Venture Equity Latin America

WORLDTRADE EXECUTIVE
VENTURE EQUITY
LATIN AMERICA
Despite Macroeconomic Tapering, 2013 PE/VC
Confidence Still Strong in Latin America
By Linda Zhang (Thomson Reuters)
Editor’s Note: This issue will be one of two special editions of VELA in which we will
provide detailed analysis on private equity and venture capital activity in the region
based on proprietary VELA data from the first six months of the year. This will be
provided in lieu of a 2013 Mid-Year Report.
Overview
The “impressive comeback” of private equity and venture capital activity in
Latin America and the Caribbean by the end of 2012 set high expectations for
2013.1 Despite the macroeconomic decline in the region, private equity and
venture capital data showed that positive factors from 2012—including the
continued attraction of middle class consumers and a spike in Internet and IT
deals—carried over to the first half of 2013, driving a healthy rise in investments
overall in the region.
See PE/VC Still Strong in Latin America on page 2
Mid-Year Review Shows 2013 May be
Mexico’s PE/VC Moment
By Roberto Charvel (Vander Capital Partners)
It is easy getting lost in all the business acronyms and jargon created by an
economist or equity analyst in a midtown office in New York. Getting lost has
not always proven to be bad for some countries. Think about the BRIC acronym.
In his infamous 2001 white paper, Jim O’Neill from Goldman Sachs did not only
start the hype around emerging markets, but also marginalized the rest of them
including Colombia, Peru, Turkey, Indonesia or Mexico, among others.
Without a doubt, the past decade and the 21st century began with China becoming a partner of the World Trade Organization in 2000 and the effect of China’s
economic ascent on some countries like Brazil which exported coal, oil and soy
to China, fuelling its own growth. However, since 2008-2009, the pieces of the
economic puzzle have shifted and some of the ugly ducklings of the past decade
seem to be making a comeback.
The beginning of 2013 brought good news to Mexico which had been lagging
behind other emerging markets. At the end of 2012, Nomura, a Japanese inSee 2013 May be Mexico’s Moment on page 10
November 15, 2013
Volume XII, No. 18
In This Issue
ANNUAL REPORT
Despite Macroeconomic Tapering,
2013 PE/VC Confidence Still Strong
in Latin America
1
Mid-Year Review Shows 2013 May
be Mexico’s PE/VC Moment
Andean Region Stands Out for
Fund Raising Activity
1
17
DEAL MONITOR
4
DEAL AMOUNT PER COUNTRY
9
DEAL MONITOR: MEXICO 14
DEAL MONITOR: ANDEAN REGION
19
INTERVIEWS
VC Firm IGNIA Thrives on
Base of Pyramid in Mexico
15
ROUND UP
500 Mexico City Unveils Newest
Class of Startups; Latin Idea
Ventures Backs Mexican
Startup Linio; Brazil-based
Technology Startup ContaAzul
Receives Series B Investment;
Multilateral Investment Fund
Invests in Innovative Colombian
Seed Capital Fund
20
RECENT PRIVATE EQUITY IN
LATIN AMERICA
Follow @thomsonvela
8
Annual Report
PE/VC Still Strong in Latin America
Continued from page 1
Within the first six months of 2013, a total of $3.5
billion was invested from 101 transactions, a 96%
increase in deal value and 98% increase in deal number from the same period in 2012, suggesting that
performance in the region is on the right track for a
healthy rise ahead, though perhaps not a record year.
Deal-making activity still felt short of peaks in capital
from mid-year 2011 by 20% and in 2010 by 43%, yearover-year, when levels reached a record high.
Despite the macroeconomic decline
in the region, private equity and venture capital data showed that positive
factors from 2012—including the
continued attraction of middle class
consumers and a spike in Internet
and IT deals—carried over to the first
half of 2013, driving a healthy rise in
investments overall in the region.
Though Brazil faced a shrinking GDP in 2013,
rising inflation, and renewed political unrest, the
country’s private equity and venture capital market remained relatively robust. Brazil continued
to receive the highest number of private equity
and venture capital deals, by far, in the first half of
2013. The coutnry captured 57 deals, or over half
of the recorded transactions in the region, matching performance in the same period a year earlier.
In addition, total deal value in the country grew
from $1.7 billion to $2.3 billion, a 35% increase
year-over-year, suggesting the larger financial
slowdown and related factors have not deterred
investors from opportunities in Brazil just yet.
Middle Class Growth Still Key; Internet,
Mobile, and IT Reach Record Levels
From a macro standpoint, private consumption
grew continuously throughout 2012 until it hit a
peak at 3.9 percent growth in the final quarter of
the year. By the first quarter of 2013, rates dropped
to 2.1 percent and has since only slightly improved
to 2.3 percent six months into the year. The meager
growth has suggested that the hype surrounding
the rise of the middle class and its hungry consumers has somewhat calmed down.
© 2013 Thomson Reuters/Tax & Accounting
Yet, private equity and venture capital data from the
first six months of 2013 indicated that investor confidence in the consumer middle class has remained
high, relative to other industries, and has emerged
in a slightly different form since 2012. Six months
ago, e-commerce was the exciting new leader in
consumer-related investments, capturing the largest proportion of any single sector, exceeding even
energy, a historical favorite. However, two quarters
later, while the number of e-commerce deals remained relatively constant—though dropping from
9 to 8 deals in the same period in 2013—Internet, IT,
and mobile investments have skyrocketed instead.
In the first half of 2013, there were 38 deals captured
in Internet, mobile and information technology
sectors combined, a 280% increase in deal number
from the same period in the prior year when only 10
deals were recorded. The spread in the breakdown
among the individual industries was even, with 13
deals each in the Internet and IT sectors and 12 deals
in mobile applications. In total, they made up 39%
of total deals in Latin America and the Caribbean in
the first half of 2013, up from 22% of all deals in the
same period in 2012.
Infrastructure Sector Thirsty for
Private Capital
Beyond the technology boom, the 2012 VELA YearEnd Report predicated a rise in infrastructure investments in Latin America and the Caribbean.2 Faced
with the rising needs of the middle class as well as
the upcoming 2014 World Cup and 2016 Olympic
Games, data showed that the region is thirsty for
capital to support its infrastructure growth, increasingly seeking private sources.
Brazil, Mexico, and Haiti took on a total of seven
investments from private equity and venture capital firms, a jump from no investments in the same
period in 2012. The infrastructure fund managed
by Goldman Sachs agreed to acquire an 18.7%
stake in Red de Carreteras de Occidente, which
runs approximately 760 kilometers of highways
in Mexico. In addition, BNDESPar, the private
equity arm of the national bank of Brazil, agreed
to acquire Triunfo Participações e Investimentos,
a Brazil-based infrastructure firm engaged in the
operation of highways.
November 15, 2013
Annual Report
Paul Capital’s Duncan Littlejohn, who directs the
firm’s Latin American operations, said, “There’s a
large infrastructure deficit that’s being addressed
and is attracting a lot of capital to the region”. He
also noted that most of the private equity investments he sees target Brazil or Mexico, the two
countries experiencing the most recent political and
financial reform.
Other countries beyond Brazil and Mexico have
expressed a need for private capital in building
infrastructure projects as well. “Private equity and
private-public partnerships are needed, particularly
for infrastructure [in Peru],” said the former President of Peru Alejandro Toledo during an exclusive
interview with VELA. “If we diversify the economy,
and if we continue growing, we need to attract capital
investments for infrastructure, roads, airports, in
order to be competitive in the world.”
“Now, investors are realizing that if you don’t grow
the early stage end of the financing chain, you will
run out of mature companies with the right strategy,
corporate governance and financial transparency to
invest in,” she noted. A case in point, in April, the
MIF provided $5 million to NXTP Labs, the leading
seed fund accelerator in Latin America. The Labs
invest up to $25,000 in each of their selected start-ups
in return for small stakes of between 5% to 10%.
Largest Assets Reach Higher
Peak than Last Year
In the first half of 2013, large assets grew in both size
and number compared to performance in the same
period in 2012. In particular, the healthy rise shows
prominent investors—like Gávea Investimentos,
Actis, and General Atlantic—are maintaining their
See PE/VC Still Strong in Latin America on page 4
Regional VC Deals Take Center Stage
After Brazil and Chile, regional deals captured the
largest proportion of deal dollars with $181 million
from eight deals in the first half of 2013, compared
to merely $3.2 million raised from six deals in the
same period a year ago. The number of regional
deals has consistently increased each year for the
past five years. All the deals, expect for one in education, fell in the e-commerce or technology sector,
highlighting the expansion of the technology sector
across the region.
Leading venture capital firms took an active role in
driving the number of early stage investments, indicating the newfound and likely sustained interest
in this small but growing venture capital sector. The
most active firm was the well-known Kaszek Ventures, which invested in five deals, including three
in Brazil and two in Chile. Also in the spotlight this
semester was Monashees Capital, which made three
investments in Brazil, and Rocket Internet which
invested in two Brazilian technology startups.
To further confirm the attention that venture capital
is drawing in the region, this was the first time in
recent history that all completed regional deals in
the first half of the year were in venture capital
rather than private equity. Susana Garcia-Robles, the
Principal Investment Officer at the Inter-American
Development Bank’s Multilateral Investment Fund
(MIF) pointed out that previously, Latin America depended on its most consolidated industries—namely,
private equity—and “it was hard to find angel investors, seed funds, and venture capital funds.”
VENTURE EQUITY LATIN AMERICA
Venture Equity Latin America
Published by WorldTrade Executive,
A Part of Thomson Reuters
Thomson Reuters/Tax & Accounting - R&G. Customer
Service Dept. PO Box 966, Fort Worth TX, 76101-0968
Tel: (817) 332 3709
Email: [email protected]
Publisher:
Gary A. Brown
[email protected]
Editor:
Linda Zhang
[email protected]
Assistant Editor:
Heather Martel
[email protected]
Correspondents:
Elizabeth Johnson
[email protected]
Dan Weil
[email protected]
Venture Equity Latin America is published 20 times
a year by WorldTrade Executive, a part of Thomson
Reuters. Venture Equity Latin America is a trademark
of Thomson Reuters. All Rights Reserved. Entire
contents copyright 2013 by Thomson Reuters/Tax &
Accounting. Reprinting, transferring or forwarding
contents, in whole, or in part, is a violation of federal
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questions, please call (817) 332-3709 and ask for
Subscriber Services.
© 2013 Thomson Reuters/Tax & Accounting
Annual Report
PE/VC Still Strong in Latin America
Continued from page 1
• General Atlantic’s investment in SMILES, a subsidiary of Brazilian airline GOL Linhas Aéreas
Inteligentes, for $200 million in April
• General Atlantic’s minority acquisition of XP
Investimentos, a leading independent brokerdealer and financial supermarket in Brazil for
$170 million in February
• The acquisition of equity in infrastructure company Triunfo Participações e Investimentos by
BNDESPar, the investment arm of the Brazilian
Development Bank, for $166 million in April
• Global Equity’s $100 million investment in Native, a producer and processor of fish products,
in February
appetite in the region. Among the 45 disclosed deals
recorded by mid-year 2013, 9 or 20% surpassed $100
million in individual values, two more deals than
recorded in the first six months of 2012. Combined,
large assets of over $100 million made up nearly $3
billion, or 81% of all capital invested in the region
in 2013 so far, or about twice the total value of the
same pool of largest assets in the first half of the
prior year.
The 9 investments over $100 million completed by
mid-year 2013 include:
• The joint investment of $700 million in rental car
company Unidas by Gávea Investimentos, Vinci
Partners, and Kinea Investimentos in Brazil in
June
• Initial Capital, 500 Startups, Rhodium, e.Bricks
Digital’s investment in Brazilian video advertising company Samba Ads of $500 million in
February
• Larrain Vial’s investment of $500 million in Cruz
Blanca Salud in Chile through its Larrain Vial
Global Private Equity Fund in January
• Emerging markets private equity firm Actis’s
acquisition of a 60% stake in Chilean wind and
solar energy provider Aela Energía in June
• International Finance Corporation’s investment
of $225 million in Chile’s CorpBanca through its
IFC African, Latin America and Caribbean Fund
in February
A Healthy Rise in PE/VC Ahead
Despite signs of macroeconomic decline, industry
experts throughout the first half of 2013 have expressed their sustained interest in private equity
and venture capital opportunities in Latin America
and the Caribbean. The data from the first half of
the year—the hike in deal value and number along
with the shifting spotlight to Internet, IT, mobile sectors—has confirmed that the region is experiencing a
healthy intake of capital and attention that will set a
positive foundation for the rest of the year. o
1 2012 VELA Year-End Report, 5.
2 2012 VELA Year-End Report, 2.
Deal Monitor: 1H2013 (by investor)
Investors
Fund
Portfolio Company
Investor Type
Amt°
Stake
Country
Industry
Other Investors
Date
3i Group, Siguler Guff &
Óticas Carol
VC
54.8
Brazil
500 Startups
Runrun.it
VC
1
Brazil
Abril Participações
Rock Content
VC
0.5
Brazil
Accion International
Salud Facil
VC
Actis
Aela Energía
PE
Company, Neuberger
Retail
Mar 2013†
Berman
Information
May 2013†
Technology (SaaS)
Digital News
Internet (content
Ventures, Napkn
marketing)
Ventures, e.Bricks
May 2013†
Digital
Cruzeiro do Sul
Actis
Mexico
290
60.00%
Chile
50.00%
Colombia
PE
Brazil
Alianza Fiduciaria
Educacional
Advent International
ALSTIN, Lakestar
Natue
VC
8
Brazil
Ondore
VC
1.5
Mexico
ZoeMob
VC
0.5
Brazil
Alta Ventures Mexico
Altivia Ventures
Alta Ventures Mexico
PE
© 2013 Thomson Reuters/Tax & Accounting
Financial Services
(affordable credit)
Energy (wind and
solar)
Education
May 2013†
Mainstream
Renewable Power
May 2013†
(universities)
Financial Services
E-commerce (health
Jun 2013*
Jun 2013†
products)
Information
Mar 2013†
Technology (big data)
Mobile (family safety)
Jun 2013†
e.Bricks Digital (RBS
Group)
Apr 2013†
November 15, 2013
Annual Report
Anjos do Brasil,
Redpoint e.ventures,
Altivia Ventures
Startupi
VC
0.3
Brazil
Internet
Initial Capital,
Mountain do Brasil,
Apr 2013†
Trinidad
Anjos do Brasil
Atomico, W7 Capital
Axon Capital
Amerigo Colombia Ventures
Axon Capital
Amerigo Colombia Ventures
Startupi
Bebe Store
VC
VC
RedSeguro
VC
Colombia
ClickDelivery
VC
Colombia
PE
Brazil
Knijnik Integrated
Axxon Group
Engineering
Brazil
Brazil
10.2
Internet
E-commerce
Internet (car
Investements
Mar 2013†
Mar 2013†
May 2013†
insurance platform)
Internet (restaurant
May 2013†
platform)
Information
Feb 2013†
Technology
(integration)
Banco Nacional de
Desenvolvimento
Economico e Social
Granbio Investimentos
PE
Integra Arrenda
PE
15.00%
Brazil
Energy (ethanol)
May 2013†
Mexico
Transportation
Feb 2013†
Brazil
Infrastructure
Apr 2013†
Brazil
Consumer (adhesives)
May 2013†
(BNDES)
Beamonte Investments
Triunfo Participações e
BNDESPar
Investimentos
PE
166
BTG Pactual Principal
CCRR Participações
Investments Investment
Fund
Calera Capital
Management
Calera Capital Partners IV
Ironshore
PE
32.70%
PE
Bermuda
Financial Services
Feb 2013†
(insurance)
Great Oaks Venture
Capital, Nexus
Venture Partners,
Regional
Capital Indigo
Assured Labor
VC
5.5
(Mexico,
Mobile (job search)
Brazil)
Kima Ventures,
Enzyme Venture
Apr 2013†
Capital, Fabrice
Grinda and Jose
Marin
Capital International,
Capital International Private
Acon Investments
Equity Fund VI
Vetra Energia, S.L.
PE
Colombia
Energy (oil)
Jun 2013†
Cartesian Capital Group
Grupo MetroNet
PE
Mexico
Internet (data center)
Mar 2013†
China Fishery
Copeinca
PE
Peru
Confrapar
Fundo Horizonti
Illusis
PE
2.3
Brazil
Confrapar
Fundo Horizonti
Starline Tecnologia
PE
1.5
Brazil
Agriculture (fishing
Feb 2013†
business)
Mobile (game
developer)
Jun 2013†
Information
Technology
May 2013†
(educational software)
Darby Overseas
Colombia Transportation
Investments
Infrastructure Fund
Darby Latin American
Darby Private Equity
Mezzanine Fund II
Intertug
PE
Alta Rail Technology
PE
DLM Invista
OpenTech
PE
Draper Associates
Safer Taxi
VC
Colombia
15
Brazil
10
Brazil
Chile
Transportation
Feb 2013†
Technology (rail
May 2013†
services)
Information
Mar 2013†
Technology (logistics)
Mobile (taxi service
Feb 2013†
app)
ru-Net, Kai
e.Bricks Digital
e.Bricks Early Stage
Juv&You
VC
Brazil
E-commerce
Schoppen, Florian
Jun 2013†
Otto
Emergence Capital
Quasar Ventures
Partners
VC
5.4
Regional
Technology
Mar 2013†
VC
8.21
Mexico
Food and Agriculture
Jan 2013†
Procesamiento
Endeavor Catalyst
Endeavor Catalyst
Especializado de
Alimentos
FIR Capital Partners
First Reserve
Clube de Autores
First Reserve Energy
Renovalia Reserve joint
Infrastructure Fund (FREIF I)
venture
PE
Brazil
PE
Mexico
Consumer (book
Apr 2013†
printing services)
Energy (wind)
Renovalia Energy
Apr 2013†
Thrive Capital, Initial
Flybridge Capital
Partners
Pitzi
VC
Brazil
Mobile (phone
insurance)
Capital, Fabrice
Grinda and José
Apr 2013†
Marin, João Alceu
Amoroso Lima
Fundo Pitanga
I.Systems
PE
Gávea Investimentos
Energisa
PE
Gávea Investimentos
Camisaria Colombo
PE
Brazil
Cell Site Solutions
PE
Brazil
Gávea Investimentos,
Goldman Sachs
Brazil
10.72%
Brazil
Business Processes
Energy (electric power
distribution)
Retail (menswear)
Wireless
Communications
(mobile phone
Mar 2013†
Jun 2013†
May 2013†
Feb 2013*
towers)
VENTURE EQUITY LATIN AMERICA
© 2013 Thomson Reuters/Tax & Accounting
Annual Report
Gávea Investimentos,
Unidas
PE
701.3
General Atlantic
SMILES S.A.
PE
202
Brazil
General Atlantic
XP Investimentos
PE
171
Brazil
Gerbera Capital
Guadalajara
PE
Native
PE
Vinci Partners, Kinea
65.25%
Brazil
Investimentos
Global Equity
Goldman Sachs & Co
GS Infrastructure Partners
GP Investments
GP Capital Partners V
GP Investments
GP Capital Partners V
Red de Carreteras de
Occidente
Empresa Brasileira de
Agregados Minerais
Cor do Brasil (Beleza
Natural)
Mexico
102
PE
Brazil
18.70%
PE
50.4
PE
32
Mexico
Brazil
33.00%
Brazil
Transportation (rental
Jun 2013†
car company)
Transportation
Apr 2013†
(airlines)
Financial Services
Real estate (mixed
Feb 2013†
Apr 2013†
housing)
Agriculture (fishing
Feb 2013†
business)
Infrastructure
Jun 2013†
(highways)
Natural Resources
Feb 2013†
(mining)
Retail (beauty
Jun 2013†
institute chain)
Financial Services
Feb 2013†
GTCR Golder Rauner
Ironshore
PE
Bermuda
HFPX Holding
ProveAgora
Procesamiento
VC
Brazil
(insurance)
E-commerce
Especializado de
VC
Mexico
Food and Agriculture
Jan 2013†
Haiti
Infrastructure (water)
May 2013†
IGNIA Partners
IGNIA Fund I
8.21
Apr 2013†
Alimentos
InfraVentures (World
dloHaiti
Bank Group)
VC
Flybridge Capital
Partners, Thrive
Initial Capital
Pitzi
VC
Brazil
Mobile (phone
Capital, Fabrice
insurance)
Grinda and José
Apr 2013†
Marin, João Alceu
Amoroso Lima
Initial Capital, 500
Startups, Rhodium,
Samba Ads
VC
500
WebRadar
PE
Geofusion
PE
CorpBanca
PE
224.5
Brazil
e.Bricks Digital
Intel Capital
Intel Capital
International Finance
IFC African, Latin America
Corporation
and Caribbean Fund
International Finance
Brazil
Brazil
Chile
Internet (video
Feb 2013†
advertising)
Information
Feb 2013†
Technology (big data)
Internet (big data)
Mar 2013†
Financial Services
Feb 2013†
(bank)
Corporation
Kaszek Ventures
dloHaiti
VC
3.4
Haiti
Infrastructure (water)
May 2013†
Compara Online
VC
5
Chile
Internet
Mar 2013†
Kaszek Ventures
Eventioz
VC
1.5
Brazil
Kaszek Ventures
GetNinjas
VC
Brazil
Internet (event
Jun 2013†
planning platform)
Internet (services
Otto Capital,
platform)
Monashees Capital
Apr 2013†
Flybridge Capital
Partners, Thrive
Kaszek Ventures
Pitzi
VC
Brazil
Mobile (phone
Capital, Initial Capital,
insurance)
Fabrice Grinda and
Apr 2013†
José Marin, João
Alceu Amoroso Lima
Kaszek Ventures
Safer Taxi
VC
Kinea Investimentos
Grupo ABC
PE
84
Brazil
Kinea Investimentos
Delfin Group
PE
34
Brazil
Nephila Capital
PE
Cruz Blanca Salud
PE
dloHaiti
VC
Kohlberg Kravis Roberts
& Co
Larrain Vial SA
Larrain Vial Global Private
Corredora de Bolsa
Equity Fund
Leopard Capital
Leopard Haiti Fund
Linzor Capital Partners
Linzor Capital Partners
Macmillan Digital
Education
Linzor Capital Partners II
Chile
24.90%
500
Bermuda
Chile
Haiti
Coboe (Farmashop)
PE
Uruguay
R2 Energy Solutions
PE
Colombia
Easyaula
Macmillan Digital
Veduca Servicos em
Education
Tecnologia da Educacao
Mercatto
Amor aos Pedaços
VC
Brazil
VC
PE
© 2013 Thomson Reuters/Tax & Accounting
Brazil
33.00%
Brazil
Mobile (taxi service
Feb 2013†
app)
Consumer
(advertising)
Health (diagnoses
provider)
Financial Services
(invesment manager)
Financial Services
(insurance)
Infrastructure (water)
Retail (pharmacy
chain)
Energy (oil and gas)
Education (online
video platform)
Education (online
video platform)
Food and Agriculture
(chocolates)
Apr 2013†
Pátria Investimentos
May 2013†
Jan 2013†
Jan 2013†
May 2013†
Jan 2013†
May 2013†
Feb 2013†
Feb 2013†
Mar 2013†
November 15, 2013
Annual Report
Mercatto
Laticínios São Vicente
PE
Miyamoto International
dloHaiti
VC
Modal Private Equity
Modal's Óleo & Gás FIP
50.00%
Brazil
Infrastructure (water)
Brazil
Energy (oil and gas)
Georadar Group
PE
EDUK
VC
Brazil
Monashees Capital
Runrun.it
VC
Brazil
Monashees Capital
GetNinjas
VC
Brazil
NXTP Labs
VC
dloHaiti
Grupo Educativo Cead
Fund (MIF)
5
Apr 2013†
(dairy)
Haiti
Monashees Capital
Multilateral Investment
50.1
Food and Agriculture
May 2013†
Feb 2013†
Education (online
May 2013†
instruction)
Information
May 2013†
Technology (SaaS)
Internet (services
Otto Capital, Kaszek
platform)
Ventures
Apr 2013†
Regional
Technology
Apr 2013†
VC
Haiti
Infrastructure (water)
May 2013†
PE
Mexico
Netherlands
Development Finance
Company (FMO)
Newgrowth Fund
Otto Capital
GetNinjas
VC
Otto Capital
Safer Taxi
VC
Paul Capital
Ideaiasnet
PE
Resource Capital Funds
Provale
PE
Rocket Internet
Latin America Internet
Holding
Rocket Internet
Santander Brazil
Equity Investments
3
Brazil
Chile
40
18.20%
Brazil
Brazil
Easy Taxi
VC
15
Brazil
Airu Produtos Criativos
VC
2.5
Brazil
Ambievo
PE
23.00%
Brazil
Education
Feb 2013†
Internet (services
Manoshees Capital,
platform)
Kaszek Ventures
Mobile (taxi service
Apr 2013†
Feb 2013†
app)
Information
Mar 2013†
Technology
Natural Resources
Mar 2013†
(mining)
Mobile (taxi service
Jun 2013†
app)
E-commerce (retail)
May 2013†
Industrial (natural
May 2013†
decontamination)
Regional
(Mexico,
Santo Domingo Group
Linio
VC
32
Colombia,
E-commerce
Apr 2013†
E-commerce
Feb 2013†
Peru,
Venezuela)
Regional
(Mexico,
Summit Partners
Linio
VC
26.5
Colombia,
Peru,
Venezuela)
Technology Crossover
OpenEnglish
Ventures
VC
65
Regional
Education (online
Apr 2013†
instruction)
Regional
(Mexico,
Tengelmann
Linio
VC
20
Colombia,
E-commerce
Feb 2013†
Peru,
Venezuela)
Terranum Capital
Terranum Capital
Terranum Capital Real Estate
Fund I
PE
Peru
(affordable residential
Graña y Montero
Jan 2013†
housing)
Terranum Capital Real Estate
Fund I
Real estate
Argentina Aceros
Real estate (middleCarabayllo
PE
Peru
income residential
housing)
Líder Grupo
Constructor
Jan 2013†
Flybridge Capital
Partners, Initial
Thrive Capital
Pitzi
VC
Brazil
Mobile (phone
insurance)
Capital, Fabrice
Grinda and José
Apr 2013†
Marin, João Alceu
Amoroso Lima
TMG Capital
Fundo TMG
NeuroTech
PE
GoodData
VC
Brazil
Information
Apr 2013†
Technology (software)
Andreessen Horowitz,
Totvs Ventures
22
Regional
Technology (software
company)
General Catalyst
Partners, Next World
Jun 2013†
Capital, Tenaya
Capital
Mobile (business
Totvs Ventures
Vertex Real Estate
uMov.me
1.6
20.00%
Brazil
Guadalajara
PE
Mexico
Vox Capital
Wpensar
VC
Brazil
WAMEX Private Equity
Productos Medix
PE
CASA Exploration
PE
Investors
Vertex Real Estate Fund I
VC
Warburg Pincus
32
Mexico
Regional
Feb 2013†
management
solutions)
Real estate (mixed
Apr 2013†
housing)
Education (software)
May 2013†
Health
Feb 2013†
(pharmaceutical)
Energy (oil and gas)
Mar 2013*
Total $3.5 Billion Invested (via 101 transactions -- 45 disclosed in 1H2013)
Total $3.5 Billion Committed (via 105 transactions -- 45 disclosed in 1H2013)²
Source: VELA Data
VELA Notes (applies to all charts throughout report):
°All amounts given are in millions US$ unless otherwise noted. Amounts initially reported in local currencies were translated to
*Deal announced
†Deal closed
²This includes recorded transactions that have been publically announced, but not completed as of Jun 31, 2013.
VENTURE EQUITY LATIN AMERICA
© 2013 Thomson Reuters/Tax & Accounting
Annual Report
Recent Private Equity Activity in Latin America (1H03-2012)
Currency=USD millions
Year
1H2003
2003
1H2004
2004
1H2005
2005
1H2006
2006
1H2007
2007
1H08
2008
1H2009
2009
1H2010
2010
1H2011
2011
1H2012
2012
1H2013
Deals
$213
$822.00
$358.50
$609
$551.09
$1,015
$1,538
$4,264
$2,295 (47
transactions)
$7,545 (84 transactions)
$1, 656.5 (26
transactions)
$3,086.1 (34
transactions)
$1,307.05 (29
transactions)
$2,839.6 (67
transactions
$6,210 (63
transactions)
$17,200 (119
transactions)
$4,400 (39
transactions)
$5,517 (84
transactions)
$1,791.08 (51
transactions)
$11,555.38 (143
transactions)
$3,514.72 (101
transactions)
© 2013 Thomson Reuters/Tax & Accounting
Funds
$258
$416.85
$108.24
$714.00
$341
$1,272
$291.20
$3,209
$1,497 (20 closings)
$4,654 (29 closings)
$1,981.2 (17
closings)
$5,780.9 (25
closings)
$2,176.5 (18
closings)
$5,034 (40 closings)
$4,747 (27 closings)
$7,800 (37 closings)
$6,900 (20 closings)
$12,966 (40
closings)
$1,672 (13 closings)
$3,957 (36 closings)
$3,103.85 (19
closings)
Exits
$213
$1,098.20
$404.53
$662.23
$720.00
$1,494
$1,966
$3,109
$1,573 (22
transactions)
$5,407 (43
transactions)
$958.1 (5
transactions)
$1,267 (10
transactions)
$2,600 (7
transactions)
$3,543.01 (16
transactions)
$5,238 (16
transactions)
$7,930 (34
transactions)
$7,100 (18
transactions)
$8,329.9 (25
transactions)
$3,632.35 (10
transactions)
$3,884.52 (16
transactions)
$1,144 (9
transactions)
Source: VELA Data
November 15, 2013
Annual Report
Deal Amounts Per Country (1H2009-1H2013)
Country
Argentina
Barbados
Belize
Bermuda
Bolivia
Brazil
Cayman Islands
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Panama
Peru
Paraguay
Puerto Rico
Regional
Trinidad & Tobago
Uruguay
Venezuela
Total
# Deals
2
10
(Financial Info. Available)
1H2009
$ millions
73.7
1029.8
2
2
3
2
5
1
1
1
29
18
NA
NA
30.75
12
36
1
20
400
$1,307.50
1H2010
# Deals
$ millions
6
10
1
550
33
2102
3
3
1
1
1
8
3
3
63
39
1161
212
NA
NA
120
165
1500
390
$6,210
1H2011
# Deals
$ millions
3
957
1
NA
2
NA
15
3120
1
2
2
7
2
3
1
39
18
NA
1.3
345
2.4
NA
12.85
0.5
$4,400.00
1H2012
1H2013
$ millions
# Deals
$ millions # Deals
2
1
3
NA
3
29
1665.38
57
2260.5
1
NA
3
86.5
7
1019.5
1
35
5
5
3.4
1
NA
3
NA
12
49.92
1
NA
1
NA
3
6
3.2
8
181.4
1
51
$1,791.08
101
$3,514.72
21
45
Source: VELA Data
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VENTURE EQUITY LATIN AMERICA
© 2013 Thomson Reuters/Tax & Accounting
Annual Report
2013 May be Mexico’s Moment
Continued from page 1
vestment bank, and the Financial Times started a
much-awaited change of sentiment towards Latin
America’s second largest economy. Part of the
change pointed to the increase in Chinese labor
costs resulting in the relocation of manufacturing
back to Mexico due to its proximity to the U.S.,
still Mexico’s largest foreign market.
Private pension funds (similar to the Chilean
model) also started in 1997. By now, they manage
close to $170 billion and the potential role of these
assets was not included in the rules of the Mexican
board. The new reforms bring a series of structural
changes that are focused on getting Mexico to
reach a growth rate of 5.5% by 2015.
Part of the favorable press also came from the improvements seen in Mexico’s fiscal environment
including historically low inflation and close-to-zero
budget deficits.
These reforms will not only help Mexico become
more competitive, but also open several industries
for private investments for the first time in over 70
years. These industries include but are not limited
to oil & gas and energy, which are both in dire need
of investment and skilled managers that could
benefit from private equity investors.
Even while the economic factors have existed all
along, it often takes the release of a positive investment bank report to coax investors into becoming
interested in a specific market, like Mexico.
The main highlight of Mexico’s recent
rise in Latin America has been a series
of recent constitutional reforms since
the arrival of the PRI.
Positive Fiscal Reforms in Mexico
The main highlight of Mexico’s recent rise in Latin
America has been a series of recent constitutional
reforms since the arrival of the PRI, a center party
which was once in power for over 70 years, after
12 years of the right-wing PAN in office. From a
business perspective, these reforms have not been
publicized in detail in the mainstream press, and
when they are mentioned, there is little analysis
of their potential impact on the economy and in
this case, the private equity industry.
To put these reforms in perspective, it is important to keep in mind that ever since the PRI lost
the majority in congress in 1997, not a single
constitutional reform had been passed. In a way,
Mexico lived with a regulatory framework that
lacked the latest changes in the global economy
including the spread of the Internet or emergence
of China, for example.
10
© 2013 Thomson Reuters/Tax & Accounting
Since December 2012, when President Enrique
Peña Nieto (EPN) came to office, seven major
regulations have been discussed, passed or in the
pipeline to be approved both by congress and the
senate, which would fuel a “Mexican moment”
supported by structural reforms and not merely
an investment banking report.
The reforms include: labor, education, competition, telecom, finance, energy and fiscal constitutional legal changes. These reforms will not only
impact Mexico’s economic core, but also come at
a defining moment, a time of global uncertainty
where few countries are being able to achieve
change, helping to drive more foreign interest to
the country.
Labor and Education Reforms
Without going into too much detail, the labor
reform will make hiring and firing people easier,
bringing much needed flexibility to the job market.
The education reform is potentially the most important of them all. Mexico spends around 5.5%
of the GDP on education (close to the average
in the U.S. or OECD countries); however, 90%
of the money is used to go to salaries or union
demands, resulting in an underdeveloped and
slow-adapting education system. Among the new
rules, teachers will be rated yearly with an up-orout system (those that fail will still be able to get
administrative jobs at schools). This has not been
accomplished in Argentina, Chile or Colombia.
November 15, 2013
Annual Report
Competition and Telecom Reform
Energy Reform
The competition reform will break monopolies
or oligopolies that plague the Mexican industrial
organization. After the privatizations of the early
90s, Mexico has struggled in many cases due to
the ever-powerful oligopolistic forces, which had
as a poster boy, Mr. Carlos Slim, the richest man
in the world and the controller of 80% of the cell
phone traffic in Mexico.
The oil & electricity reforms will open up the sectors to private investment. The objective of the
reform is to increase productivity, explore new oil
fields as well as monetize gas reserves. PEMEX has
accounted for 30% of the government’s income.
PEMEX has become inefficient, with not enough
available capital to replenish exploited reserves
and with a sub-optimal union. Something similar
will happen with the energy industry controlled by
the State and that will welcome private investment
potentially backed by private equity investors.
No firm will be able to have 50% of any market
after the reform is passed. The competition reform and the way the state telecom concessions
will work will bring much needed change and
competition to a stagnant and expensive sector.
However, this reform will impact many other
sectors such as cement—likely causing Cemex to
struggle—and even the baking industry in which
Mexico’s Bimbo, the largest baker in the world,
has close to no competitors in Mexico. All of these
industries have natural barriers of entry through
high capital requirements that can be overcome
through private equity investments.
Financial and Fiscal Reform
It should not come as a surprise that there is also
financial reform. After the Tequila crisis in 1994,
the government created a bad loan bank to avoid
bankruptcy of the banking sector. In 1997, the government accepted foreign ownership of banks and
by now, the industry has all the most prominent
names in the world.
The Mexican financial sector did not suffer in the
aftermath of the 2008-2009 crisis, because it is wellcapitalized, mainly as it does not provide credit. A
report published in 2012 shows how the Mexican
banking industry provides less credit to firms than
the average country in Latin America. In 2011, the
total amount of outstanding bank loans to firms
was less than $80 billion with only 13% going to
non-large firms. The number is surprisingly small
for an economy well over a trillion dollars.
From an investor’s perspective, fiscal policies are
always a complicated topic. The proposed fiscal reform seems to tax the captive taxpayer more. About
60% of the workforce in Mexico is outside the formal
economy (by informal economy, we mean people
not paying taxes except for VAT). The informal labor
force performs tasks that are impossible for the fiscal
authority to track such as selling food on the street
and looking after parked cars.
VENTURE EQUITY LATIN AMERICA
The oil and gas reform will create a fiscal gap that
will result in higher taxes for the middle class
for additional fiscal revenue created by a more
dynamic and faster growing economy. Investors
are particularly concerned about the disappearance of consolidation as a fiscal strategy as well
as a new 10% tax over dividend’s payments. The
new reform also includes capital gains in the
stock exchange, which are a norm in the rest of
the world.
2013 Mid-Year PE/VC Overview
Private equity and venture capital activity in
the first half of 2013 has drawn Mexico into the
spotlight.
The number of deals in Mexico rose from four to
12 deals, an increase of 67% from the first half of
2012, year-over-year. While no financial information was available in the first six months of deals
in Mexico in 2012 , four disclosed deals rounded
the value of investments in Mexico to $50 million
in the first half of 2013. Though this was a significant jump from a lull in deal activity in Mexico in
2011 , the total value of deals created in the first
half of 2013 makes up only about one-third of the
value recorded in the exceptional first six months
of 2010 in Mexico.
Despite the increase in activity over the past
two years, Mexico, in terms of deal-making, still
lags behind Brazil, the largest economy in Latin
America, even amidst slower macroeconomic
growth. Yet, four aspects set Mexico apart from
Brazil as well as the rest of the Latin American
region, which suggest that the upcoming few
years may witness Mexico’s moment for private
equity: more opportunity for exits, public trades,
growing support for venture capital firms, and a
rising seed capital industry.
See 2013 May be Mexico’s Moment on page 12
© 2013 Thomson Reuters/Tax & Accounting
11
Annual Report
2013 May be Mexico’s Moment
Continued from page 11
Distinct Liquidity Market for
Real Estate Sector
Unlike Brazil, private equity, not the stock exchange, finances real estate developments in
Mexico. The income producing real estate portfolios created since the mid-90’s in Mexico have
changed hands several times between different
fund managers and since 2011, have been able to
reach the stock exchange through a similar REIT
structure known as Fibra.
One of the most exciting things about
the entrepreneurial ecosystem and
the sustainability of the private equity funding cycle is the fact that the
Mexican government through a fund
managed by Nafin and the Inadem
have created LPs to invest in seed
capital funds.
The Fibra sector has raised $6 billion since 2011
and has exited several private equity-backed portfolios, including CPA, G&E, Kimco, Prudential
and Vesta’s industrial portfolios.
Most notably was the sale of all the assets in
MRP’s funds as well as the management company
performed by MRP (a private equity retail development company initially backed by Sam Zell)
through Fibra Uno for close to $2 billion in the
first half of 2013. Prologis, a U.S. logistics real estate
firm will most likely list its Mexican assets developed
through private equity vehicles in the Mexican stock
exchange in late 2013 or early 2014.
Public Trades
In Mexico, exits of private equity-backed companies through the public stock exchange are growing popular. Volaris, a low-cost airline became
public in September. Before Volaris, City Express,
a business hotel operator, also became public.
Historically, there are several other examples of
firms with private equity investments that have
become publicly traded :
12
© 2013 Thomson Reuters/Tax & Accounting
Financial Institutions:
• Banorte
• Banregio
• Compartamos
• Credito Real • Procorp
Retail:
• Famsa
• Gomo
• Sports World
Real Estate:
• Consorcio Hogar
• Homex
Other Industries:
• Genomma Lab
• Promotora Ambiental
• Maxcom
Growing Support for VC Firms
The Mexican government through Nafin, a development bank, created a venture capital fund of
funds called Mexico Ventures I. Though the fund
has not been very active or is yet to be fully committed, the move indicates that the government
is growing keen to support the venture capital
industry in Mexico.
These new players include Capital Indigo, which
performed an investment in the first half of 2013,
as well as Adobe Capital. Even when the fund of
funds was started by the previous administration,
the current one has created a National Institute for
Entrepreneurs or INADEM for its name in Spanish,
which will continue supporting the VC industry.
A Rising Seed Capital Industry
One of the most exciting things about the entrepreneurial ecosystem and the sustainability of the
private equity funding cycle is the fact that the
Mexican government through a fund managed by
Nafin (Fondo de Co Inversion de Capital Semilla)
and the Inadem have created LPs to invest in seed
November 15, 2013
Annual Report
capital funds. These funds will become the first
line of investors to source good entrepreneurs,
help them become more institutionalized and
prepare them for VC investments who in turn
will probably source them to private equity funds
before they go into the stock exchange.
Some of the previously described trends can be
found in the Fund Monitor. The table describes
firms raising funds. Nexxus, Mexico´s private
equity leading manager is raising its sixth fund.
Also EMX was able to close their first fund. EMX´s
management team is the former Carlyle Group
Mexican team. Evercore Mexico also raised its
third private equity fund. This fundraising activity
suggests the health of the industry: underperforming teams and funds would not be able to raise
subsequent funds.
There are two other interesting funds in the table.
One is Jaguar. Jaguar was founded by Eric PerezGrovas. Eric is a proven entrepreneur, a member
of the founding team of Mercado Libre. After a
liquidity event, Eric was investing in early stage
internet initiatives and decided to create his own
investment management company.
There are other important fund raising initiatives.
Angel Ventures Mexico, an angel investment club,
is in the fund raising process of a co-investment
vehicle. Also in the early stage arena, 500 Start
Ups Mexico formerly known as Mexico VC is in
the fund raising process of a seed capital. Finally,
Venture Institute a former seed capital manager is
in the fund raising process of a VC fund.
There is one more seed capital fund in the fund
raising process. The firm is called InventMx and
has created a lot of expectation in the market
for several reasons. A media conglomerate has
committed more than 50% of the equity of the
fund. This is the first event of its type in Mexico.
Most of the funds either have commitments from
individuals or government funds. The other
relevant aspect of InventMx is that its founder
was a successful Internet entrepreneur. Similar
to the founder of Jaguar, he is also related to the
Endeavor network in Mexico.
Looking Ahead
The Mexican stock exchange makes up only 40%
of the country’s GDP, a relatively small proportion
compared to 117% in Chile or 119% in the U.S. One
of the reasons for this difference is that in most
VENTURE EQUITY LATIN AMERICA
other economies in the world, oil and gas sectors
as well as energy firms are listed.
The new regulations will eventually allow
Mexico to do the same, but first, the firms in
these sectors need to be created, opening up an
incredible opportunity for private equity investments. Already indicating interest, Temasek, a
Singaporean sovereign wealth fund, became the
lead player in a $250 million round of funding
for a new company that is buying service firms
in the oil & gas industry. In 2012, Evercore’s
Mexico private equity arm also took part in an
investment in the oil & gas industry.
On the energy front, firms will continue investing
in cogeneration—also known as heat and power
(CHP) systems—but will potentially start distributing electricity as well, which would be a new
industry in Mexico.
Based on recent successful exits, the Mexican
energy industry will continue to prove its attractiveness. For example, Sempra, a California-based
energy firm conducted an IPO of its Mexican
subsidiary and the private equity firms Conduit
and First Reserve have also seen positive divestments. In the future, there could be several energy
companies creating and distributing cheaper and
cleaner electricity, fueling Mexico’s growth. The
usual suspects, Mexican oligopolistic groups as
well as foreign firms, will come into the space,
but there will be enough space for private equity
strategies as well.
Several other sectors will become attractive.
Telecom, a historical darling for private equity
worldwide, will finally become interesting for
private equity investors again. Soon after the
privatization in the early 90s, firms like Blackstone or Hicks Muse invested in the sector with
unimpressive results. Hopefully, investments in
the sector will now be profitable by weakening
the market power of the existing oligopolistic
structure of the sector.
Apart from the new rules in these industries, the
labor, education and financial reforms will create
a new institutional framework, which will help
investments in the country become more flexible
and find more and cheaper leverage, situations
that potentially will increase the returns of the
industry. Of particular interest for private equity
will be to understand the new regulations to be
See 2013 May be Mexico’s Moment on page 14
© 2013 Thomson Reuters/Tax & Accounting
13
Annual Report
2013 May be Mexico’s Moment
Continued from page 13
proposed for Mexican pension funds, which manage close to $170 billion. These funds do not pay
managers based on performance and managers
cannot invest directly in private equity vehicles.
5% in domestic private equity funds and 5% in
foreign strategies. Peru can invest up to 3% exclusively in non-Peruvian private equity strategies.
Hopefully, Mexico will follow suit. o
The new reform has already shown its interest in
changing compensation to pension fund managers and hopefully, will soon come out with new
investment rules for pension funds to invest in
private equity directly and not through expensive
publicly traded vehicles known as CKDs. Pension
funds in Colombia, for example, can invest up to
Roberto Charvel ([email protected])
is the Founder and Managing Director of Vander
Capital Partners. Vander has a specific focus on equity project finance. Prior to founding Vander, Mr.
Charvel was Vice President and head of Business
Development for Prudential Real Estate Investors
Latin America.
Deal Monitor: Mexico (by investor)
Investors
Fund
Accion
International
Alta Ventures
Alta Ventures
Mexico
Mexico
Beamonte
Investments
Cartesian
Capital Group
Endeavor
Endeavor
Catalyst
Catalyst
Portfolio Company Investor Type Amount° Stake
Salud Facil
VC
Ondore
VC
Country Industry
Mexico
Other InvestorDate
Financial Services
May 2013†
(affordable credit)
Information
1.5
Mexico
Mar 2013†
Technology (big
data)
Integra Arrenda
PE
Mexico
Grupo MetroNet
PE
Mexico
Procesamiento
Especializado de
VC
8.21
Mexico
Alimentos
Transportation
Feb 2013†
Internet (data
Mar 2013†
center)
Food and
Jan 2013†
Agriculture
First Reserve
First Reserve
Energy
Renovalia Reserve
Infrastructure
joint venture
PE
Mexico
PE
Mexico
Energy (wind)
Renovalia
Energy
Apr 2013†
Fund (FREIF I)
Gerbera Capital
Guadalajara
Goldman Sachs
Red de Carreteras de
& Co
Occidente
Procesamiento
IGNIA Partners IGNIA Fund I
Especializado de
PE
VC
18.70%
8.21
Mexico
Mexico
Alimentos
Newgrowth
Fund
Vertex Real
Vertex Real
Estate Investors Estate Fund I
WAMEX Private
Equity
Grupo Educativo Cead
PE
Mexico
Guadalajara
PE
Mexico
Productos Medix
PE
32
Mexico
Real estate (mixed
housing)
Infrastructure
(highways)
Food and
Agriculture
Education
Real estate (mixed
housing)
Health
(pharmaceutical)
Apr 2013†
Jun 2013†
Jan 2013†
Feb 2013†
Apr 2013†
Feb 2013†
Total $50 Million Invested (via 12 transactions -- 4 disclosed in 1H2013)
Source: VELA Data
14
© 2013 Thomson Reuters/Tax & Accounting
November 15, 2013
Interviews
VC Firm IGNIA Thrives on Base of Pyramid in Mexico
By Dan Weil
IGNIA, a venture capital firm based in Monterrey,
Mexico, is doing well by doing good. It invests
in businesses that serve the poor in Mexico. The
firm has put more than $60 million to work since
it began in 2007. It invests $3 million to $5 million
per company on average.
VELA recently spoke to IGNIA co-founder Michael Chu about the firm’s activity.
VELA: What sets Mexico apart from other emerging markets as a target for investments?
We are interested in Mexico for several reasons.
In general, we think emerging markets will be an
important pillar of world growth for the next 10
to 20 years. Emerging markets came out of the
financial crisis of 2008 with much better fundamentals than the developed world, particularly
Latin America. It represents an area where markets
are evolving quickly and people are increasingly
gaining access to goods and services taken for
granted in the developed world.
As for Mexico specifically, we think the country’s
fundamentals are very strong. Its macroeconomic
statistics are in good shape. We deploy venture
capital in enterprises delivering high-impact
goods and services to low-income consumers. This
base of the socioeconomic pyramid represents 80
percent of Mexico’s population. It is characterized
by increasing income while being served by very
low value propositions. That includes very basic
goods and services. That has great impact on the
ability of people to live up to their potential, while
constituting a very attractive opportunity for us,
as investors.
VELA: What industries do you find most appealing?
We concentrate on goods and services that make
sense for the base of the pyramid, but where the
value proposals they get are either very weak
or very costly. The total cost of a transaction is
more than just price. For example, Mexicans have
free access to healthcare, but if you have to take
two buses and wait three hours just to make an
appointment, and do this all over again when
you actually return to see the doctor, the entire
VENTURE EQUITY LATIN AMERICA
free transaction has become extremely costly. At
IGNIA, we look for disruptive models that solve
such deficiencies at the base of the pyramid.
Sometimes these models don’t quite exist. We’re
interested in things like healthcare, housing, water,
education and access to basic services, including
radically new forms of financial inclusion.
IGNIA, a venture capital firm based
in Monterrey, Mexico, is doing well by
doing good. It invests in businesses
that serve the poor in Mexico. The
firm has put more than $60 million to
work since it began in 2007. It invests
$3 million to $5 million per company
on average.
VELA: Can you tell us about a few of your
investments?
One was a response to the fact that poor people
around Mexico City have very few banking options. To pay a utility bill, they often have to take
one or two buses and then wait three to four hours
in line to pay. Barared has established a network
of mom-and-pop grocery stores and pharmacies,
which have installed booths with iPads. Anybody
can input the data for their utility bill over the
Internet and pay by handing the money over to
the owner of the mom-and-pop store.
Those mom-and-pops are now recognized as
formal correspondent banks. Our company is
the first entity authorized as a manager of correspondent banks. In a Barared booth you can also
open a bank account, buy goods and services and
receive payments.
It opens a whole new market. Say a woman gets a
cash remittance. She can pick it up at her grocery
story and use it to open a bank account. In the
future, remittances can just be deposited into her
bank account rather than using a high-cost paySee VC Firm IGNIA Thrives on page 16
© 2013 Thomson Reuters/Tax & Accounting
15
Interviews
VC Firm IGNIA Thrives
Continued from page 15
ment system. You can service a microcredit loan,
receive government conditional cash transfers,
pay bills or even buy bus tickets.
Barared creates a platform so people at the base
of the pyramid can make transactions over the Internet. The digital divide has been closed through
mom-and-pops. The mom-and-pops love the traffic and get the lion’s share of the transaction free.
We made our first investment in the company in
October 2010.
The challenge is we need to bring
new models. The ecosystem is either
indifferent, doesn’t exist or hostile.
There are a lot of challenges to make
it work. But if it does, we’re responding to a huge market demanding better products. That allows for a long
period of sustainable growth.
We invested in Ver de Verdad in November 2011.
In Mexico, it’s difficult for anyone to get good
eyeglasses for less than $125 to $150. Ver de Verdad has a chain of retail stores that provides free
eye exams and offers glasses starting at $25, and
ready for pick up in 45 minutes. Traditional glasses
stores in Mexico are very formal, with salespeople
in suits. Ver de Verdad is light and airy, with sales
people in polo shirts.
In October 201, we invested in Provive. For
more than 10 years, Mexico has been building
affordable housing. Following the U.S. recession,
people started to abandon their homes or their
homes were foreclosed. Within days, the house
is stripped bare, and then there’s crime, etc. As
these homes get abandoned, the whole neighborhood degrades.
Provive realized you can’t solve the problem one
house at a time. It buys a series of houses, and
then it spends on mobilizing the community,
first cleaning communal spaces, then creating
community capital, like junior league soccer
16
© 2013 Thomson Reuters/Tax & Accounting
tournaments. It has been so successful that the
houses no one wanted now have waiting lists.
Provive’s expertise is mobilizing the community.
They change the environment.
VELA: What are your risks in investing in the
base of pyramid?
We incur two. There’s a high business risk because
of our disruptive models. By definition, there’s
never been something like them. We also focus
on a population that may be a majority, but the
infrastructure in emerging markets was designed
to serve the minority. The ecosystem for business
at the base-of-the-pyramid is often either nonexistent or hostile. In Provive’s case, this was a
market not accustomed to foreclosure. You need
to learn how to navigate through the ecosystem.
For example, Provive has to arrange with authorities to have trash taken away, something that had
never been done before.
VELA: Have you found enthusiasm from investors
for your base-of-the pyramid strategy?
Our focus on this strategy is very new. Our fund
is considered a pioneer in this whole area. Our
investors are one-third development-oriented institutions like the World Bank’s IFC, another third
institutional investors like JPMorgan and another
third high-net-worth individuals.
By definition, we ended up with people who understand and were attracted to the idea of using
venture capital to solve important social issues.
How many people love this? Very few in relation
to traditional markets. We’re proving this investment thesis can be successful. That will make
conventional capital markets interested.
VELA: What are the biggest obstacles you face?
It’s not whether the market exists. It’s huge. In
Latin America, only the A, B and C+ classes are
well-served. The challenge is we need to bring
new models. The ecosystem is either indifferent, doesn’t exist or hostile. There are a lot of
challenges to make it work. But if it does, we’re
responding to a huge market demanding better
products. That allows for a long period of sustainable growth. o
November 15, 2013
Annual Report
Andean Region Stands Out for Fund Raising Activity
By Elizabeth Johnson
With strong economic growth and significant potential for increased consumer growth as well as
infrastructure investments, Peru and Colombia are
increasingly on the radar screen of international
fund managers.
While countries like Brazil have posted limited
economic growth, Peru’s gross domestic product
grew 5.2% in the first half of 2013. Peru is seen by
the market as one of the countries in the region that
is pursuing the right policies to leverage growth.
Unlike countries in the Mercosur Trade Bloc, which
has been mired with difficulties, Peru is moving
ahead with an aggressive free-trade strategy. In the
past three years, the country has signed free-trade
agreements with the European Union, China, Japan
and South Korea. Peru joined Chile, Colombia and
Mexico to form the Pacific Alliance, the largest free
trade zone in Latin America. Unlike Mercosur,
members of the Pacific Alliance are more free market
oriented. The Pacific Alliance represents 35% of Latin
America’s GDP.
Unlike like other countries in the region which could
lose their investment grade status, Peru was recently
upgraded by Fitch Ratings to BBB+ from BBB, a
notch higher within investment grade. The increased
rating reflects the country’s pragmatic fiscal account,
as well as strong growth and stability.
Despite the fiscally conservative nature of the current
government, President Ollanta Humala has also been
pursuing policies which aim to reduce poverty and
increase social inclusion. This trend began before
President Humala took office with the percentage
of Peruvians living in poverty declining from 54.3%
in 2001 to 25.8% in 2012. Since his election, Humala
passed a mining royalties bill which will generate
revenues of around $1 billion per year, which will be
used to increase social spending and as a result, boost
consumption among lower income groups.
Peru’s economy has grown at a faster rate than all
other Latin American economies since 2001.The rapid growth, coupled with improved political stability
has attracted fund managers to the market. During
the first half of the year, two major Peru-dedicated
funds were raised, a feat that seemed impossible
five years ago.
Colombia has also been one of Latin America’s success stories, with GDP growth seen surpassing 4%
VENTURE EQUITY LATIN AMERICA
this year. Colombia’ growth has been surprisingly
resilient, given the country’s dependence on oil
and mining, which have had a challenging year following the downturn in commodities prices driven
by declining growth in China. Several sectors have
outperformed including agriculture and the services
sector. Another factor that has helped boost domestic
consumption has been the 36-month decline in the
unemployment rate.
Fund Raising on the Rise
With such positive fundamentals and room for
growth in a broad range of sectors, international
fund managers, who in the past had been unable
to invest in markets like Peru and Colombia, are
increasingly setting their sights on these Andean
countries. Whereas in the past, Argentina has been
the recipient of hundreds of millions of private equity
dollars, the lack of a favorable investment environment has kept investors away. They are now turning
to high-growth countries like Peru and Colombia,
which have been more concerned about attracting
foreign capital.
Nexus Group has reached a final close on the NG
Capital Partners II fund. Nexus Group raised $600
million, surpassing its target of $500 million in
fundraising. The fund received commitments from
international pension managers, sovereign wealth
funds, corporations, funds of funds, and family
offices from across the globe. Of the capital raised,
approximately 26% was committed from local and
regional investors, 37% from North America, 21%
from Europe, and 16% from Asia/Middle East. The
fund is Nexus Group’s second and will focus on
companies that serve the country’s growing middle
class. The first fund made seven investments in sectors including education, retail, out-of-home dining
and financial services.
Similarly, private equity giant Carlyle raised $308
million for the Carlyle Peru Fund, which will be comanaged by Credicorp, Peru’s largest bank. Like the
Nexus fund, the Carlyle Peru Fund will also have an
eye toward companies that will provide services to
the country’s growing middle class. The fund will invest across industries including healthcare, retail and
consumer, services as well as mining, construction,
infrastructure and education. Carlyle’s team in Peru
sees opportunities in medium-sized family owned
© 2013 Thomson Reuters/Tax & Accounting
17
Annual Report
Fund Raising Activity
Continued from page 17
business, many of which have significant growth
potential. Carlyle opened its Lima office last year.
Additionally, two other funds were raised that will
invest across the Andean region, once again with
the goal of capitalizing on the growing consumer
classes of these countries. Latin American real estate
investment firm Terranum Capital held a first close
on a US$235 million fund, which will invest in the
development of low and middle-income housing
and retail projects in Peru, Colombia and Mexico.
Analysts estimate that the housing deficit in Lima is
equivalent to some 425,000 households. In Colombia,
local think tank Economia Urbana calculates that
the need for new housing is 300,000 units per year.
Terranum Capital will partner with local developers in these countries, all of which have significant
housing deficits and strong demand for middle and
low income housing.
Altra Investments held a final closing on the Altra
Private Equity Fund II, also exceeding its fundraising
target of $300 million. The fund received commitments
from a broad range of institutional investors from
North America, South America, Europe and Middle
East & Asia. Among these institutions were leading
public and private pension funds, funds-of-funds, family offices, sovereign wealth funds, endowments and
foundations. The fund will target mid-cap companies
with revenues ranging from $15 million to $100 million. Unlike many other fund managers in the region,
Altra seeks controlling stakes of companies in sectors
that are fragmented but consolidating.
With an increasingly mature venture capital and
private equity market, Chile has also seen consistent
fund raising activities in recent years. Although economic growth in 2013 is likely to fall to 4.5% in 2013
after reaching 5.6% in 2012, Chile had outperformed
the region and has moved ahead with a series of
long-term reforms which have shielded the country
from the global slowdown. Furthermore, the country,
which is now solidly middle class, with per-capita
income of over$20,000 per year – the highest in Latin
America. The strong consumer base of the country
has pave the way for investments in small, consumer
oriented companies.
Local InverSur Capital launched its first venture
capital fund, which will focus on the information
technology segment. The fund, which has been
18
© 2013 Thomson Reuters/Tax & Accounting
dubbed the Amérigo Chile Early Stage & Growth
Fund is targeting fund raising of $50 million, but
has already received commitment of $30 million
from both private investors and Chile’s Financing
Program for Venture Capital Investment Funds.
Amérigo Chile is targeting innovative start-ups in
the IT sector, which have the potential to expand
globally. The fund’s anchor investor is Telefónica
Digital, which will help integrate the fund’s portfolio
companies with a broader startup network.
Dealflow Slow
Despite strong fund raising in the region, deal flow
has been sluggish. The most significant investment
made in the Andean region in the first half was
Advent International’s acquisition of a 50% stake in
Alianza Fiduciaria. The deal was made in conjunction with insurance brokerage and financial services
company Organización Delima, a firm with more
than 60 years of experience. Alianza Fiduciaria is
the leading independent trust and asset management company in Colombia with more than 27
years of experience.
Regional start-ups have also been receiving attention
from funds, with Chile-based company Safer Taxi
receiving a $4.2 million investment from venture
capital firms Otto Capital, Kaszek Ventures and
Draper Associates. Safer Taxi allows its users to call
taxis through a smartphone application and has 2,250
registered taxis in Chile, Brazil and Argentina.
Likewise, e-commerce company Linio has raised
nearly $50 million from a broad range of funds
including Summit Partners and Germany’s Tengelmann Group. Linio, which has been called the
Latin American Amazon, has already received
backing from AB Kinnevik and JP Morgan Asset Management. The company has operations
in Colombia, Mexico, Peru and Venezuela and is
seeking to grow in markets that are not dominated
by Amazon.com.
The Amerigo Ventures Colombia fund also closed
its first to deals, including Red Seguro, an online
car insurance platform which allows car owners to
compare prices of auto insurance products. The fund
also invested in ClickDelivery, an online company
that facilitates delivery orders from several restaurants in Bogota.
November 15, 2013
Annual Report
Exits Sluggish
As was the case for dealflow, the number of exits
in the Andean region was also limited during the
first half of 2013. The highlight of for the region was
the IPO of Chilean construction company Moller
Perez-Cotapos. The company, which was backed
by CVCI Private equity, raised roughly $92 million
in its IPO on the Santiago Stock Exchange. The IPO
reduced CVCI’s stake from over 90% to around 20%.
The IPO will also allow the company to grow and
strengthen its financial position. This was the first
IPO of 2013 on the Santiago Stock Exchange.
Colombian venture capital firm also announced
the sale of its fraud protection company Easy
Solutions, via a sale to Medina Capital Partners.
This is the Promotora fund’s second exit from its
venture capital fund, which still has four portfolio
companies. While the deal is an exit for Promotora,
it is also involved a capital injection from Medina
Capital, a high-growth equity investment firm
focused on the IT infrastructure sector. The capital
will be used to expand sales and marketing in
the U.S. and worldwide in order to meet increasing demand for the company’s fraud protection
platform. o
Deal Monitor: Andean Region (by investor)
Investors
Fund
Portfolio Company Investor Type
Amount°
Country
Date
Advent International
PE
ClickDelivery
VC
Colombia
RedSeguro
VC
Colombia
Vetra Energia, S.L.
PE
Colombia
Energy (oil)
Jun 2013†
Copeinca
PE
Peru
Agriculture
(fishing business)
Feb 2013†
Intertug
PE
Colombia
Transportation
Feb 2013†
Safer Taxi
VC
Chile
Mobile (taxi
service app)
Feb 2013†
CorpBanca
PE
224.5
Chile
Financial
Services (bank)
Feb 2013†
Compara Online
VC
5
Chile
Internet
Mar 2013†
Chile
Mobile (taxi
service app)
Feb 2013†
Chile
Financial
Services
(insurance)
Jan 2013†
Energy (oil and
gas)
May 2013†
China Fishery
Darby
Overseas
Investments
Draper
Associates
International
Finance
Corporation
Kaszek
Ventures
Kaszek
Ventures
Colombia
Transportatio
n
Infrastructure
Fund
IFC African,
Latin America
and
Caribbean
Fund
Colombia
Mainstream
Renewable Power
(40%)
Alianza
Fiduciaria
Capital
Capital
International, International
Acon
Private Equity
Investments
Fund VI
50.00%
Other Investors
PE
Axon Capital
Chile
Energy (wind
and solar)
Aela Energía
Axon Capital
60.00%
Industry
Actis
Amerigo
Colombia
Ventures
Amerigo
Colombia
Ventures
290
Stake
Safer Taxi
VC
Larrain Vial SA Larrain Vial
Corredora de Global Private
Equity Fund
Bolsa
Cruz Blanca Salud
PE
Linzor Capital Linzor Capital
Partners
Partners II
R2 Energy Solutions
PE
Colombia
Safer Taxi
VC
Chile
Otto Capital
500
Terranum
Capital
Terranum
Capital Real
Estate Fund I
Argentina Aceros
PE
Peru
Terranum
Capital
Terranum
Capital Real
Estate Fund I
Carabayllo
PE
Peru
Financial
Services
Internet
(restaurant
platform)
Internet (car
insurance
platform)
Jun 2013†
Jun 2013*
May 2013†
May 2013†
Mobile (taxi
service app)
Real estate
(affordable
residential
housing)
Feb 2013†
Real estate
(middle-income
residential
housing)
Graña y Montero
Jan 2013†
Líder Grupo
Constructor
Jan 2013†
Total $1 Billion Invested (via 15 transactions -- 4 disclosed in 1H2013)
Total $1 Billion Committed (via 16 transactions -- 4 disclosed in 1H2013)²
Source: VELA Data
VENTURE EQUITY LATIN AMERICA
© 2013 Thomson Reuters/Tax & Accounting
19
Round Up
Round Up
By Linda Zhang (Thomson Reuters)
500 Mexico City Unveils Newest Class of Startups
500 Mexico City—the Mexico arm of 500 Startups—
has selected 17 new companies as part of its latest
accelerator round, according to the 500 Startups press
release. Only 5 percent of applicants made the final
cut, and those selected will undergo a 5-month acceleration process during which the companies will
work with the 500 Mexico City team on issues of
distribution, product and fundraising, and knowledge transfer. The founders come from all across
Latin America, including Buenos Aires, Santiago de
Chile, San Luis Potosí, and Bogota.
Deals
Latin Idea Ventures Backs Mexican
Startup Linio
The Mexico-based venture capital firm Latin
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Idea Ventures has made its first investment of
$50 million in Linio, an Amazon-like e-commerce
company, according to the New York Times’ Dealbook. The startup plans to use the capital to drive
the expansion of operations beyond Mexico, into
Peru, Colombia and Venezuela. Other investors in
this round include JP Morgan Asset Management,
Summit Partners, Investment AB Kinnevik, the
Tengelmann Group and Rocket Internet, which all
participated in previous rounds. Linio has raised
about $100 million to date.
Brazil-based Technology Startup ContaAzul
Receives Series B Investment
Brazilian technology startup ContaAzul received
a Series B investment from venture capital firms
Monashees Capital, Ribbit Capital, 500 Startups,
Napkin Ventures and Valar Ventures, according to
Valor International. The company owns a management system that caters to small companies and
recently raised a Series A round in January. The
company will use the capital to expand operations, and aims to reach 50,000 subscribers by
2014. Financial terms of the transaction were
not disclosed.
Funds
Multilateral Investment Fund Invests in
Innovative Colombian Seed Capital Fund
The Multilateral Investment Fund (MIF), a
member of the Inter-American Development
bank (IDB) Group has agreed to invest $5
million in Velum Early Stage Fund I, an early
stage venture capital fund that provides longterm financing and guidance to technology
startups in Colombia, according to the IDB
announcement.
Velum is the first private seed fund focused on
technology in Colombia, and within technology,
the fund will target Information and Communication (ICT), medical and health technology,
and clean technology sectors in particular. The
fund will fund 24 early stage startups that have
a minimum viable product and sales lower than
$500,000. o
November 15, 2013