Nothing Ventured, Nothing Gained...

Posted by: Andreas Kraemer, '96 on Wednesday, October 17, 2018

Nothing Ventured, Nothing Gained...

Developing the Venture Capital and Tech Ecosystem in Latin America

 

 “Did you just wake up one morning and ask yourself: What is possibly the hardest thing you can do?”

 

I get that question a lot. I am Andreas Kraemer ’96, TIAA member, and co-Managing Partner at MITA Ventures, a venture capital fund that invests in Mexico and broader Latin America.

 

I recently moved from San Francisco to Guadalajara, Mexico, long considered the “Silicon Valley of Mexico”. Companies such as Oracle, IBM, Intel, Jabil, Bosch and Flextronics have established a presence here, some for over 15 years. Young companies such as Wizeline have large operations with over 200 software developers.

 

That’s today. But of course, it’s easy to look at the present and forget that the road here had to be forged through unknown territory by brave explorers.

 

Andreas & Carol Kraemer

on their Tbird graduation day in 1996

How did I get here? Well, I am married to a Tbird from Mexico, Carol Kraemer ‘96 (also a TIAA member). Through her, I developed a relationship with the country and we visited many sites in search of a place where we could eventually retire (Puerto Vallarta is on top of that list).

 

About six years ago, on one of those trips I met my now co-Managing Partner Lynne Bairstow in Punta Mita, Mexico. Lynne has lived in Mexico for over 20 years and she told me about her idea to grow the tech ecosystem in Mexico. Having been in the venture world before, I was intrigued. A new frontier! At that time, there were maybe 10 active funds investing in Mexican entrepreneurs and innovation.

On a venture panel with Cindy Blanco (StartupGDL), and Scott Rafer (Rafer Capital) at Talent Land Guadalajara

 

Today, more than 100 active funds are investing in Mexico, including well-known Silicon Valley funds such as Sequoia and Andreessen. Mexico has a young population, with over 50% being under 30 years of age. They are also very mobile, digital and socially connected with over 90% of mobile users being on Facebook.

 

There are real problems in Latin America that are in need of real solutions, and Silicon Valley USA seems to be at an innovation standstill right now (someone seriously pitched a social platform to me that connects white wine lovers!). One of those growth areas is financial innovation, or FinTech. Fewer than 50% of the population here have a bank account, and sending and receiving money is painful. So is paying with credit cards, which very few people have. Mexico has a FinTech law that allows startups to experiment with new solutions (“sandbox”) without being subject to strict regulation, and the country is on its way to putting rules in place for cryptocurrencies. We also see a lot of innovation in education technologies, Internet of Things and robotics as well as e-commerce and AgTech. We are tech driven and like AI as well as blockchain as enabling technologies for the above-mentioned verticals.

 

This innovation is, among other things, driven by access to high quality engineers coming from universities that now offer entrepreneurship courses and even host accelerators, such as Plug and Play from Sunnyvale at the Tec de Monterrey Campus Guadalajara. Mexico graduates more engineers than Germany.

 

It is also driven by a young generation that wants change, and is not afraid to take on risks.

 

Our first fund invested in six companies, all of which either from Mexico or wanting to expand into Latin America via Mexico. Four of the six companies are now raising follow on rounds at significantly higher valuations. Needless to say, for a first fund this is a very good hit rate.

 

Sunu Band

As one example, let me introduce you to our portfolio company Sunu which developed a wearable device for blind and visually-impaired people right here in Guadalajara, the Sunu Band. It gives haptic feedback and allows blind people to navigate their environment without a cane. MITA Ventures was one of the first investors in the company. This year is their first year of sales and they are on their way to generate USD1 million in revenues, with new distribution arrangements in eight different countries.

 

We are now raising MITA Fund II with a target size of USD30 million, of which we have USD11 million soft circled via two anchor investors and several family offices and angels. A first close will happen at USD15 million. One of our anchor investors is a sovereign fund from Korea. China is also investing heavily in the region, with Didi (Uber competitor) starting operations in Mexico City and investing in 99 in Brazil. MITA Ventures is also connecting ecosystems in Latin America with other ecosystems globally, including strong ties we developed with Silicon Valley VC funds.

 

There are fast growing tech ecosystems in countries such as Argentina, Chile, Colombia, Brazil and Mexico. My venture fund, while strongly positioned in Mexico, invests in innovation coming from Latin America, but we also invest in companies that want to expand into the Latin American market. To foster and further grow these ecosystems, we organize several events every year, including our signature event the MITA TechTalks in Punta Mita, Mexico.

 

 

To get back to the question in the beginning of this article, the answer is simply “no.” No, I did not just wake up looking for the hardest thing to do. I simply couldn’t resist the opportunity to be a part of a developing startup ecosystem. Maybe we were a little early at the time, but better too early than too late.

 

Join the Fund....If you would like to learn more about our new fund or be added to our newsletter, please contact me directly.

 

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