to scale.  However, this is a small minority of prospective international investors. The quandary for the Latin American entrepreneur is to understand how to target these few, open-minded international investors in Silicon Valley, New York and elsewhere.

The good news is, there is a proven strategy to entice international investors to your LatAm-based tech company and it doesn’t involve flying to Silicon Valley. This advice is: “Think Global, Act Local”.  

Before thinking about securing an international investor, most  Latin American entrepreneurs first need to find a local fund or investor.  This local investor should also have credibility with investors in Silicon Valley.   

On the bright side,  there have never before been so many quality local investors in LatAm.  Beyond the established local funds like Kazsek, Monashees, NXTP, Redpoint eventures and 500 Startups/Luchadores who helped create the TechnoLatino over the past 10 years, there is a whole new crop of smaller VC funds that are reshaping the tech ecosystem in Latin America.  

In the past few years, funds like Magma Partners, Magnetico Ventures, and Endurance Investments have been appearing to support early stage investments as well. These VC funds generally have less than US$50 million to invest, focus on a specific country or industry, and write checks between US$250K to US$1M.

The goal for most entrepreneurs in LatAm should be to work with  one of these local funds who can lead their company’s Seed round or Series A round of financing.  When the company is ready for its Series B round, that local fund can become the startup’s champion to prospective international investors.  

The best way to create interest in a Latin American tech company is for a Latin fund manager to reach out to an international investor and say “We invested in this great company last year.  Great founder, great technology and currently scaling. We are going to continue to invest in the company, but given our fund’s size we aren’t going to be able to lead the company’s next round of financing.  So we are bringing this opportunity to you. Would you be interested in leading the company’s next round, with us co-investing?”

What makes this introduction to your company so compelling is you aren’t the one saying great things about your company.  There is a real investor, who has put their money into the company and has watched the company’s progress and is now touting its investment potential.  

In short, if you want to attract the best investors in Silicon Valley, start by attracting the best investors in Latin America to your company and let them make introductions for you.

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In his next blog post Juan Pablo will address another common mistake that entrepreneurs from Latin America make.  Juan Pablo can be reached at jp@pag.law

 

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