333. Mexico’s New Tech Mafia, Winning Copycat Strategies, and the Future of Fintech in LatAm (Hernán Fernández)

Hernan Fernandez VC


Hernán Fernández of Angel Ventures joins Nick to discuss Mexico’s New Tech Mafia, Winning Copycat Strategies, and the Future of Fintech in LatAm. In this episode we cover:

  • LatAm’s Explosion in VC Funding
  • Mexico’s New Tech Mafia
  • What to Look for in Copycat Strategies
  • Democratizing Fintech & More!

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Transcribed with AI:

Hernan Fernandez joins us today from Mexico City. Hernan is managing partner at Angel Ventures, an early stage venture fund. There he has led investments in Clip, Kueski, Urbvan, Homie, and the Aprende Institute. Hernan, welcome to the show!

Thank you, Nick, very excited to be here. And again, many, many thanks for the invite.

Yeah, it’s so great to connect. It’s so great to work on a deal together. But you know, talk us through your background and your path to VC.

Yeah, sure was, it was a very non traditional, you know, path we see and definitely very serendipitous. So I actually started off as a lawyer in Mexico City, and in the legal profession in civil law countries is very different from common law countries like the US or whatever, it’s usually an undergrad degrees. So I went to my undergrad in law for approximately five years. And then, you know, as a freshly minted lawyer, but you know, going through the decision making process on why, you know, a company A will buy a company B or whatever, I felt very much, you know, kind of, like, trapped into a very legal role. And, you know, when you’re like a lawyer with that vision is like, you drop into y Company A, it should execute like x or y documents, right? But you’d never ask about, like the whys or why, you know, a certain decision was was made. So I studied for the GMAT, and I was trying to switch careers. So the MBA was a good one for me. And I was lucky to get accepted into MIT. The day when I got accepted to MIT, I paid that same day, there was like, if this was a mistake, there’s like, no way they’re getting rid of me. So imagine a lawyer from Mexico getting into one of the most quant oriented MBAs in the world, and definitely one of the most well known schools for entrepreneurship. So it was inevitable that, you know, being there, I definitely got hit by the intrapreneurship of it. And it was really what I wanted to do after graduation. So got involved, you know, in the 100k, Business Plan Competition, I participated, and I helped a little bit the organizers into the same venture mentoring services, you know, that the thing would, with the US compared to many other emerging markets is that in the US, you definitely take intrapreneurship for granted, right, and you have all these variables ecosystem to help you you know, different ideas or different, you know, thesis and you raise your hand and you can get like a co founder or a lawyer or accountant to support you. And the, that journey is actually not not so established in many other emerging markets. So I fell in love with ecosystem and I knew from you know, day three at MIT that I really wanted to do something regarding entrepreneurship. And and here I am, it has been a longer but very fulfilling journey.

Amazing. So I think you’ve been at this for 12 years now is Angel Ventures, is it over a decade old?

Yeah, that’s absolutely right. I will say that there’s like, two moments, right. Like, when we launched Angel ventures back in 2008, we were the first official angel investor network in Mexico. And again, it was like, we felt that it was a piece of the puzzle missing, you know, there were like some private equity funds or growth funds, and you have like the car loans or whatever, already doing business in Mexico. And there were like, some local, I will say, like row PCs, or guys like trying to do like lottery tickets. But early stage was pretty much still, you know, NASA, right? So we saw the opportunity of how to organize some people that I knew, you know, personally, that were looking for investment opportunities. You know, the big challenge was, when you think about an angel investor in the US, 80% of angel investors in the US have been successful entrepreneurs. So we’re talking about wealth that is created through entrepreneurship, right? So think in terms of, you know, Mexico, Turkey, many other emerging markets, you’re talking about, you know, wealth that was created, you know, many families ago, and it’s kind of like, wealth passing on generation three generation. So to actually get these people in line with, you know, what is an entrepreneur, what is step or whatever, it was a completely different story, and certainly was a labor of love. So between 2008 and 2012, we basically did this, you know, breakfast parameter, which is kind of like a fancy place here in Mexico City. And we were just, you know, trying to teach or high net worth individual ways how to do a tech investment, right. Obviously, we stumbled upon upon so many problems. And we saw, you know, very interesting features, many of the features that we’ve you know, failed to back or whatever, but, but certainly, I think it was commitment that got us here, it was certainly that we were harnessing the collective power of very smart people could probably have not a lot of experience into tech. But, you know, we were literally seeing, you know, during bonuses from the CEO of Google or the CEO of Pfizer, whatever, starting to go as an investment into, you know, startups or entrepreneurs. Right. So it was certainly a very exciting time. I would say that the first year that we saw that we did as an angel investor network, we’re very, very little on deck, we’re very, you know, light on deck and up until 2011. That’s where we started, you know, that kind of like, like a different trend or different sets of Intrapreneurs. And at that point, we said to ourselves, guys, you know, we really need to tap into our game and many of Have the investors that we send you investor network, were telling us, you know, I probably know zero about the commerce, but I trust you guys, you have been at this for three or four years, you’re bringing us interesting pipeline. So why don’t I give you a mandate for 500k and invest on my behalf, where they will probably see, you know, like the CEO of Google was doing a good investment on Keystone. I mean, maybe these sort of person came from a ritual background, right? So it wasn’t like those those kind of like relationships where you say, I would like to invest into tech with the guy that knows. And the guy from tech would probably say, Hey, I might be open to having something in retail. And I would like to coin base with the guy who ran Walmart for many years, right. So it was kind of kind of like those symbiosis and try to fit the puzzle. And up to today, you know, and obviously, we’re going to talk about the journey, but I still call Angel ventures, collective decision making process of sorts, right? And, again, that’s, that’s being true to or angel investor, network origin,

What is the thesis today Hernan?

So we’re actually launching our fund three, now, we’re literally kicking off next week, we’re finally feeling positive about fundraising.

Congrats!

Thank you! But funds one and two. So for one, it was a very small fund was a $20 million fund, that was a 2013 vintage, we had very little idea of what we were doing at the time. But you know, we had an amazing pipeline, we have a lot of passion for what we did, we have, you know, a growing team, we have so many people that came to us, you know, and I sometimes feel like the Wizard of Oz, you know, I, I have worked with that. And then we at some point, because, you know, we were very little bit very few people doing VC back in 2012 2013. And you had all of these amazing people super talented, coming to you to pitch their idea. And, you know, many times I was just like blown away. And it was actually an act of humility, trying to take two steps back, try to hollow into some of the data that was just like, thrown into you about like the market size of the opportunity. And then, you know, following up with some people that you knew that probably knew way more than I did back then, about any given vertical and try to make them you know, a fairness opinion. And if if you show the bounds with the process or not. So it’s kind of like a, it was a very, very interesting time. But our frontline was 100% generalist, again, it was a very small fund, we were based out of Mexico. So we basically backed either Mexican companies or companies that have a clear intention. And actually, that actually set up like a Mexican operation. So fun to it was 2018 vintage, it was called the Pacific landscape Fund, which is Mexico, Chile, Colombia, Peru. So I would say that, we were expanding a little bit of what we did well in front one, but now for the Spanish speaking countries of Latin America are the ones that are perhaps the most relevant. Again, Mexico, Chile, Colombia, Peru. And if you are these four countries together, you’re talking about a GDP of 2.3 trillion, and an economy of 230 million people, right? So that’s larger than Brazil, which is always uses to draw a bunch of the investment being made in Latin America, because of its size. So I would say that for one and two were mostly about like geographic expansion, and keeping, you know, with very different approaches, in terms of investment, right. So I will say that we stumbled upon FinTech and our first one, and obviously, we have grown that, and we have seen the rise. So there are no InsurTech or proptech, or things that are now embedded finance, by definition. So that’s something that has us pretty excited, we’re doing a lot of Foodtech nowadays have an amazing partnership. And they’re one of our LPs, Nestle, you know, the one of the largest food companies in the world. So, again, keeping ourselves true to you know, trying to leverage a collective decision making process and bringing people that know more about verticals. And as we strike up an amazing deal witness team, we’re super happy with that partnership. So I will say like, food tech is also one of the major things where new ventures is nowadays excelling at, and you know, obviously, ecommerce and some of the other, you know, e commerce related verticals, they run a place where, you know, the pure plays a marketplace or whatever, it’s something that we also look into closely. But I will say it’s easier for us to kind of like define what we do not look at, and obviously that’s, you know, kind of like acid carry models or cargo playoffs or whatever we I mean, we have done some in the past and, and we’re deriving from experience that we probably shy away from some of these models. But I will say that our place and energy place and stuff like that will probably will not do it. But we’re very open when it comes to listen to pitches. We love a good story to be told by an entrepreneur and we love being team players with some of the best minds that we can get in Mexico in the US and Canada. anywhere as long as you know, there’s a certain angle to be here with Latin America.

So we’re on a you know, alongside your firm’s maturity, the geography has matured quite a bit. And we’re all pretty familiar with all the capital that’s sort of entered the ecosystem over the past couple of years. But can you talk about maybe some of the major inflection points, you know, over the past decade or so in Latin America that has sort of catalyzed this opportunity that we’re all experiencing today?

Yeah, no, I mean, obviously you you guys know the data, right? But last year was a close to 90 million. Amazing, right? Like the amount of capital that Latin America saw the past year. It’s just like Record breaking and and I think you know, the trend will continue to go upwards. But I don’t think that we’re going to have like a record year of that magnitude. I guess that’s that’s something that’s also happening in other latitudes. In terms of inflection points. It’s interesting, obviously. And I love this question, because we were also lucky, we’re the child of luck in the sense that we started to do ventures back in 2008. And yeah, it was a hell of a time to actually try something that had to do with entrepreneurs. Right. So it was obviously, you know, kind of like, we did not foresee what was going to happen at the time. But, but I will tell you this, you know, we were taught many of our angel investors back in 2008 2009, were people that were in their 30s, something like lower 30s. And when you tell them, when you ask them, What were you doing back in 1989? A 90% of them will tell you, I tried to do a startup, you know, back in Mexico, which was more impressive, right? Like, I mean, we’re talking about many guys that probably went to school in Stanford, or Harvard or MIT or, or they have, like, close ties to the US. And obviously, they also got, you know, kind of like the the viewers for the.com in the US. Right. So that started like a spillover effect in Mexico as well. And you asked many of my angel investors back in 2008, what were you doing, you know, back in 99, and again, they were trying to do bad stuff come from Mexico, I mean, a bunch of like, e commerce right, or things that a on web 1.0 The interesting part for us is that, you know, obviously, the dot.com may burst happened, and you know, not only happened to us, but also everywhere else. So many of these, like very highly motivated guys, you guys even raised, you know, some initial money from local NGOs, from family of visa, or even from US funds, they already went bust. But they held on to dear life, in terms of you know, trying to keep their business alive. And then at some point, this is a true story by one of my my investors, right? His wife sit sat with him as like a this fucking Pepe, Pepe, either you get a real job, you don’t keep being given the uterus in terms of if we can afford afford to pay rent or not. Or it’s not going to end well, you know, for us as a couple, right? So this was maybe 2003. So these guys went to the corporate world. And because of the drive, because of the credentials of many of these people had, they were back in 2008. You know, with some money, they currently recuperating the losses that they probably invested back in 99, or whatever. But they were what I like to call closeted intrapreneurs, right, because they really wanted to be an entrepreneur, but their opportunity cost now to become an entrepreneur was just so high. And they were now you know, probably like a beam like a second house mortgage, and, you know, children to college, or whatever. So it was really hard for them to become an entrepreneur again. But they really had the VOC they had so much energy to help other entrepreneurs. And they lived through us their entrepreneurial journey, which was, you know, a pretty interesting factor. So, first inflection point, you know, this generation of.com bursts that became in your investors that the I will say that, it was like the real serious real generation of angel investors in the country happening that vintage. I will say alongside with that, you know, Latin America has always been about, there’s a really big penalty when it comes to that in America in terms of failure. And that’s something that has changed dramatically, but they’re, we’re still addressing, right, like, I recall, you know, talking to my us friends, whatever is like, Oh, what did you want you to do between, I don’t know, 2001 and 2005, like, oh, I started working in X company, then I got fired, then I was like, trying to look for a job, I did a couple of things. I ended up like working for subway. And then you know, I ended up like working for this company. And we did well, and it was happily ever after. You know, if you ask that same question to a Mexican and Colombian or, you know, in Manila watching that America, it’s all a bit of roses, right as like, I started working in Company A, and then it was just like, you know, trending up, trending up, trending up, I got promoted, and the you will never hear like something negative or something we really fader. And I think that’s pretty cool that it’s changed. And the fact that there’s like so many startups nowadays is doing well, it’s, it’s critical for the economy, right? Because we used to have something internally that we call the grandmas test, right? Like, which pretty much she’s like, if you’re going to a school, make sure your grandma knows about it, right? Because that’s kind of like the brand equity goes that way. If you go to a company, make sure your grandma knows about it, right. So most startups did not pass the parameters because your grandma would probably have not heard about clip request key back in the day. And she will be you know, praying for you and concern for you. Because you probably you know, you will be out of the job and you know, kind of like, like be struggling in life. Right. And that, you know, fortunately has changed. I don’t think that this applies anymore. In in so many things in life, but again, that’s positive that I think that we’re embracing a little bit more for our own failure. And I think that’s really positive. Because startups have to have like, you know, what the, the numbers are zero, right? There’s like so many things that fail but on the other hand, you learn so much about failure and that’s a real teacher right? Many successes can probably be attributed to lock but failure is not there. And my last point towards you know, what, what has happened in Latin America, I will say, we started to see you know, kind of like the mafia in the woodwork. We will you See you here in Mexico mafia, obviously is not for the right reasons, I do think that we have a pretty bad PR problem. But when it comes to tech mafia, I think that we’re starting to see the first tech mafia, right. So it’s pretty exciting to learn from, you know, linear was probably one of the early tech mafias, or Rocket Internet company, for sure. But then you have like the rapid mafia, which I think is a dominant mafia today, and you start seeing, you know, the gathered mafia, and the quest key mafia, and the clip mafia is, it’s like, super exciting to see how these intrapreneurs are like paying it forward. Right. So so that appears, so the first mafia setting it’s very important, I think it was kind of like this, around the same time that we started seeing the first transactions in terms of acquisitions being made. I do think that the pending items still in Latin America as exits, right, like, right now we’re gonna like seal on the, out of the thrill of the ride of you know, these mega rounds or whatever. But that will make us still has the, to deliver your exits. Right. And I think that the it’s definitely now a time for, you know, to see IPOs in our in our fun one pitch, we never imagined that we’ll have an IPO and we actually now will have two IPOs within our portfolio, one portfolio. Right. But the but yeah, I think that exits are something where Latin America really needs to demonstrate the work that he’s capable of doing, you know, something, obviously, we have massive, you know, kids like like Mercado Libre, but we now know that for sure, but they’re still you know that, that path for that four to four to seven to $8 million, billion dollar, you know, cap companies to actually do well in performing public markets. So I think that’s yet but in terms of inflection points, 2016 17, we started seeing also more and more acquisitions being made, like BBVA, acquired openbay, for 60 million, which again, it seems paltry right now, but back in the day was one of the most like, you know, a record setting news or whatever. So, again, it’s been a long journey. I’m very bullish on the region, you know, the fact that more and more investors from different parts of the world, you know, we talked on a regular monthly basis to investors from Japan, from Australia, from Germany, I mean, I think the US and Canada mostly for granted, but it’s very interesting to see how Latin America is going. So we’re gonna, if you’re super excited, we love seeing, you know, by national, or by cultural teams, trying to tackle a huge opportunity for the region. And, again, it’s a very interesting time of place to be doing this

Quick question about these mafias, you know, in my experience, I started investing about a decade ago in Chicago, in the middle of the country, an emerging ecosystem. And I noticed these mafias that were sort of, you know, offspring from really successful companies. And often the businesses that they founded, sort of rhymes with the the business that they had belonged to, sort of the key strengths of some of those businesses repeated. And in some cases, you know, Sins of the Father repeated. For instance, there’s one mafia in town that’s notorious for raising tons of capital, before proof points and trying to sort of scorch the earth instead of, you know, focus on on a key problem. And when you see the founders that have kind of split off and done their own companies that grew up at those companies, you know, they have very similar characteristics. I’m curious if the Mafia’s that you’ve observed throughout Latin America, if they also, if their businesses tend to rhyme and share some characteristics with the business that they originated from?

It’s a really good question. You know, I think that let me put it this way, you need to have insiders within the mafia, right? Because they’re, for example, let’s let’s, let’s address Rappi, which I think you know, and and there’s a lot of documents on how many companies or how many, you know, companies, they have spawn, and some of them are unicorns, many of them are unicorns, and, you know, it’s certainly, you know, an exciting new system, there’s a thing that I will say, first and foremost is you need to have like an insider within Rappi where you can double check, you know, some of these names, right? Because these are the guys are proud to tell you, Oh, this guy was working next to Simone or whatever. And he was instrumental on building this product, right? Because I get the feeling and nowadays you know, you’re gonna get some of these people that literally worked for rugby for four or five months to put in their LinkedIn X rapid whenever I see like an X rugby, you know, as kind of like your description and getting, I get a little bit like, kind of like, it’s I’m not sure this is like the right guy, right? Or maybe he was like, the city head of Pachuca, you know, which is like a very small city. So probably is not the right people that you should be looking at a rapid so it’s not like the mafia per se does not give you like a minced for USBC to actually get excited about the opportunity. You still have to dig deeper into who is the person and you know, kind of like the, the grand vision or whatever and what he’s trying to execute. Right. I do think that many times there’s, I will say that it’s very true, you do see some of the sins of the father like being perpetrated and kind of like the new companies, I guess. It depends if there’s things that USBC can can live with, right, like, right now, for example, you know, obviously rappy is a company that could have burned, right? So I’m not sure that today if you’re like an extra P founder, you want to be pitching a company that is going to burn something similar to what Robbie Burns, right, because, again, they are competing to be the Super App of Latin American That’s a very valid point. And it’s great, but it’s questionable how many other companies can actually sustain that level of growth, right? So you have to have, you know, the right team direct conviction and the right vision and product. Or you’re gonna be, you know, the new x company that failed in Latin America, similar to you know, many others that we’re seeing right now in the US that were unicorns a few months ago, and now they’re running out of cash. So I guess it depends, but my advice to that is like, a mafia is not everything. It’s certainly like a good validator, but you need to check your own sources or references, if that particular person was relevant in the story that he’s trying to convey to you.

You had mentioned earlier, the pets.com for Mexico- I’m curious, what sort of data points are you looking for when you evaluate imported concepts, or some of these copycat v2 strategies that are launched in emerging regions?

This is something that I’m very passionate about. And this is the thing that, you know, I think that the the US is an amazing ecosystem, right. And, and obviously, you know, the amount of money that goes into tech or whatever, it’s, I don’t think it’s replicable for many other regions of the world, and certainly not Latin America. And the things that I get to see in Mexico, we obviously, you know, we are not we scourge A, or we look very heavily to PitchBook, or punch base, or TechCrunch, or whatever, to see what’s kind of like, gaining heat in the US. But here’s the thing, I actually feel more excited about, you know, companies that I might see in India, or in Indonesia, or a more comparable emerging market than the US. Yeah. And, you know, I’ll put an example for example, locks, remember that, you know, on demand, but let’s service, no harm intended whatsoever, right. But if you four or five years, you know, after, after the boss room, I’m probably it was like less than that. You think about the value prop. Like, it’s like, yeah, I’m driving late to work in San Francisco. And I have a very important meeting. So I get, you know, a guy to get in a scooter, you know, to an app to meet me in the entrance of my building, so he can get my car to give me parked somewhere, and then I give him the keys or whatever. So the use case, of course, you know, I think everybody can relate to that use case, like once or twice in your life, right, but it’s not common. I got pitches, you know, the looks for Mexico. And he was like, Dude, I never think this and I don’t think this is gonna work. Because a, you know, the people that can afford, these kind of services are after they probably already have a driver, right? Like, then Uber is like, so dominant here that it’s kind of like a lot of people like we’re starting like to not own a car. So I really like when I hear you know, currently, like intrapreneurs, going deeper into countries that are more comparable to Latin America, which, you know, we’re talking about like a low credit card penetration, you know, various symmetric information when it comes to data, crowded cities, crowded mega cities, when it comes to mobility. So we invest in urban, for example, right. And we were when we saw urban, the comparables that we could see were actually in emerging markets, or the big companies were in emerging markets. I mean, you obviously have beer production, for example, chariot, which was acquired by I think, was like General Motors, which was actually about right leg, like, like, right off. And it’s because you know, in the US, yeah, you can, if you live in San Francisco, yeah, you can complain everything that you think that you know about the bar, and you said ineffective system or whatever. But guess what, you know, a lot of people will probably mark the enbart, right. A lot of people in the US with, you know, a ridiculously low APR is whenever you can probably afford to buy a car. Whereas in Mexico, you have Mexico City, let’s think about Mexico City for a while you have the wealthy that own a car, many cars, maintenance drivers, whatever it may be many times there’s like two cars per family. And then it’s pretty much empty all the way to the lower part of the of the equation, which is, you know, public transport, which is very inefficient, heavily subsidized, but for the same reasons, it’s uncomfortable, sometimes it’s risky. And we’re talking about, you know, a city that used to have, you know, two or two and a half hour commute, right? So Uber comes along, and then obviously, Uber starts tackling some part of the equation and Uber pool or whatever, they start pushing down. But what urban came is like just come in between, you know, the very inefficient public transport and Uber X. And that part was a what we saw like as evolution right and, and guess what, we found it very comparable companies, right, we saw swirl in Egypt, we saw shadow in India, we saw a bolt in Turkey, because again, these are the markets or the cities where this is a real pain point. So it’s not about like a nice to have for many people that are actually taking this as an option. It’s a life changing product. So we love it when we wait to hear oh, you know, we studied Michaud in India, because again, the cultural traits or whatever and these later on, like social commerce, pyramid sales or whatever, are very common in Mexico much more common in the US compared to economy, right? And for example, the expenditure in in beauty in Latin America is off the chart. It’s one of the largest in the world, and even if compared on absolute numbers, is the size of China arguably. So we tried to look into what makes her you know, kind of like a region better or or even more interesting in that sense. And again, I really love it when entrepreneur does single Unlike only the easy way out and say, oh, you know, this S company in the US just, you know, raised tons of money in the US to do this vertical. And now I’m doing that for Mexico, I actually think that, if that happened in the US, there’s probably going to be a company in India, Indonesia, which, you know, I think Southeast Asia is more advanced than Latin America in that sense. It just broadly, also adapted that model, but is probably also bringing some sort of innovation or limb for like tropical cessation tools into their model in India, Indonesia, Vietnam, or wherever. And I think those models are more ready to adapt to Latin America than the ones directly coming from the US. And you can ask, you know, several American founders that, you know, just tried to do the X company into Latin America. And yeah, I recall, three or four years ago, you were doing an E commerce and you don’t take like cash on delivery. That decision right there because you 90% of your business period. Right. And obviously, you know, it’s hard for an American I mean, right, right now, it’s, it’s changing dramatically. But four years ago, we started seeing, you know, the big, the first might pushes for E commerce, right, like, and you will actually have a hard time with an American family, like telling them, You need to have a cash on delivery. Otherwise, you know, there’s like not enough credit card penetration, people still are kind of like not trusting like online payments, etc. So even to this date, probably things are a little bit more, more equalized. But you still need to think about ways of how to enable people to pay, right. And probably, it’s your convenience store to you know, SMS or whatever. But it’s not as simple as Yeah, I have like three or four credit cards right now with me. And I can pay for any goods and services, and it’s going to be a seamless transaction. Yeah, Amazon recovery, right? Many of the big guys do offer a seamless transaction, right. But for many other companies, you know, it’s not the case. Again, I do think like Latin American founders will do well, if you actually try to look for business models that are successfully adapted in countries that are more similar to home, then, you know, just bringing something for Israel, Europe or the US.

Hernan, what sort of challenges are there to investing across all these different countries? There’s different cultures throughout Central America, South America, in there’s substantial distance between these countries, right? Do you have any advice for those, you know, trying to invest across Latin America? And as opposed to, you know, picking maybe one or two countries to focus on?
Yeah, definitely. Everything gravitates towards Mexico and Brazil, because obviously, they’re, they’re the largest market, right, but, but the thing is, like, they could not be more different weather, obviously, Brazil, you know, its massive, and it’s kind of like an ecosystem of its own right. And even even, you know, it’s a different language. And, and it’s more different. I will say, you know, and the thesis of recycled fund was actually Mexico, Chile, Colombia, Peru, which these four countries are the Pacific Alliance. They’re Spanish speaking. And, you know, to be honest, Mexico and Colombia are very much like, in you know, in cultural traits in slang and everything. And yeah, there’s like so many Colombians living in Mexico, so many Mexicans living in Colombia, and I was, I would dare to say that they’re two of the regional leader, two of the mores, more similar cultures, and probably, you know, the route to a lesser extent, and Chile, probably a little bit less. But, you know, I think that still they’re very open market zero, very open economies, I do find them to be very similar, I think it’s, it’s more a matter of how to become relevant to all these countries, right. And the thing is, with Chile, and Peru, there are so small markets, that you know, any company that is growing a little bit bit in size, one of the first markers that they will try to tackle is Mexico, for sure. Right. And probably Colombia is kind of like also sort of a stepping stone. So you do have the benefit in Mexico of getting you know, inbound pitches of companies probably also see receive that are coming to you, right, obviously, you want to have like better access or validation or whatever you should definitely go. And you know, look for this, my founders in Canada, which, by the way, you know, there, there are now very interesting networks, even in countries like Syria, where, you know, I think that they’re, some of these companies are growing super fast, like, you know, like the butterflies or they’re not close to whatever we find interesting cluster, for example of biotech and food tech and cheetah, right? They do, I think you know, Husqvarna and we’re starting to see like some some sense of a pretty interesting, proven ecosystem. But to your point about like, how difficult it is, obviously, Zoom has been an amazing tool for us to try to explore that more and more, definitely, you know, speaking the same language being on the same timezone is really helpful. And the connectivity is amazing. There’s between Mexico and Bogota, there’s probably like 10 to 10 flights a day. It’s a four hour flight. So we try to do it every now and then. And finally, and this is something that we saw early on, we do have an office in Colombia will have an office in Peru. We’re trying to set up something in Chile because I think it’s it’s not only about you know, us getting a faster to some of these like very interesting products, but it’s also about what can you offer like a local entrepreneur, right? And where we have really tried to be different from the competition is business development, and really become a sort of an agent for many of our entrepreneurs, right? We really need to be there for them in the Golden Valley. We need to be a mystery shop Do we need to be a recruiter, we need to, you know, help them fundraise a like, like, there’s no tomorrow with, you know, beer friendly phones or whatever. And the fact that you have, like a local presence means a lot to intrapreneurs. And that’s, that’s, you know, what are we trying to do? Obviously, we’re small funds for the footprint that we have, and many other funds will say, Yeah, I will just send one of my resources every two months, whatever to check in with, you know, your portfolio. And that’s fine. I’m not saying that that’s not not the wrong approach. But what I do say is, like, whenever there’s like an someone local, and that can offer to, you know, go and, you know, get a coffee review with extra white team or, you know, just like talk shop or, or get things more and more on a personal note and attend, you know, weddings, funerals, you know, we do that all the time for portfolio companies, I think that’s important. And I do think that, you know, venture capital will continue to be a human centric a job, and the fact that you can have actually real people closer to where the action where your portfolio is, I think it’s for the better. Are there

Any characteristics of LatAm-based startups that would lead you to a quick pass around?

Yeah, I mean, obviously, we were super bullish in FinTech in in some of these verticals that we mentioned. And, and we love it, when a team is passionate about the product, they’re trying to be alright, when, when we, for example, invested in kreski our that was was was giving away his own money with his partner, right, I mean, there was probably just doing $200 A week because otherwise it will be unsurmountable. But you can just feel the pain point that and he was like just help so happy solving the pain point. And it was like a real pain point for you know, millions of Latin Americans right? Speaking with with Carlos of karate, you know, it’s exactly the same, you know, ganache is, is something like a real pain point, clip, you know, obviously, you know, just like empowering so many SMEs or whatever, to be able to have, like, very easy to use, like point of sale or whatever. It’s just massive the opportunity in Latin America, it’s not about like making a lot of money, which, you know, there’s tons of opportunity. It’s also about, you know, making good for your people for the country. And I love those stories about like, people that are like passionate and that go beyond the money of, they’re very, you know, ambitious, and they want to do like a massive company, whatever. But guess what, the byproduct is not some kind of like, like being on that nanoplates It’s something that’s really going to transform lives. And to your point about, like, what will be like a quick pass, obviously, you know, if it’s kind of like a niche market, or whatever. It’s like, Yeah, I like it. We still like many times of not very sophisticated intrapreneurs, we get asked, you know, what’s kind of like the repayment interest rate, which we definitely will never do. And the last one, which is sort of like a pet peeve, you know, many of these parts of the world, it’s how you did business many times was about who, you know, who you knew, right? And, and yeah, you probably know, yeah, I go to play golf with Carlos Slim, you know, every two weeks, or I got with X or Y, you know, person or whatever, which we launched implementers in 2008, with a very clear idea in mind to make access to capital, democratic, right. So we didn’t care if you came from Polytechnic or from you know, Nam, or from ATM or from Harvard or whatever, you were targeting, like a good market, there was like talent, you were able to pitch and recruit, we wanted to back you, right? So when I hear some of these speeches, and they just like, go on a massive namedrop of you know, the Forbes list in Mexico is like a sometimes I would like to call bullshit. And be it’s like, I mean, if you’re telling me a story about you know how that person in particularly is relevant, because you know, he’s going to be big investor, or he’s like opening up, you know, his companies for you to grow. I think that’s fair. But if it’s just, you know, like the whole school Rolodex and how they think that you read or whatever, it really feels that I’m finally betraying. The reason why we launched Angel ventures back in 2008.

You mentioned FinTech a couple times. And now our firms are co invested in a fin tech company in Mexico, super excited. Now, tell us about some of the areas that you’re tracking closely within FinTech and then maybe you know, some of the categories within FinTech that you’re intentionally avoiding, if any?

I’m very excited in everything that we’ve seen with embedded finance, right? So there’s all of these like, huge, massive data plays that are just like getting humongous amounts of data. And they’re now thinking about, like, how can I spin this into fintech? Right? That’s super excited. And obviously, you know, we have an investment into Indonesia tech company. And again, you know, the access to data that we have and the possibilities of changing, you know, so many livelihoods. It’s amazing, right? And only 93% of people in Mexico have some sort of insurance. So the opportunity is there it’s about you know, the right go to market and we feel we have the right team to to actually tackle you know, all these opportunities. And even for example, prop tech, right like prop Tech, I think that we have seen seen it like become more and more like relevant like two or three years ago, but obviously at its core it’s also FinTech, right because it’s enabling like you know better financial transactions for arguably one of the most important purchases that you will do your life which is a house right? And for example, we investors in call me which is an amazing company, you know that we’re always wanting rental marketplace in Mexico, and we just launched a product that it was kind of like accidental but you know, we have data for you know, some of these like houses or apartments, you know, for four or five years. So we know that whenever we put one of these compartments for renting Condesa Roma, it probably takes us, you know, three or four days, like literally, they will snatch it away from us. And not only that, but you know, we have we know exactly how much time some of these, like leases have still on the books, right. So, we launched a product where we are enabling landlords to actually take a cash advance in exchange of, you know, some of their future rents, and it’s standing on like crazy, right, they, so, you know, your property company, or like a peer reviewed rental marketplace, is now offering insurance, you know, like home insurance, or whatever it is, Swiss Re is now you know, doing these, like cash advance for landlords, which is like, say crazy. So, once you have the platform, you know, the possibilities are limitless. And, and I feel like very, very comfortable about about, you know, some of these companies that are like really having the data or that they already have like some sort of platform that can create, like some sort of, you know, of more like financial services. And for example, we also invested in, in cargo, which it’s amazing, right, because they are financing, you know, trade cargo from, let’s say, China to Colombia, because they know that, you know, for many of these SMEs, the 4k or 3k, or whatever it is, you’re paying for cargo between China and Colombia, those two or three months of headway are just very valuable for many of these companies, right. So they have an amazing chance to really be, you know, very, very relevant and, and they’re doing amazingly well. Because there’s like so much growth, and they can also provide, you know, with other financing products, to the SMEs that are already importing with them, right. And they have become very relevant in their in the distribution chain. So I’m going to embed in five minutes, it’s certainly one that I’m really positive. There’s some other for example, that I think that again, kind of like the last example that I mentioned, for example, super, super fast delivery, right? Again, we can all think about the use case, and you can see some advertisements here in Mexico City about like a company that’s saying, oh, imagine if you run out of toilet paper, and you need it within the next 10 minutes. Yes, I think we can all relate to that use case, right? But how many times in reality that can happen. So, you know, the fact that some of these companies are just like racing, you know, Congress of millions of voters, it’s kind of like bargain, and I’m not sure if that will sustain Well, in the future, and the other one that we passed away, and you know, it was kind of like a, it was a debate internally was, for example, the whole ibuyers, right, which is interestingly, you know, even in the USA, I mean, it’s very capital intensive. And I kind of get the feeling that it’s one of those things where we’re pretty much if there’s three or four other companies doing it by ear in Mexico, and you will see, you know, the city just like, you know, advertisements all over the city, and they’re trying to differentiate themselves in Oh, LPU within the next 10 days, right, like, I’ll give you money fast or whatever. But in the end, you know, if you’re selling your house, you’re gonna sell it to the person or to the company that pays you them more than the other period. I mean, unless there’s like some other like attachment to X or Y company or you like the people that are doing the deal better, you’re probably going to sacrifice a little bit, but in the end, it’s all about the money. Right. And, and where we’re seeing is that there’s you know, I don’t know if you know, Mexico City, but you have Roma, Condesa Polanco, right, and, and we see the three or four companies, you know, going after the same, kind of like neighborhoods, right. And if I have a house in Roma that I want to sell, obviously, I’m going to call the four of them and I’m not going to sell to the one that actually is going to pay me more. But if I want to buy a house in Polanco, I probably really want to just a house in Polanco. So I don’t care about your inventory in Santa Fe. I don’t care about your inventory directly because I really want to live in Polanco. So the fact that just like so much competition among among all of these four, just like enrolling so much cash, you know, potentially for investors because, you know, if someone wants to do Polanco, he’s going to probably go after my offering. But then, you know, you’re kind of like technically subsidizing that person who’s probably going to buy from your competitor because he wants to win Polanco. So this is one of those things where, you know, I would imagine like, kind of like an Italian Mafia kind of like city where it’s pretty much like, I’m Company A, and I’m going to own Polanco. So stay away from Blanco and then accompany and I’m going to own Roma Condesa. Stay away from Bronco desta and Company C, and I’m going to go for added value, right? Stay away from the value. Because I mean, right now as a consumer, it’s great, right? But but as an investor, I think that there’s, there’s a lot of cash is being eroded in some of these verticals. And you have to think about like long hard on what is sustainable, you have to have an amazing product. I think that I buy is an interesting product, but it’s kind of like the go to market that I have my doubts on that

Hernan, if we can feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about?

Oh, man, so many so many things have you know, I’m very grateful that you guys you know, are opening to Latin America obviously is a very, very exciting, exciting a space.

I’ll tell you what, it took us a little more work to get through the diligence on that first deal, you know, weeding the first deal in Latin America, but thank goodness we had here open your partnership on it. It was a good learning exercise and now we feel prepared.

No, you know, for us, you know, I think that’s it. Right, like there’s a few funds are here, you know, many of my colleagues or whatever we’re very hands on, and we’re very open to collaborate, right? So what you will find in in Mexico at least is like a very collaborative atmosphere. You know, you’re talking to funds that in the end, you guys ended up like being the lead investor, right, which is great, well, we happy to commit to that, we will join you on the board, we have all the right vaccinations, you know, to deal with that in America. So if there’s a regulatory hiccup, we know how to deal with it, if it’s about recruiting, we know where where the best places to do locally sourced. So I think, you know, for American funds that can bring a lot of like technical expertise or sector expertise, which is, you know, full disclaimer, I think that that’s where some local funds might be lacking. The fact that you can have a coin base monitor with someone who knows his way around the area, and who knows, you know, the right network of people or whatever, I think that’s, that’s a really perfect match. So, for us, it was a pleasure, you know, we we, we probably have all of our Co-investors into our slides, projects, or whatever. And we went, you know, as you know, we have our angel ventures friendly fund lists, which we have over 70 funds, and we will be happy to introduce any of our portfolio companies, or even a company that we might as it has, like a right, you know, pitch and idea to try to you, you know, for us, it’s very important that intrapreneurs succeed. And that, and hopefully, you know, this is one of our mantras, right, if they, if they come to a process, I do not want any entrepreneur to go out empty handed. So if I can provide, you know, like an intro, if I can give, you know, Amazon Web Service Credit, if I can give them like a freebie from from a portfolio, we will certainly do that. And maybe that’s, that’s an intro to, to someone that probably give them give them you know, 15 minutes at a time and, and hopefully something good will come out of that. So, so I think I think it’s the right mix to have local investors on board for anything that you’re doing that’s in America.

And finally here, Hernan, what’s the best way for listeners to connect with you and follow along with Angel Ventures?

We’re very active. I’m personally not very active in Twitter, but Angel Ventures Mexico is so you can follow us at Angel Ventures Mexico on Twitter, you can also reach me at hfernandez at angelventures.vc. LinkedIn. And yeah, we have Instagram Tiktok, open, we’re very active Facebook as well. So yeah, and to running for portfolio companies, I think that you actually want to pitch. And this is some advice I usually tell you know, other founders, if you want to pitch us and you know something to invest in, the best way to do this is to entrepreneur, right? So if you’d have like any any means to connect to them, those are the ones that will know, what are your filters? What are we good at, that we actually, you know, do walk the walk and talk the talk. And if I get a recommendation from any of our founders, good, small, you know, but whatever, either myself or Camino will always take that, that meeting personally. And that’s that’s a completely different, you know, path to entry. I mean, Google co investor funds, like obviously, new stack a will definitely take those those meetings personally as well. For us, you know, it’s all about the network and you can build and again, this is a very people centric business.

Well around it was a true pleasure today. Glad to you know, get to work with you and your firm on our first deal in Mexico. And looking forward to catching up in Polanco. Next time we’re down. Definitely, Nick,

I’ll treat you to some proper tacos.

I can’t wait. Take care.

Transcribed by https://otter.ai