FUNDRAISING IN LATIN AMERICA: OUR JOURNEY

Building a Venture Studio with the right capabilities to systematically build new startups requires, among other things, access to capital. Fundraising in Latin America has its own challenges and characteristics and after nine years doing it, we have acquired a massive amount of learnings that we believe are worth sharing. 

We met with our co-founder and CFO, Carlos Fernandez de la Pradilla to talk about our journey, the key learnings and the most valuable lessons other founders can elevate when fundraising in Latin America. 

HOW DID WE START? 

In the early days, around June of 2012,  Wenyi was leading the conception and structure of Polymath as a Venture Studio. As a foreign entering a new market her first move was to provide the seed capital to kick off the journey. Instead of fundraising from external sources in an unknown market, she wanted to focus on the creation of what we called Labs1.

Labs 1 was our first seed vehicle, which was focused on researching the transportation ecosystem in Colombia. At the time, a team of five, 2 designers, 2 business people, and an engineer observed urban mobility behaviors of real users in their daily lives. This research allowed us to surfaced complex market insights and exciting areas of opportunity. 

From smart bus stops to personal security networks, the team iterated and tested their ideas in the field until one concept, a safer taxi, began to take real action. By early Q3 of 2012, we had our first concept on the ground, Taximo, a data-driven vehicle leasing platform for Latin America’s ride-sharing market. We started fundraising with friends and family and then started our first approach with angel investors in LatAm. 

WHAT IS OUR FUNDRAISING STRATEGY? 

Our fundraising strategy has two levels of complexity, on one hand, early-stage fundraising in Latin America has its own dynamics, then we need to consider that fundraising for Ventures is very different than doing it for a Venture Studio, no matter the region. 

The value proposition of these structures is dramatically different. Venture Investors are usually big corporations, family offices, and VCs, which are mainly looking for economic returns, knowledge, and business synergies due to their structures. The venture’s structure is clear when considering disinvestment objectives and timelines. In this sense, the fundraising strategy for the ventures of our portfolio aligns with the expectations of the market. We build high-growth startups that can provide the desired results.

On the other hand, our value proposition as a Venture Studio mainly focuses on knowledge, learnings, and synergies, and lastly on returns. We know it is a long-term investment, primarily because we are not looking to sell in short periods of time, and that does not necessarily match with the expectations of the more traditional institutional investors.  

As a Venture Studio, we operate as a holding company that designs ventures from scratch. We leverage our entrepreneurial methodology, the right talent, our deep knowledge in the emerging middle-class, and the acquired expertise after nine years of building. This scheme allows investors to unlock richer partnerships, reduce their risk through a diversified portfolio, and access a broader network of talent, advisors, and experts. 

The evolution of our fundraising strategy for the Venture Studio considers a stronger relationship with Corporations looking to enter the digital native ecosystem along with proven entrepreneurs. This relationship does not necessarily reflect on direct investment, but it clearly unlocks valuable partnerships focused on co-building along with them. 

Our long-term strategy as a Venture Studio led us to build an ever-green funding structure, different than closed-end funds, which allow us to eliminate any predefined exit deadlines and better tackle the volatility of Latin America.

BIGGEST WINS FUNDRAISING IN LATIN AMERICA

After nine years and $41M of capital raised, we feel very proud of our results. First of all, as a portfolio, we have been able to raise relevant amounts both for capital and debt, which is truly significant considering the investment behavior in Latin America (without Brasil) and the nature of our structure which at the time was relatively unknown. This amount is a reflection of our work and the trust of our investors, who believe in the power of building for Latin America. 

Beyond our track record, we feel particularly proud of being part of the entrepreneurial ecosystem acceleration in the region; enabling the arrival of renowned international investors, 60% of our capital comes from outside Latin America, and building a stronger bridge of collaboration between local entrepreneurs, corporations, and family offices looking to extend their presence in the region.

Lastly, I would like to highlight the work we have been doing to bring methodologies and formality to the fundraising exercise. It is no doubt that within the startup ecosystem there is a gap between ideas and methodologies. In fact, one of the key reasons for startup failure is the lack of proper research before launch and the lack of formal tools to support pivots and achieve product-market fit. 

Amongst this, we made sure that our methodology covered these gaps. We have built an entrepreneurial toolkit that ensures proper research in the initial stages, we have also designed a validation stage that ensures we prove desirability and viability. Lastly, our studio structure allows supporting the designed ventures in the most advanced stages of the process. 

This ensures they have the right tools to cover potential pivots, continue applying internal methodologies to better understand the business, and access a platform of experts, resources, and stakeholders. 

FUNDRAISING IN LATIN AMERICA: OUR ADVICE 

• Fundraising is an ultramarathon, not a sprint. We have experienced 38 rounds of financing, over 2K pitchings, 6K investor leads, so you must know this is an ongoing process that requires continuous preparation and follow-up. 

• Fundraising is a fundamental skill of a startup CEO. As a Venture Studio that recruits founders, we always have this component in mind.

• Fundraising requires planning. Consider leaving some margin in your cash flow, and always have at least one additional plan. 

• Manage a disciplined process. Start by building your investment thesis, which will help you identify your target leads and qualify them. Once you have that structure, build your timelines to follow up and always consider that it’s not closed until the money is in the bank. 

• Each round is different. When you are raising Series Seed, you must prove that you have identified and articulated the problem and a good team. When you move forward to Series A, Investors are looking for Product plus Market Fit. Then Series B is all about scalability. 

• Always be honest. Good businesses do not need to be over-embellished. If you have built something differential, with a great team and a clear growth plan, feel confident you are starting with the right foot.  

• Nothing beats building a good business. So make sure you focus on your building methodology. This will support the first fundraising stages when you need to prove the value of your concept.