1

Venture Capital Opportunities in South America A Fund Manager's Perspective

Boston, September 2012

Lisandro Bril

Founder & Managing PartnerHoldInvest, AxVentures/Pymar & EMVC1

Twitter: @lisandrobril

Harvard Business School - Latin America y Venture Capital Club

2

Lisandro Bril is Managing Partner of AxVentures – Pymar Fund’s manager in Argentina. He is the founder and Managing Director of Holdinvest S.A., a company focused on providing advisory on venture capital issues to investors and entrepreneurs in Argentina. He has almost 30 years of experience as an entrepreneur and a Top Management Consultant on Strategy, Organization and Executive Search for world class companies.

The trajectory of Mr. Bril in the field of venture capital is associated with his auspicious experience as Angel investor (Sales ESS sold to Oracle) CEO of BGS Seed Capital Fund in Latin America –Argentina-Brazil-Mexico and Venezuela) and CEO i5/Hicks Fund in Argentina, those funds invested U.S. $ 17.5 MM in emerging technology companies. The fund was able to repay money to investors through the successful case of Amtec Software Company, now Neoris, as well as Comunia, B2B Latin America, PalmSite, Gemelo.

Prior to this, Mr. Bril founded Booz Allen Hamilton in Argentina, and was it’s Managing Director. He worked on several projects in South American financial services, automotive industry restructuring, privatization and diversification of conglomerates in the chemical and steel industries, both in the public and private sector. Mr. Bril also worked for seven years as Partner at both Spencer Stuart and Korn/Ferry, the Executive Search firms.

Between 1985 and 1989, he was Undersecretary of State for Foreign Trade, and as such, he was responsible for the administration of exports and imports and for the exports promotion policies of Argentina’s non traditional sectors. He actively participated in the creation of MERCOSUR.

Mr. Bril is co-founder of Endeavor Argentina and currently advises its Global Management on Seed Capital Financing and is a participant in Endeavor Catalyzer VC Fund; co-Founder and Treasurer of Fundación Equidad; former President of Harvard Club Argentina; former member of the Foreign Trade Commission of the American Chamber of Commerce in Argentina (AmCham) and the International Organizations Commission of the Unión Industrial Argentina (Argentine Industry Organization). Mr. Bril also participated in the organization of the Group of 50 Latin-American Business Leaders, based in Washington (Carnegie Endowment for International Peace).

Mr. Bril holds a BA in Economics (Cum Laude) from University of Buenos Aires, and a MPA from Harvard John F. Kennedy School of Government. He also worked as a Case Writer for Harvard Business School.

Lisandro Bril has 30+ years of Entrepreneur, Management Consulting and Venture Capital experience

3

Table of Contents

• The Latin American opportunity

• Our experience in VC Investing

• Going forward‒ New Fund‒ Team

• Opportunities for MBAs

• Annex

4

Table of Contents

• The Latin American opportunity

• Our experience in VC Investing

• Going forward‒ New Fund‒ Team

• Opportunities for MBAs

• Annex

5

Challenges: sustain growth, reduce poverty and inequality

Innovation and entrepreneurship are critical

Key player in Cloning-Copycats, Open Innovation and Hybrid projects

Latam executions of USA technology innovation for Emerging Markets (eg. Legatum)

Source: World Economic Outlook, April 2010, IMF

Latin America is an attractive region for investments due to its scale and its fast growing market place

Emerging Middle Class 580 million people Combined GDP USD 5.15 trillion Average GDP growth 5.7% for 2010

and 4% expected for 2011 Portuguese language: 200 MM,

including Portugal Spanish language: 480 Million people

including Spain and US Hispanic

Urbanization 20 countries 5 cities with over 7MM people

Entrepreneurship and Innovation

6Source: Euromonitor

Selected Latin American Countries Size and Performance

Selected LA Countries USA

5,790

15,065

Selected Countries: Argentina, Brasil, Chile, Colombia, Mexico, Peru and Uruguay

2011 GDPInternational US$ PPP Billion

2008 2009 2010 2011 2012

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

-0.3%

-3.5%

3.0%

1.5% 1.8%

4.4%

-0.9%

8.0%

6.9%

5.1%

USASelected Countries

Real GDP Growth

38%

… as well as an expanding GDP growth of 5% fueled by external and domestic demand

7

Japó

n

Bélg

ica

Din

ama…

Italia

Rusia

Alem

ania

Fran

cia

Mal

asia

Espa

ña

Finl

andi

a

Eslo

veni

a

Croa

cia

Rein

o …

Sudá

fric

a

Hol

anda

EE.U

U.

Nor

uega

Gre

cia

Hun

gría

Leto

nia

Isla

ndia

Uru

guay

E. A

rabe

s

Arge

ntina

Chile

Bras

il

Chin

a

Perú

Colo

mbi

a

(*)Improvement-Driven Opportunity Entrepreneurial Activity: Relative Prevalence: Percentage of those involved in TEA who (i) claim to be driven by opportunity as opposed to finding no other option for work; and (ii) who indicate the main driver for being involved in this opportunity is being independent or increasing their income, rather than just maintaining their income

Source: Global Entrepreneurship Monitor (GEM) 2009

% of the population 18- 64 that are involved in an entrepreneurial venture

Brazil

Chile

China

Colom

bia

Israe

l

Mexico Pe

ruUSA

Urugu

ay0

10

20

30

40

50

6046

53

3441

55

4147 50

54

Improvement-Driven Opportunity Entrepreneurial Activity: Relative

Prevalence (*) 

The region is characterized by an improvement-driven entrepreneurial culture

8

Source: “Venture Capital at the MIF: Empowering SMEs and entrepreneurs in Latin America and the Caribbean”, presentation by Susana Garcia-Robles, FOMIN, April 2010

MOST DEVELOPED VC ECOSYSTEMSBrazil, Chile, Colombia, Peru

MOVING TOWARD CONDUCIVE BUSINESS AND/OR REGULATORY ENVIRONMENTMexico, Uruguay, Argentina, Costa Rica

CURRENTLY DO NOT HAVE CONDUCIVE BUSINESS AND/OR REGULATORY ENVIRONMENTPanama, Barbados, Bahamas, Jamaica, Suriname, Trinidad & Tobago, Bolivia, Paraguay, Belize, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Nicaragua, Ecuador, Guyana, Venezuela

• Entrepreneurship is flourishing• Angel groups starting• Incubators are commercializing• Entrepreneurs starting to

understand VC• Corporate governance and

accounting standards receiving attention

• Few capable local VC fund managers• Funds with track record in PE only• Some government actions are not

investor-friendly• VC laws need to be improved or put

in place (e.g. Argentina, Mexico)• Tax treatment of VC investments

needs improvement• Exit options are limited• Pension funds do not invest or are

not permitted to invest in VC• No organized government support

to VC• Minority shareholder protection

rights are ambiguous

• Early stages of corporate governance awareness

• Angel groups starting• Scarcity of capable local VC fund

managers• Business environment at times

challenging• No local laws for VC investing, so only

offshore funds are possible• DFIs and foreign PE regional funds are

the main investors in VC/PE• Pension funds not investing in VC• Difficult to generate adequate deal

flow due to size of markets• Exit options are limited• Government does not provide

organized support to VC industry• Minority shareholder protection rights

are ambiguous• Low levels of entrepreneurship• Few incubators• Quality of accounting standards is

ambiguous• VC and seed investing not well-known

• Needs to be developed further• Most promising VC ecosystems• Acceptable legal, tax and regulatory

frameworks in place• Fund managers with track records• Local capital markets and strategic

exits possible• Numerous SMEs and

entrepreneurship culture• Still room for improvement • PE is most developed in Brazil, but

early stage VC, seed and angel investing

The entrepreneurial Ecosystems in Brazil, Chile, Colombia and Peru are the most attractive for VC Investment

9

Which is highly correlated with the Institutional Framework for VC. There is still room for huge growth of PE-VC/GDP

Source: Adapted from LAVCA, LAVCA 2011 Scorecard: The Private Equity and Venture Capital Environment in Latin America, (NY, NY: LAVCA), 2011, p. 5.

LAVCA Scorecard & PE-VC/GDP

10

Colombia, Mexico, Peru and Chile are the fastest growing destination for Private Equity investments over the next 2 years

Source: Emerging Markets Private Equity Association “Global limited partners survey” May 2012

Latin America (ex. Brazil)

Southeast Asia

Brazil

China

Turkey

India

Sub-Saharan Africa

Central/Eastern Europe

Russia/CIS

MENA

0% 10% 20% 30% 40% 50% 60%

38%

41%

24%

26%

29%

16%

20%

11%

11%

11%

16%

12%

28%

18%

14%

20%

21%

13%

10%

17%

LPs' Planned Changes to EM PE Investment Strategy Over the Next 2 Years

Expand Investment Begin investment

11

Table of Contents

• The Latin American opportunity

• Our experience in VC Investing

• Going forward‒ New Fund‒ Team

• Opportunities for MBAs

• Annex

12

We have managed 4 funds -2 Latin American and 2 Argentinian- in technology innovation with successful returns

Fund Vintage LPs Stage Capital Companies

AxVentures/ Pymar 2009

• FEC

• MIF

• COFIDES

• CAF

• Private

Seed & Series A

USD 18MM

• Keclon• Zauber • GranData • Cupoint • PixOwl • BioScienc

e

HoldInvest Technology

Fund2008

Argentine Family

Offices & High Net

Worth Individuals

Growth USD 1MM• Technisys

(software for Banks)

I5 Hicks Muse / BGS 1999

Hicks Muse &

Management Affiliate

Seed & Series A

USD 13.5 MM

• Amtec/ Neoris

• Despegar• BonVivir• Certant• Gemelo• Comunia• Advertium• Palmsite• B2B Latin

America

1

1) Mercado Libre was a direct investment of HMTF Partners

131) Estimated according to EVCA methodology

AxVentures/ PYMAR and HoldInvest

Development of an enzyme that raises the quality of vegetal oil derived biodiesel, by reducing the steryl-glucosides amounts.

12/11 -

Company DescriptionDate

InvestedDate

Realized

Platform of integrated products and services targeted at the

banking industry.01/08 -

Research, development and production of medical diagnosis

equipment for neurology, neurophysiology and cardiology

03/11 -

Mobile Video Games 06/12 -

Software development boutique focused in applications for social

networks. 12/11 -

GranData

Strong internet user analytics for financial sectors

telecommunications and electronic commerce.

06/12 -

Daily deal aggregator website for more than 50 cities among

Argentina, Brazil. Spain, Mexico, Colombia, Chile and Peru.

09/11 -

14

Hicks Muse

Company Description Outcome Lessons Learnt

Amtec, now Neoris.IT consulting

Sold for 30MM Great founder

Internet based travel agency

Diluted before success. Now @Sequoia 1B

Great founder’s team, but adoption took time

Wine club Recycled into La Nacion

Great founder’s team, but adoption took time

Software development and service company

Surviving Very professional, but lack of commitment and passion

Cloud back up Surviving Too early for cloud computing

Comunia Group buying turned into Cuponica, now

SonicoRecycle Too early

Advertium Advertisement market place Closed

Great founders team. Lack of commitment of strategic

partner

Palmsite Electronic commerce market place Closed Wrong founder

Mercado Libre was a direct investment of HMTF Partners

15

Table of Contents

• The Latin American opportunity

• Our experience in VC Investing

• Going forward‒ New Fund‒ Team

• Opportunities for MBAs

• Annex

16

Focus The Approach

Seed and Early stage investments

US$ 500K to 7/10 MM per target

US$ 10/20 MM for selected follow ons

EMVC1 Investment Strategy

1)TME = Telecommunications, Media and Entertainment

The Strategy of the Fund is to invest in the best entreprenuerial teams in LA which are able to escalate oportunities globally

Stages

Business Plays

Industries/ Businesses

Disruptive models (50%)

Copy cats (50%)

Internet and TME1

Biotechnology/ Nanotechnology

CleanTech

Software applications (SAS)

Health Equipment and Services

Accelerator (?)

Best Teams

Founders Market Fit

Scalability

Best Practices

World and local network

Hands-on Investment

Seats in Boards of Directors by Partners and Principals

GP that combines businessmen, entrepreneurs and hands-on consulting capabilities

Formal Investment Process

1% GP commitment

Team, Scalability and Hands-On Participation

17

BogotáMedellin

THE EMVC TEAMWe have the capability to execute a VC strategy in Latin America networked with global key innovation hubs and financial markets

Buenos Aires

Santiago de Chile

Lima

Silicon Valley

Minas GeraisRio de JaneiroSao Paulo

London

Tel Aviv

Mumbai (Pune)

New York

Company & Investment Locations

Technology Hubs

Financial Hubs

18

Growth

years

$

1 2 3 4 5 6 7 8

Attractive Market Opportunities

Global Niches

Market valuation of $20/50 MM

Series B targeting

$500MM

Capital Need

Investment Rounds to: Complete the development of

prototypes and gain client access. Product development Scale to reach global and regional

markets. Recruiting of key talent for

management team. Investment readiness for Series B

rounds

US$500K to US$ 7/10MM

Source: New Fund V

Investment target is US$500K to 7/10US$MM to scale up and globalize entrepreneurial companies with high potential

19

Table of Contents

• The Latin American opportunity

• Our experience in VC Investing

• Going forward‒ New Fund‒ Team

• Opportunities for MBAs

• Annex

20

Adding

Value

Strategy

Contacts

SynergyTechnology

Expansion

Leaded by a team with experience in the development of global strategies and new business models

Brazil, Chile, USA Silicon Valley , Europe, and India

Access to follow up investment funds

Regional and Global entrepreneurial development services and VC Network• Financial, Legal,

Tax, IP• Clients• Key Professional

and Board Recruiting

• Investment syndication

Access to local and international mentor experts

Maximization of portfolio synergies and complementation

Source: New Fund

EMVC1’s Team plays a role as a smart and hands on investor in key value added functions

21

The Team will cover the geographies, industries and functions with 1 Managing Partner, 2 Principals and 4 Senior Associates

Lisandro BrilFounder, Managing

Partner and Key Man

Brazil, USA

Advisory Council & Angel Investors Network

• Brazil, Colombia, Chile, Argentina. Silicon Valley. Israel,

• Internet, Biotech, Nanotech, Clean Tech, Health

Investors

1) A2C is a Management Affiliate and Venture Partner, Management Consulting Firm (www.a2cadvisors.com)

Argentina Chile

A2C 1

Management Affiliate

JF

Senior Associate

SM & DH

Associate

Brazil

LB

Managing Partner

LB2

Senior Associate

TBC

Associate

Colombia Peru

StrategicAlliance

Internet

A2C 1

LB

Bio & Nano Tech

ATGF

CleanTech

NKGCH

Finance and

Legal

A2C 1

SM

Human Resources

LBLB2

Control & Investor Relations Support

IF

Geography Industry Function

22

Table of Contents

• The Latin American opportunity

• Our experience in VC Investing

• Going forward‒ New Fund‒ Team

• Opportunities for MBAs

• Annex

23

This is the right place to be…?

• Geographies: Emerging Markets• Brazil• Colombia• Mexico• Chile• Peru• Argentina ?

• Industries • Internet• TME• Biotechnology• Nanotechnology• Cleantech• Health• Education

• Careers:• Entrepreneurial• Venture Capital• Private Equity• Corporate

• Strategy and Business Model compass. Customer development approach.

• Finance• Valuation• Venture Finance• Tax and Legal• Equity Research

• Human Resources• Start up organizational development

(Luana Bichuetti – HBR article)• Talent Management: recruiting,

compensation, retention• HR and Knowledge Management

Processes• Hackatons• Marketing: Product Managers for Digital

Storefronts• Lean Start Up Paradigm

Opportunities Functions

24

GPs and LPs operating in Latin America

LPs Latam

Canadian LPs

Silicon Valley Bank

Horsley Bridge

Adam Street

Harbour Vest

Hamilton Lane

57 Stars

Carnegie Corporation

University of Texas Endownemt

Grove Street (?)

Altius (?)

University of Virginia

GPs Latam

Wayra/ Amerigo/ Telefónica - PanLatam

Monashees-Br

Redpoint – Br

Kaszek - PanLatam

Promotora -Co

Alta Ventures -Mx

Equtias - Ch

Austral- Ch

Aurus- Ch

CAP Ventures-Ar

Ax Ventures / Pymar Fund- Ar

Marc Andreessen

FINEP

CORFO

NAFINSA

Bancoldex

21212 – Br

Ángeles – MX

Nextp – Ar, Ch, Co

Quasar - PanLatam

Accelerators Latam

25

Work session

26

Email: lbril@axventures.com

Twitter: @lisandrobril

Linkedin: http://ar.linkedin.com/pub/lisandro-bril/7/709/17ª

Blog: lisandrobril.wordpress.com

27

Table of Contents

• The Latin American opportunity

• Our experience in VC Investing

• Going forward‒ New Fund‒ Team

• Opportunities for MBAs

• Annex