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About a year ago, we shared with you a reason to feel despaired, depresso, doomed: the Series B crunch was coming to LatAm.
Only 42% of the demand was being fulfilled by the supply, which is capitalese for: there hasn't been enough VC money available for startups in that stage. And that was a much higher gap than what other stages were showing.
But since then, LatAm has seen a surge of relevant Series B rounds including Pomelo, Incognia, Nomad, Tractian, Conta Simples, QI Tech, and, more recently, Simetrik. Nossa!
Is that... a refreshing breeze we're feeling? The winds of change arriving? The equinox being kind to our little crops for once? 💨
We're not delulu, we know that winter is not over (yet).
But panicking is not the solulu. And you know us, we like to see the glass half full, but keep our feet on the ground.
So let's break down what this means for your startup's future and how you make sure that supply goes to you when it's your time to demand ask for money.
Series B is where we start to see the line between build capital and growth capital.
In case the name never clicked for you, growth capital is a business of massive scale.
Take it from Paulo Passoni, Head of Growth Investing at Valor. In a recent interview to Astella Playbook, he made it clear they're looking for the IPO-bound. Those are the real fund returners, the ones that make the math work. 🧮
A quick comparison: for a pre-Seed or Seed fund, a startup sold for US$200M makes for a great ROI for everyone – likely above 20x.
A growth fund, however, can easily have a US$200M valuation as their starting point for a new investment. Twenty times that means becoming a US$4Bn company. 👀
To investors, the potential needs to be clear – ie. as a founder, you should be able to communicate how you'll get there (or at least close since return multiples vary a lot between stages).
"To be at Nasdaq, a company needs US$250M in revenue if they're software-based, and US$500M if not, since structural margins are much lower," says Paulo.
💭 Pause for reflection:
What markets can produce these numbers for your startup?
We hate to say it but… Chile alone won't cut it. Neither will Colombia. Perhaps not even Mexico or Brazil. 🤏
Paulo shares two paths:
1. Expanding operations globally
That can mean having a Latin American strategy - where Brazil is a must - or exploring other regions.
But there's a caveat: the easiest it is to replicate a solution in different countries (read taxes, logistics, regulation, etc), the more exposed one is to competitors. So you better be sure you're either cracking a bunch of complexity and building a strong moat, or that you're the best one around.
2. Acquiring global customers
Easier said than done, but if your product is genuinely good and doesn't require large local operations, that's a great position to be in.
That was the path taken by Simetrik, a Colombian startup founded by Santiago Gomez and Alejandro Casas that offers financial automation in a single platform for customers in over 35 countries. 🤯
Two years after raising their US$20M Series A, Simetrik just announced a US$55M Series B. Santiago compared the two experiences from a founder's perspective:
"Strategy-wise, showing a global opportunity was key. Growth capital is thinking about really big markets. And that's something I always say: LatAm is huge, yes, but there's more out there."
But Latitud, I'm still trying to convince my tía to lend me $10,000 for my MVP, what does this have to do with me?
Everything, Kevin. Everything.
If there's one thing most entrepreneurs (should) have in common, it's a long-term vision. It's usually matched with high ambition.
👉 It's always a good time to assess the size of your total future market and the steps you have to take now to get gradually closer to your goal in 3, 5, or 10 years.
You also want to make sure that the investors you look for early on can connect you with growth capital funds once you're ready to raise a Series B and so on.
TLDR; forget about thinking big and start thinking HUGE. 🚀 That's if you ever want to get past the Series A, of course.
Need some inspiration? Santiago told us all about their journey at Simetrik on the Latitud Podcast:
Hot News Ahoy! ⛵
🌍 Yuno who it is
Yuno, a Colombian payments orchestration fintech and Latitud portfolio company, just closed a US$25 million Series A. With this new capital injection from DST Global Partners, Andreessen Horowitz, Tiger Global, Kaszek Ventures, and Monashees, the startup founded by Julian Nuñez and Juan Pablo Ortega aims to solidify its presence in Asia, Europe and Africa.
🌼 Don't stop believin'
Hold on to that feeeeliiiing that spring is very close. Latitud Ventures partners Tomas Roggio and Gina Gotthilf shared with Crunchbase News 6 reasons to stay optimistic about the LatAm ecosystem in 2024 – and we're putting them up our walls.