Patrick Wakeham, CEO of Apurata, presenting at the 500 Startups Investor Night in Lima, Peru.
It is a good reminder that:
The number of startups across Latin America is growing. The growth of applicants compared to batch 9 in 2018 was over 50%.
Startup investors are very selective. Being chosen for any program, including StartupPeru, UTEC Ventures, or LIQUID Ventures Studio, is a big deal. Founders and investors in these programs can be proud of what they have accomplished and know they are in special company.
Founding teams from Peru belong to the exclusive 500 Latam community. Apurata, Decompris, Rebajatuscuentas.com, and Fitco are all part of the #500STRONG family. None of the startups from batch 10 are from Peru, but not being selected isn’t a reason to give up, it’s a reason to keep trying.
Last night, 500 Startups held its first Investor Night of 2019 at Comunal Coworking in Lima. The event was a sponsored by Porto Legal. A great collaboration of leading startup community players in Peru and Latin America.
Startups aren’t exactly the best clients. Neither are early stage investors for that matter. The lawyers that take them on are an essential part of our ecosystem.
Working with small startups doesn’t make legal work less complicated. Cap tables have lists of 30 or more investors, new rounds are raised every 6 or 12 months, and everybody wants an options pool. None of it is easy, but somehow needs to be done in order for interests to be aligned and exit paths to remain feasible. Lawyers often spend the time picking up the pieces after decisions are made, all the while knowing that getting paid probably depends on a successful future fundraising round.
Fortunately, a new crop of lawyers is shaping around the startup ecosystem in Peru. They are taking their own professional risks by jumping in and are entrusted with making sure that the ecosystem is built on a solid legal ground.
Here is a summary of some of the startup ecosystem lawyers I have come across in Peru. I have divided them in two main groups:
Alexandra Orbezo, who I put in the Transformer group, and Jose Miguel Porto, a Pioneer, were first movers in the startup ecosystem in Peru. Alexandra leads the venture capital practice at Rebaza, which has a long history of working with venture clients, including Naspers, Cinepapaya and Delivery Hero. Jose Miguel, of Porto Legal, and a UTEC Ventures mentor, worked on the recent Xertica round as well as led to process of creating seed round legal documents with PECAP.
Other transformers include Janett Burga at Rebaza, and Itala Bertolotti, who leads the charge to support startups at Muñiz. Diego Carrión of Hernandez & Co. and Augusto Caceres of Rodrigo round out the group.
The Pioneer group includes the Sumara Hub Legal team of Alvaro Castro, Juan Jose Hopkins, Angie Umezawa, who are experts in fintech, the largest startup segment in Latin America, as well as venture capital fund formation and structuring. Sofia Yague, who started Next Legal, is a essential link for startups that are interested in setting up international holding company structures and preparing for Series A financing rounds. Alberto Arrieta, of Legal Ventures, has been a key advisor to startup founders for raising seed rounds and corporate governance, among other things. Francisco Davalos is a valued advisor to many startups that have passed through 500 Startups Latam. Finally, Oscar Montezuma is building a unique cutting edge, legal practice at Niubox Legal. He is a key industry leader, in both words and example, for the legal profession in Peru.
These Transformers and Pioneers are the keepers and protectors of our startup ecosystem. We depend on them and they are looking out for us.
If you are a startup founder in Latin America, you are making an impact. It may be time to start measuring that impact – and sharing the results.
The United Nations has taken a leadership role in creating and promoting the Sustainable Development Goals. These goals have trickled down from global investors, to the funds they invest in, and now into startups that receive capital. Look no further than the recents investments by Acumen in Crehana and IDB in Cabify for examples of impactful startups that have received backing from global investors.
Why measure these goals?
Your investors care. Many funds have the sustainable development goals explicitly in their investment criteria. When you track these metrics, you will open more doors and be ready for an investment evaluation process.
Your employees care. Startups compete with better-funded corporates to attract talent. Providing a challenging role and genuine purpose levels the playing field
You care. Won’t it be more fun to wake up in the morning knowing exactly how much you are contributing to a global sustainable development? Something you can brag about at startup events when everyone else is talking about the latest funding round.
Start small and specific
Pick a metric and start tracking results each quarter. Take time to make sure you are using the recommended methodology. Over time, I think you will be happily surprised with how much you are doing for the world – and how many people want to help you accomplish your goals.
I visited Mystic Seaport on a recent trip back to USA and my home state of Connecticut. Unexpectedly, it gave me a chance to observe how whaling trips were financed.
Whaling crews would leave for one to two year journeys to hunt sperm whale off the coast of South America. From a financing perspective, there are parallels to the venture capital industry today, as highlighted in The Economist article entitled Fin-tech.
In order to align incentives and keep crew members motivated, an agreement was made to divide future profit among all parties.
Every crew member, down to the cabin boy, had predetermined share of the profits
The captain’s share, typically 1/15th, was much less than what is recommended for startup founders today. (startup cap table tips )
Display at the Mystic Seaport Museum
Below is an example of what a “capitalization table” looked like. If you zoom in on the right hand column you can see the amount of shares allocated to each crew member.
In his book, Principles, prominent investor Ray Dalio writes “truth — or, more precisely, an accurate understanding of reality — is the essential foundation for any good outcome.” In fact, the first life principle he mentions in the book is “embrace reality and deal with it.”
What is the reality of the Peru startup ecosystem?
First, investment dollars in Peru are small compared to the total in the region.
Data from Peru is from PECAP, while the regional data is from LAVCA. Importantly, the Peru numbers do not include Series A investment rounds in MiMediaManzana, Turismoi and Xertica.
Second, Peru is ranked in the middle of the region both in terms of investment environment and as a technology hub.
Startup founders are a perfect match for the education sector in Peru. Founders are experts at identifying problems, finding solutions, and taking on the challenge to deliver an impact.
Here are a few reasons why Peru is a great place to launch and scale a startup in the education space:
Over the last ten years, significant impact has been made by both for-profit and non-profit actors. Innova Schools has been a pioneer in K-12 private education with a model that is being now being replicated in Mexico. Enseña Peru, also in the K-12 space, has been a non-profit leader in Peru by impacting students in underserved areas as well as the professionals who have taught in the classrooms. UTEC, a new university in Peru, has quickly positioned itself as the leading engineering university, implementing forward thinking initiatives such as an early stage accelerator and open book exams.
Startups exist across the traditional spectrum of education
There are already a full array of startups in Peru from early childhood to lifelong learning that are addressing local market needs. The presence of local players is not a reason to stay a way, it is a reason to learn alongside other founders and use Peru as an education sandbox to test ideas and iterate.
Success stories and regional thought leaders
Trailblazers in Edtech are already paving the way. The largest financing round for Peruvian startup, of any kind, was raised by Crehana, an Edtech startup. Diego Olcese and his team attracted investment from both regional venture capital funds and global funds with an Edtech focus. Laboratoria is making a large impact and is Mariana Costa a thought-leader globally.
The best is yet to come
All of the ingredients exist for Lima to become a hub for innovation education in Latin America. UTEC Ventures’s recent decision to launch an EdTech program, one of the few sector-specific initiatives in Lima, will add further support and incentives for regional startup to come to Peru.
Perhaps next steps to strengthen the Edtech startup community in Lima could be to incorporate local education experts as startup advisors and build startups that offer value propositions directed at teachers and the government, not only students. There are many people in Peru with deep pedagogical expertise that could contribute a necessary perspective around quality. Including them and working with governmental education providers will help lead to systemic change.
I have no doubt that current and future startup founders will take on this challenge and be the drivers of impact, not just in the startup world but in millions of lives through education.
Like many things in the Lima startup community, the Lima Fintech Forum keeps getting better with age. The conference is becoming a standard bearer in the region.
According to LAVCA a report, “Fintech is the #1 sector of VC investment by dollars and #deals in Latin America with $540 million and 94 deals” in the 18 months from January 2017 to June 2018. Fintech accounted for 63% of venture capital deals in Peru during the same time period.
This year’s Fintech Forum. led by Luis Jose Giove, promises a full agenda. Here are a few highlights:
Public policy dialogue
What: Luis Jose Giove will lead a panel with leaders of five fintech associations in the region.
Why is it important: Any regulatory framework for fintech startups should be a regional effort. This is a must see panel to get into real issues and a great example of ecosystem integration.
Regional perspective
What: Panel of venture capital fund managers including Adelina Dasso of Accion, Miguel Herrera of Quona Capital, and Jorge Farfan of Bamboo Capital. Moderated by Alvaro Castro, a local lawyer, with experience both with startups and early stage funds.
Why is it important: Regional investors provide the downstream capital for our local startup ecosystem. They bring important perspectives and learnings from other emerging markets.
Founders’ pitches!
What: Apply to pitch here before April 21st for a chance to present on the main stage. Stay tuned for the list of founders that will present.
Why is it important: Putting founders in the spotlight and and have them share their story build ecosystem. It is their growing companies that make the impact for clients, users and employees. At the end of the day, we are here to help them reach their dreams.
The consistent execution of the Lima Fintech Forum over the years builds trusts and generates value for founders and investors. EmprendeUP, led by Javier Salinas, is leading the way for Lima to to become a Fintech destination in Latin America!
If you are a founder you have likely faced the dreaded scale question: Is this scalable? After asking the question myself, I realized that I didn’t know what it meant. I am still trying to figure out.
Here are some steps to answer the question:
Ask the person to clarify the question, and determine whether they are thinking about scale in a specific way.
Use specific examples of small wins, when possible with a time dimension:
Revenue is growing, even when number of people on the team doesn’t
Revenue has been achieved in another city or country without having a local team
Sales cycle has decreased due to streamlined processes
Customers are coming back to buy more often
A new sales channel results in reaching more clients with the same effort
You have resold existing software or content to another customer
Use benchmarks of successful startups in your industry or with a similar business model and talk about how they have grown.
Walk through a scenario of how your startup could grow over time. Answer the questions: “how does this get really big?” or “what does this look like in an optimal case?” This will show investors you are thinking big and also have an idea how to get there.
One way to think about scale is exerting less effort to achieve the same or more value over time. Start analyzing your business model and have conversations with investors and advisors about how to grow your business in a non-linear way.
The date is set for this year’s Peru Venture Capital Conference. It will be held October 22nd and 23rd in Lima.
For this fourth addition, UTEC Ventures and COFIDE will once again team up along with PRODUCE and Startup Peru to organize the event in what has been a successful formula in the past. They do a great job incorporating input across the regional startup community and creating momentum in order to make the event a valuable experience for all.
Founders highlight the conference and have space to mingle with investors. The organizing team is actively looking for participants and speakers in areas of venture capital, angel investing, and impact investing.
Last year’s conference was also a multi-day event with lectures, workshops and startup pitches. Here are some posts on the 2018 PVCC with a summary of the content and takeaways.
Set your calendar and come to Lima to share and learn alongside fellow members of our regional startup community.
Startup skills can be learned, but mostly outside the classroom. Instead of studying for an MBA, many young professionals in Latin America are going to work at global and regional startups.
These companies give recent university graduates the opportunity to take on leadership roles, including country manager, city manager, head of operations, product manager, and community manager.
Launch. Startup teams entering new markets map out the local opportunity, build a client base, integrate technology platforms, then press “go.” Going from 0 to 1 is an intense process and that can’t be replicated in an MBA classroom.
Execute. Startups put a premium on getting things done. And fast. The goals is often to accomplish 80% of the execution with 20% of the work. Country managers are charged with quickly acquiring new clients and doing everything possible to make sure they don’t leave.
Scale. Building out a team rapidly while still maintaining a core culture is hard. Global and regional startups have the right processes and organisational structures to make this happen effectively.
Here are some examples of people with significant leadership positions at fast growing companies in Peru and the region:
If you are a young professional, thinking about jumping into startup ecosystem, consider following the steps of these people. You will gain skills you will need when you set out on your own as a startup founder.
If you are already a startup founder, this list people may be the right mentors for what you need now.
TECHSUYOis a conference organized and led by top Peruvian professionals in science, technology and innovation. The conference rotates in location (Silicon Valley, Lima, Boston) in order to connect Peruvians globally. This year, conference will be in Lima on April 3rd.
The conference serves the local startup community in three ways:
Bridge to international startup communities: Participants that live and work in Silicon Valley come to Lima
Link between corporates and founders: Technology professionals at HoloBuilder, Apple and Facebook will share experiences with startup CTOs in Lima
Congregate technology experts: Entrepreneurs meet future co-founders and startups are born.
Members of the TECHSUYO team (from www.techsuyo.org)
The conference is organized by a committee of volunteers which includes startup founders Eddy Wong and Alonso Mujica. Eddy was co-founder of Wanderu and Redphare before coming back to Peru to dedicate time as an entrepreneur in residence with Swisscontact and Wayra. Alonso founded Timov, a news portal for technology and startup enthusiasts in Peru, before launching Silabuz, an Edtech startup with presence in Peru and Chile.
Every day, startups teams are executing to grow fast, multi-tasking across functions, working in squads, connecting remotely, and managing multiple stakeholders. All this while the founders spend time on both hiring and raising money.
The startup journey is hard and taking a break is important. Maybe not a real break (cash is too precious for that), but a break from the day-to-day in which the whole team comes together to connect.
Offsite basics:
Who: The entire team. Don’t leave anybody out. Consider inviting key stakeholders (mentors, investors, clients) to participate in some activities. Founders can also include experts to give talks on specific topics.
What: One (or more!) day-long schedule of actives. The agenda should include talks from the founders, strategy sessions and team-building games. Oriana Fuentes, co-founder of Emptor, recommends to “budget some work hours in the itinerary . . . and include a half day off for optional activities or rest.” There a many things you can do without spending too much money. It is a great time to hand out mugs, pens, t-shirts and other products with the company logo.
Where: Definitely out of the office. Possibly in another city. Some teams in Peru rent apartments in Cusco or Arequipa.
When: Anytime is good. Once every year is great, especially if your team is growing. You can plan an offsite after bringing on new team members or when you are facing an important strategic decision or pivot.
Why: There are lot of reasons to do an offsite. Here are some:
Share the company vision (again and again)
Strengthen culture (especially for remote teams)
Motivate team (they could probably make more money elsewhere)
Establish KPIs, OKRs for the coming months.
Show-off the team to investors (and give the team a chance to meet investors)
Fun.
So, tell your team an offsite is coming and block off a few days in the calendar. The details will come together later.
Four Peru startups are among the finalists for the NextGen Women Entrepreneurs Week in Switzerland.
Swiss Entrepreneurship Program hosts the event in one of the many ways they support the startup community. Almost every actor within Peru’s startup community has been positively impacted by the program. Kenia Ordonio, Program Officer of the program in Peru flew with seven founders, mentor and investors to Switzerland to participate in the weeklong event.
Photo of the Team Peru shared on Carolina Botto’s twitter account
Rextie, Qimi, CracktheCode and Sicurezza all made the final cut prior to the selection of the winner today. FitnessPass also partipated in the weeklong event and startup competition.
Along with these startups founders, the Peru contingent also includes Carolina Botto of Joinnus and Ampara Nalvarte of Culqi, who both went as mentors, along with Elizabeth Acuña of Angel Ventures.
This is a healthy sign for our ecosystem that founders are becoming mentors of other startup. We have moved beyond the first phase of the ecosystem and are now seeing new faces. These new founders are leaning quickly from fellow founders who have gone through it before.
Carolina and Amparo been leaders of the Peru startup community since the beginning. Wayra Peru was an initial investor in both Joinnus and Culqi. Since then, they have both gone through fundraising and a scaling processes with their startups. Last year Amparo was a finalist for the WeXchange pitch competition.
Now, they continue to lead as mentors and advisors. The results from the NextGen event in Switzerland today demonstrate they are doing a great job. We have reached the next generation of the Peru startup ecosystem.
Imagínense una carretera de 1,000 km en el medio de la nada. No hay grifos, no hay repuestos. Aún los mejores pilotos estarían en riesgo de no llegar. Empezar una aventura así trae muchos riesgos. Mucho puede ir mal y no hay margen de error. O llegas o te quedas.
Ahora pensemos en una carretera amplia entre dos ciudades. Cuenta con muchas paradas, varias con grifos. Pilotos pueden parar llenar sus carros de combustible. Hay muchos pueblos en el camino y rampas que ofrecen que permiten carros entrar y salir en puntos importantes.
La primera imagen es la representación de una startup que empieza sin ecosistema y la segunda es la representación de un ecosistema de startups dinámica.
El otro día conversé con Dorn Carranza, un peruano que trabaja en VentureWell. Él me preguntó ¿que esperas lograr con estos esfuerzos? Mi respuesta era: llenar la ruta emprendedor para startups en Perú.
La ruta startup no es fácil
Podemos hacerla mas agradable con mejor posibildad de éxito
Hacer que la ruta startup en Perú se convierta de algo parecido a Dakar a algo similar a una carretera de primer nivel. Lleno de:
Grifos – Inversionistas en cada etapa de financiamiento
Mecánicos – Entidades de apoyo en cada momento importante de startups.
Rampas – Espacios de salir a otros mercados o para que startup de afuera entren a nuestro mercado
Áreas de descanso – Lugares para encontrarse con otras personas y encontrar mejor talento
Podemos crear una carretera con accesos fáciles y salidas hechas de los mejores materiales y llenos de de grifos cada cierta distancia. Va a ser que el camino sea accesible para más personas. Una ruta startup completa, dinamica, para todos.
Esto es lo que queremos lograr con este contenido. Apoyar a emprendedores e inversionistas en las distintas etapas de su camino, generando una ruta llena de oportunidades. Esto no va a ser que el camino sea fácil pero si va a mejorar la posibilidad de éxito y ser que el camino sea más divertido y enriquecedor. Al final de todo, el camino es más importante que el destino.
International expansion and fast growth of many Peru startups has motivated more founders to raise money through SAFE or SAFE-like vehicles. The agreement allows investors to fund now while key investment terms, like valuation, are postponed for subsequent financing rounds.
However, founders and investors still need to map out all of the potential scenarios in order to maintain alignment and manage expectations. A SAFE document, compared to equity, opens up a range of future scenarios for entry valuation, and sometimes control, for investors. Both the amount of money raised in the SAFE and the valuation cap of the document will affect the investors eventual entry point.
Here is an excel you can download to run through conversion scenarios for a SAFE or SAFE-like vehicle: SAFE Conversion Scenarios
I hope it helps and please let me know if you see areas of improvement so we can update the tool.
¡Ha sido un año desde que empezamos nuestro journey! Durante los últimos 365 días el sitio tiene 38,000 visitas de 94 países.
Gracias a todos por leer y comentar sobre nuestros 105 posts. Chris Hievly de Techstars y Gary Nusbaum me motivaron a compartir sobre mis observaciones del ecosistema de startups en Perú y Andrés Benavides tomó el reto de sumar en apoyarme. A ellos tres y a las 20 personas que han contribuido a la fecha – ¡Muchas Gracias!
En el año que viene seguiremos compartiendo diversas perspectivas y no dudemos que, con el apoyo de todos, la comunidad de startups en Perú seguirá creciendo y fortaleciéndose.
It has been one year since we started our journey! Over the last 365 days the site has 38,000 visits from 94 countries.
Thank you all for reading and commenting on our 105 posts. Chris Hievly of Techstars and Gary Nusbaum provided the initial motivation for sharing my perspectives on our startup community and Andres Benavides was kind enough to take on the challenge to co-manage the site. To them and the 20 contributors we have had so far – Thank You!
In the coming year, we aim to share more diverse perspectives and are confident that with your help the startup community in Peru will continue to grow and gain strength.
There is no one go-to place for information on the Peru startup ecosystem. Instead there are multiple “nodes” sharing ideas, opinions and events. That is a good thing and creates the positive ecosystem effect that will help startups grow.
On the right hand side of this blog there are links to key resources of information I refer to regularly. Below, is a list of the founders, investors and thought leaders that I follow. Most are on twitter. Some, specified below, use LinkedIn or Facebook.
To read what founders think:
Patrick Wakeham a founder and investor that gives sharp opinions on best practices in early stage startups
Mariana Costa shares views on global impact and technology.
Ragi Burhum writes,mostly on Facebook and also El Comercio print edition, about what we as an ecosystem can learn from Silicon Valley.
Monica Chavez of Andina Art (on LinkedIn and Facebook) writes about her journey as a founder in Cusco and Lima.
Martin Baes Nuñez shares about his journey with GetLavado in Bogota and Lima
Pedro Neira is an avid reader of startup books who shares his ideas
Eddy Wong posts on technology and is a great resource for CTOs
Launching a fundraising process is a really big step that often starts with a short email. This email includes a paragraph on the investment opportunity and an attached summary (one-pager) orpitch deck describing the startup.
The goals of the launch email is to:
Portray the startup in the best way possible
Filter for real interest
Get a first meeting or phone call
Not receiving any response is frustrating. Did the investor get the email? Did she open the attachment? Was there too little information to spark interest? Was there so much information that she decided to pass before speaking to the founders? Did she resend the deck to a competitor?
I have found sending short pitch decks in DocSend to be an effective way to reduce some of these anxieties. Using pitch decks is a great way to share a storyline visually. Docsend allows you to see who looked at the deck and for how long. Tracking engagement will let you be efficient and specific in follow-up emails. When you do land that first phone call, the DocSend deck, or another detailed version you send later, can be used to walk through the conversation.
Pedro Callirgos, founder of Mesa247 and Fernando D’Alessio of Juntoz have used DocSend in their fundraising process and successfully raised money from a diverse group of investors. Fernando points outs that “you can see who opens (they need to use a work or personal email), from which city, when they open (date and time), and how long they’ve reviewed your document. Most importantly, you are able to see how long they spend on each slide in a graph, and just by hovering on the slide page, you will view the slide in question.”
Cash from clients and users in the best way to finance a startup. Founders avoid giving up equity, spend time talking to clients not investors, and get a clear validation signal for their solution.
There are working capital tactics that startups can use to improve cash management. I wrote some ideas here that included tips Saul Chrem of Xertica in Peru had passed along. US-based mentor Greg Dickens highlights in Go Fund Yourself to some ways to “hold onto your cash longer and get paid quicker.”
In Peru and the rest of Latin America, this is often easier said than done, due to the leverage corporations have when negotiating with small and medium-sized businesses, including startups. Fernando Calmell del Solar and ASEP are leading the initiative to promote legislation that would require companies to pay small and medium business in 30 days. It is called “Pago 30 Días” and is a concept that is making progress in other countries in the region.
Angel investors are a key stakeholder in this cause. Many work as C-level executives and directors at corporations in Peru. They have a front seat both as investors watching startups’ runways shortened by growing accounts receivable accounts and at corporate board meetings making payment policy decisions.
#Pago30Días is an initiative that all stakeholders in Peru’s startup community can get behind. You can show your support for the cause by voting here.
Building startups is a huge commitment: emotional, financial, lifestyle, and the list goes on. When founders show they have a deep connection to the product or problem they are solving, it is easier to convince investors they are in it for the long haul.
What to look for to determine startup-founder fit:
Has the founder . . .
Experienced pain point as a user?
Gained relevant sector expertise?
Displayed genuine passionate for the space, product, or potential impact?
Even if none of these apply to you, tap into the emotional aspects of why you are doing what you’re doing. According to Harvard Business School professor Laura Huang, much of the investment decision for early stage investors is based on gut feel and emotions.
How to show startup-founder fit during an investor pitch:
Talk about a personal story and how it led you to your startup
Discuss way the startup has (or will) impact a specific person’s life
Talk through a time when you got into the details of the business with a client and solved a problem for them
These all help make it clear that the startup founder and the startup they are building go together. Sam Altman, President of Y-Combinator recently wrote a post entitled How to Be Successful. His last piece of advice is “Be Internally Driven.” Startup-founder fit ensures founders are driven by internal motivations and increases startups’ probability of success.
