Angel Ventures: On the lookout for progress-driving tech capabilities in Latin America
By Purva Aggarwal – US-based global investing firm Capria Ventures made its second investment in Latin America during the pandemic in January, with Mexican VC fund Angel Ventures. The Mexico City-based firm invests in entrepreneurs across Latin America, with a particular focus on Mexico, Chile, Colombia and Peru.
Private Equity Wire caught up with Hernan Fernandez (above, right), founder and managing partner and Camilo Kejner (above, left), managing partner at Angel Ventures to find out more about their views on the impact of the pandemic on the Mexican economy and on the country’s start-up ecosystem, what sectors they are betting on in 2021 and the duo's outlook on growth in the LatAM VC space.
What are some of the main differences between emerging markets you are focusing on, such as Indonesia, versus the US, EU and Israel?
With both funds combined, we have over 70 nationalities among our limited partners that keep us updated about different ecosystems and business models. Developed markets have a strong hold of deep tech capabilities, but the markets we focus on are fast growing economies with big populations and rapid internet and mobile device penetration. Often such economies allow us to replicate successful models that might not work in developed economies such as the US.
What type of companies will you be looking at and investing in?
We invest in three types of companies. Firstly, we look for standalone and truly disruptive business models that are unique, at least for pan-regional Latin America. These companies can have either a very innovative technology or a very innovative business model based on existing technology, but they always have to be tech enabled.
Secondly, we invest in start-ups that are in very crowded verticals, but where we can pick out the winners. Often in a category from Mexico, from Columbia and maybe one more territory; we will invest in them simultaneously to get them to merge and form a larger pan-regional company.
Lastly, we look for a company that has clearly made a dent in their space and won a dominant position and is ready to scale up their market into other markets. We look for companies in the vertical such as FinTech, insure-tech, food tech, prop-tech, e-commerce, retail companies, health and biotech. We also continue to look at companies in agriculture and are in the bottom of the pyramid industries.
What has been the impact of the pandemic on the Mexican economy, and on the country’s start-up ecosystem so far?
Handling the pandemic was uncharted territory for many world leaders as there is not a single good recipe for anyone to follow. Mexico City is a dense city and has been heavily hit, and it’s unfortunate for most businesses except technology enabled business models. Many heavy hit sectors, like real estate or restaurants and hotel tourism are huge in Mexico. We hope that there's a plan to actually reactivate many of these sectors. We can also say that some of the venture backed businesses have had a good year in 2020.
What sectors will you be betting on in terms of moving out of the crisis and into pandemic recovery, either on a global scale or specifically to your region?
The adoption of e-commerce generally speaking in the LatAm region has skyrocketed. Yes, there will be some return to traditional retailers and traditional outlets, but e-commerce is going to continue to be a strong trend. FinTech of course, because the digitalisation of the economy and digitalisation of the unbanked population will now more than ever become a priority.
Some other places where I think adoption is growing, but not yet fully consolidated, might be big areas of opportunity such as distance learning through digital means. Telemedicine is another interesting field. In the food tech area, there are certain plays that we believe will make it a much more interesting industry to look at than it has historically been.
Non animal based proteins are growing everywhere in the world. Many companies are tackling plant-based protein in innovative ways. Even deep tech capabilities in Latin America or other emerging markets have been driving real innovation.
What's your future outlook for growth in the LatAm VC space with regards to the four countries you're focusing on?
The countries are certainly at different stages and there are people like us and other colleagues that are working towards integrating and narrowing the gap. There's a lot of consolidation in Columbia. Peru is behind Columbia in many senses, despite the number of viable companies that are growing tremendously.
Mexico and Chile are two very different markets. Chile's a mature market with limited players, nesting a small domestic market that is used by entrepreneurs for validation and for escalation. Mexico, on the other hand, is the more evolved market of the four where the bulk of the money for the region allows democratic access through funding by and for entrepreneurs. If you want to get an idea of size, Mexico is about 50 per cent of the size of those four markets combined, in most aspects.