INSUBCONTINENT EXCLUSIVE:
Nathan LustigContributor
Nathan Lustig is an entrepreneur and managing partner at Magma Partners, a seed-stage investment fund in
However, Silicon Valley-style Series A rounds in Latin America are still rare, especially outside of Brazil and Mexico.Even in Silicon
Valley, only a small percentage of startups can bring together enough pieces to raise a Series A round
Jacob Mullins, a partner at Shasta Ventures, recently published an article on Medium on what it takes to raise a Series A round in San
Francisco today, which inspired my take for the Latin American ecosystem.In the piece, he lays out the table stakes for any startup looking
to raise Series A capital, including product-market fit, a strong revenue model, 2x or 3x YOY growth, a data-driven go-to-market strategy, a
compelling market opportunity, a great team and a great story
These prerequisites apply to startups anywhere in the world
However, if these requirements are the minimum needed for a Series A in San Francisco, startups outside of the Valley, including in Latin
of later-stage rounds startups are raising across the region
SoftBank also committed a $5 billion fund for Latin America, outstripping all previous funds by an order of magnitude.Exits to Latin
by Falabella for $138 million
These deals reveal a growing concern from large companies in Latin America about competition from startups.More YC grads: Latin America sent
at least 10 startups to the Y Combinator, and many more to other international accelerators, in the past year
These companies include Grin, Higia, Truora, Keynua, The Podcast App, SkyDrop, UBits, Cuenca, BrainHi, Pachama, Calii, Cuanto, Pronto and
Fintual.2018 really was a breakout year for Latin American startups.So who is raising Series A rounds in the region?Within the list of 30 or
so companies that have managed to raise a Series A in Latin America in the past year, most of the startups fit into a few categories
There is also significant overlap between the investors who are pursuing tickets of this size, most of whom are located in major markets
like Mexico and Brazil, or have offices in Silicon Valley
A closer examination of these startups reveals patterns in what it takes to raise scale capital in the Latin American market
Among those to raise Series A rounds within the past year were:Grin and Yellow (now Grow Mobility): Bird/Lime clones raised $150 million as
Grow Mobility from GGV Capital and Monashees.LentesPlus: 1-800-Contacts clone raised $5 million from Palm Drive Capital, with participation
from IGNIA and InQLab.Mercadoni: Instacart clone raised $9 million from Movile.Uala and Albo: Monzo/Revolut clones raised $10 million from
Soros, Greyhound Capital, Recharge Capital and Point 72 Ventures, and $7.4 million from Omidyar, Greyhound and Mountain Nazca,
respectively.International investors often see copycat models as less risky, because the model has been tested before.Logistics and
international investment from Valor Capital and NXTP Labs starting in their first round
They have also received funding from Soros, Goldman Sachs and Blackstone in later rounds
investors, including IFC, Monashees, MercadoLibre Fund, Variv Capital, Sierra Ventures and Sinai Ventures
operates separately from the rest of Latin America, and not only because of the language difference
Brazil has Brazil-centric funds and its startups follow their own rules, because the market is big enough to accommodate companies that only
(and some Mexican) startups in edtech, healthtech and fintech, including Neon, Sanar, Mosyle, UnoDosTres and Nexoos, raised Series A rounds
Key investors included Quona Capital, e.Bricks Ventures, Elephant and Peak Ventures
Brazilian startups tend to scale more quickly at all sizes; Creditas and Loggi were able to raise their Series A in 2016 and 2014
In 2018, they were already raising $55 million at Series C and $100 million+ Series D from investors such as Vostok Emerging Capital, Kaszek
Ventures, IFC, Naspers and SoftBank
However, startups in these industries in other Latin American countries might not find it as easy to raise larger rounds.How much to raise
in a Latin American Series ALatin American valuations are noticeably lower than their Silicon Valley equivalents
A Series A round in a small or medium Latin American market like Chile or Colombia might end up looking a lot like a San Francisco seed
Valuations and amount are bifurcated: those that have access to Silicon Valley-style capital can get higher valuations and bigger checks
model should all align to create an unbeatable business. Outside of Brazil or Mexico, startups should not expect to raise more than $5
million in a Series A, even if they are receiving co-investments from the U.S
The average Series A round in the U.S
hit $11.29 million in 2018; however, the top 10% of deals averaged more than $60 million.In Latin America, a Series A could range from as
little as $1 million to around $10 million in most countries
Brazil and Mexico might break the mold, but startups looking for growth capital in Latin America should not expect to raise more than $5
million if they are not in a massive market
While these are different industries and comparing apples to oranges, the orders of magnitude seem right.If we compare in the same industry
but different years, the results are similar
Neobanks in smaller markets, like albo and Uala, raised $7.4 million and $10 million, respectively, in their Series A rounds.To date, the
Lambrecht, Eduardo Musa, and Renato Freitas
America or USA?There are still very few entirely Latin American funds investing at Series A
Most of the time, Latin American startups must look to Mexico and Brazil, or beyond the region to Asia and the U.S., to fund rounds beyond
Startups might also find Series A-level investment from major regional tech leaders who are scouting acquisition opportunities, like
Movile has invested in and acquired many Latin American startups to increase their mobile offerings for its customers.While some funds in
Latin America participate in investments of this scale, most Latin American startups target at least a part of their Series A rounds from
Latin American startups have been able to reach U.S
VCs in one of three ways: through top-tier accelerators, by selling to consumers in the U.S
market or by taking on a copycat model
U.S.-based VCs Accel Partners, Sequoia Capital, Andreessen Horowitz, Base10, Liquid2 Ventures, Quona Capital, QED, IFC and Sierra Ventures
have all made multiple contributions to Series A rounds in Latin America within the past year.Raising a Series A round in Latin America
todayRaising a Series A round anywhere means checking a lot of boxes
In Latin America, raising a Series A also means knowing where to look for capital, and which models are receiving funding.Although there is
no instruction manual for raising a Series A anywhere, following in the footsteps of companies that have done so successfully can be a wise
investing in Latin American companies
Founders can use this information to structure their fundraising efforts and optimize their time to raise a Series A and continue to scale.
