Category: Investors

I attended an investor matchmaking event last week led by Endeavor Peru. Of the 8 startup teams I spoke to, half were led by founders over 35 in age. At a similar event in Santiago, Chile in October, three quarters of the of the founding teams I met with were over 35 in age.  The fact is, startup founders are old, or at least older than you might think.

Recently, Harvard Business Review published a report on the average age of successful startup founders. The report found that the average age is 45.

I am not aware of any similar studies on the Peru ecosystem, but if we take a sampling of the of startups in Peru using the recent PECAP report, many of the founding teams in Peru that have raised seed rounds have had relevant operating or startup experience prior to launching their current startups. These include Endeavor Entrepreneurs like Pedro Neira, Fernando D’Alessio, Gonzalo Begazo, Nicolas Droguett, as well as Courtney McColgan, who participated recently in Y Combinator. For example, Fernando led Linio Peru prior to leaving to start Juntoz.

On the newer end of the startup spectrum, there are up-and-coming founders that bring deep experience to their ventures. Valia, a recently launched startup in Peru, is led by Carlos del Carpio. Quantum Talent, were I am a board member, is led by Carlos Ganoza and Alvaro Collas. These are founders bring great analytic experience to companies that use technology and data to solve problems in traditional sectors.

Why is this important for startup investors:

1. Founders that bring sector expertise to the table, help to “de-risk” investments (startup investing in Peru is risky enough as it is!) by coming in with commercial contacts and a credible path for go-to-market
2. Many founders in Peru are experienced at building and leading teams, essential characteristics of high growth startup founders.
3. Startup founders are your peers.

Why is this important for startup founders:

1. The opportunity costs of leaving the comforts of a corporate job and building a startup in Peru is falling.  Older founders have been able to raise significant seed capital locally.
2. Founders considering building a diverse team, should consider age as a proxy for the real issues of management skills and sector expertise that they may lack.
3. Investors are your peers. You can treat them that way.

The anecdotal examples above do tell a story that older, experienced startup founders exist in Peru. I imagine this will be backed up by data. In the future, we will have better surveys of Peru’s startup ecosystem. I hope the data will encourage more (older) founders to join the startup community.

A cap table is the list of owners (equity holders) and how their ownership percentage is distributed. In high-growth startups, proper distribution of equity is key for keeping founders and investors aligned over time.

Here are some points to consider:

• Accelerator programs often take equity in startups
• Startups typically share 10%-20% of equity in each financing round
• Founding teams in Latin America often seek to reach a Series A round with at least 50% of the company

Below is a graph of how a cap table can change over time.  

Cap tables are re-organized at financing rounds so these are the moments to make sure you are set up for optimization.

Three key moments to review your cap table:

1. Founding: This is the most important part of the cap table and founders are benefited from having tough conversations up front. It often seems fair to divide ownership equally between three or four people, but it may not be optimal for the startup. The more founders a startup has, the less equity each individual will have and equal amounts spread across many people can make decision-making slower. I believe one or two founders should have significant share of the equity of a startup.

Founder vesting is a tool that can help align and incentivize founders as well as avoid “dead equity” left by members of the team who decide to leave, but retain equity stakes. Many future investors will require this term.

2. Angel, Acceleration, Seed Rounds: According to PECAP the median seed round in Peru is for 15% of the startup. Often, this 15% is split among more than one accelerator program or angel investor, leaving a cap table atomized without one investor or investor group having a significant share of the startup. This can make it hard for investors to dedicate time to add value and improve corporate governance. Founders want pick accelerator programs and investors that can add the most value by helping the startup achieve operating milestones and raise the Series A round.

3. Series A: Preparing for Series A can put a startup in a position to succeed long term. Series A investors will be keen to make sure that a founding team has enough incentives following the round – a good goal is 50% of the company going into the round. Investors should be aware that Series A investors may require a 10% Employee Stock Option Pool (ESOP) and ask that it is included in the pre-money valuation.

• Ragi Burhum of AmigoCloud recommends that founders should up an employee pool much earlier that prior to a Series A round
•  Facundo Turconi of Solven, pointed out to me that for single founder startup it may make sense to consider a larger ESOP, of perhaps 15%. 

Takeaway and Cap Table Example:

Founders and investors should seek to maintain a cap table that leaves enough incentives for founders and flexibility to add the right investors at the right time. You can find a template example for a cap table in Excel here.