latin america
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This tiny house grows with your family
Tiny houses are all the rage, but once you put more than a few people in one you have a problem: Where can you go from there?
Nowhere. Exactly.
What you do is, if you need that extra push over the cliff, you know what you do? Talk to Brian Gaudio. Gaudio is the founder of Module Housing, an incremental-building startup from Pittsburgh. Gaudio, formerly of Walt Disney Imagineering, has an architecture background and saw firsthand the need for incremental housing in his work in Biloxi and Latin America. His idea is simple: create a little house that grows with you over time, allowing a single room to turn into a mansion with a few turns of a wrench.
“We think of the home as a recurring revenue stream — buy a starter home today, purchase additions and upgrades in the future. All our homes are designed to change over time — as a homebuyer’s family grows, income grows or needs change,” he said. “We are capital-light compared to other prefab startups in that we don’t own the manufacturing facilities where our homes are built. We leverage existing network of high-performance prefab manufacturers on the East Coast.”
The service does it all: They offer multiple-room dwellings and work with you to order the modules, find land that lets you add on over time and assemble the houses. Like the Craftsman houses of old, you have a few basic styles, but in this case you can buy a one-bedroom Nook house for $212,000 and then add on over time instead of buying a house with seven rooms and realizing you only needed two.
Additional costs include building a foundation and land preparation. It’s also dead easy to add onto your house when you’re ready, said Gaudio, thanks to work they’ve done in modularizing the houses.
“We have patents pending on a removable roof and wall system that simplifies the addition process when a customer is ready to add on,” he said.
The company has raised $1.2 million so far and they have prototype houses in Pittsburgh. They already have orders and they’ve created a Tesla-like reservation system for the folks who want to try out their product.
“I moved back to Pittsburgh to start Module with the goal of making good design accessible to everyone,” he said. “Affordable housing is one of the most critical issues our country faces today. Module is a vehicle to promote responsible, equitable development in cities. We are reimagining housing to be more sustainable, adaptable and better designed.”
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Electric scooter startup Grin raises ~$45 million
Grin, an electric scooter startup backed by Y Combinator, has raised a $45.7 million Series A to operate shared, electric scooters in Latin America.
Grin, which is based in Mexico City, had previously raised funding from Sinai Ventures, Liquid2 Ventures, 500 Startups, Monashees, Base10 Partners and others.
Currently, Grin only operates in Mexico City, but it has plans to expand to other cities throughout Latin America.
Electric scooters are clearly a hot space. U.S.-based companies like Bird and Lime have raised millions of dollars. Bird is currently valued at over $2 billion while Lime is valued at over $1 billion. Meanwhile, transportation behemoths Lyft and Uber have both staked their claim in the electric scooter space, both deploying them in Santa Monica, Calif. in the last month.
I’m getting in touch with Grin co-founder Sergio Romo shortly. More to come.
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The funding mirage: How to secure international investment from emerging markets
Jose Deustua
Contributor
Contributor
Jose Deustua is the managing director of Peruvian accelerator UTEC Ventures, the organization behind Peru’s largest investor event, the Peru Venture Capital Conference.
Looking for funding as a startup in Latin America is a lot like looking for a watering hole in the middle of the desert. You know it’s out there, but finding it in time is a life or death situation.
Granted, venture capital investment in the region is at an all-time high, with leading firms like Andreessen Horowitz, Sequoia Capital and Accel Partners having made inaugural investments in markets like Colombia, Brazil and Mexico, respectively. But, at the same time, while startup founders might be tantalized by the news of big investments happening around them, as many of them get closer to the funding stage themselves, they often realize it’s nothing but a mirage.
And this isn’t just a problem in Latin America. All over the world, startups are struggling to find investment, as VCs are investing more money in fewer deals in the endless search for the next unicorn. Due to a dwindling number of VC deals in both the United States and Europe, even entrepreneurs in established ecosystems are having to look further afield for the resources they need to build their businesses, bringing many of them to emerging markets like Latin America.
Fortunately, whether you’re a local or foreign founder in an emerging market, there is a way to quench your thirst for the international investment that you need to scale your company. Here’s what we recommend to the startups that are part of our UTEC Ventures accelerator program in Peru, and what we’d recommend to you, too.
Find local seed money first
As a startup in an emerging market, the prospect of finding local investment can seem challenging. In fact, this is probably why you’re looking for international investment in the first place. But the truth is, finding local seed money to get started is really the first prerequisite for securing international funding later on.
Last year in Peru, for example, US$7.2 million of seed capital was invested in the country’s startups, with barely over US$1 million coming from international funds. This goes to show that international investors peeking into emerging markets are less active in seed rounds, and more interested in later-stage rounds once a company has better demonstrated its worth.
If you want to attract international investors, you need to be an international startup.
As such, we advise all startups to raise a first or second seed round locally in Peru, and then seek international investors. The same can go for other emerging markets, as well.
To raise these initial rounds, the most important thing is to show that you have a solid team, a business idea that works and has traction with clients chasing your product and that you’re better than any local competition. If you can demonstrate that you meet these requirements, finding local seed capital shouldn’t be too difficult; all you need is a good pitch deck and some patience when networking within local angel groups or at investor events.
Replicate success in a bigger, more competitive market
If you want to attract international investors, you need to be an international startup. In other words, you need to demonstrate that you can sell your product in a bigger, more competitive market before turning the heads of international investors. For startups in Peru and other emerging markets in Latin America, that means successfully expanding to the region’s most developed markets in Mexico, Brazil or Argentina.
Consider, for example, the Colombian courier service Rappi. It wasn’t until after the company expanded its operations to Mexico at the beginning of 2016 that it secured its first major international investment, led by Andreessen Horowitz. The company then went on to close a Series B round just one month later, in addition to a US$130 million venture round at the beginning of this year, led by a German food delivery service with participation from a number of U.S.-based investors.
The same idea goes for emerging markets outside of Latin America, too. In Eastern Europe, which lags behind its western counterpart in terms of VC funding, many entrepreneurs will either set up their businesses in Western European countries from the get-go, or expand there as soon as they’ve achieved product/market fit and demonstrated success in their home countries.
This is a clear demonstration of the broader fact that if you want to start raising money from more developed markets, you generally need to be based in those markets, or at least a market of comparable size. Accordingly, your primary focus when seeking international funding should be to first succeed locally, and then replicate that success in a more developed market — whether that be in the United States, Mexico, Western Europe or anywhere else.
Remember, not all international funding comes from international VCs
While it’s easy to be distracted by the glitz and glamour of securing a round from international VCs, startups have a number of other options at their disposal to secure international funding.
Foreign governments in emerging markets are increasingly stepping up their game with programs designed to bolster their local startup ecosystems as an engine for economic growth. As such, a number of foreign governmental programs have emerged, offering support in the form of equity-free cash to entrepreneurs who decide to set up shop in a given country.
Corporate capital has taken on a very important role in many emerging markets like Latin America.
There are plenty of examples in Latin America alone. Start-Up Chile, for example, offers entrepreneurs up to US$80,000 to launch their businesses in Chile as a launch pad to reach the rest of the world; Parallel18 in Puerto Rico offers entrepreneurs up to US$75,000 to do the same thing; and the Peruvian government plans to announce a similar program to help startups soft launch in Peru with up to US$40,000 at the upcoming Peru Venture Capital Conference.
Startups have another option, as well. Corporate capital, or startup investment from major corporations, has taken on a very important role in many emerging markets like Latin America. In fact, Qualcomm Ventures, the investment arm of U.S.-based tech giant Qualcomm, is the most active global corporate investor in Latin America. Naspers, American Express Ventures and other corporate funds have taken an active interest in the region’s startups, as well.
Together, the growing support of foreign governments and interest from international corporations highlights the fact that securing international funding is in fact possible, and not as hard as you’d expect. Knowing that there are options besides getting an international VC on board, you should take the time to find out which alternatives are available in the markets to which you’re hoping to expand.
So, no matter whether you’re a local or foreign entrepreneur in an emerging market, there’s no reason to give up hope on finding international funding. The key is to think globally and use technology to solve real-world challenges. Then, demonstrate success at home first, and duplicate it later in a bigger market. Resources are available to help you when taking your first step abroad, and if you do it well, you’ll find that the investment wells aren’t dry after all.
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Rappi raises $200M as Latin American tech investment reaches new highs
Rappi, the Colombian on-demand delivery startup, has brought in a new round of funding at a valuation north of $1 billion, as first reported by Axios and confirmed to TechCrunch by a source close to the company. DST Global has led the more than $200 million financing, with participation from Andreessen Horowitz and Sequoia — all of which were existing investors in the company.
Rappi kicked off its business delivering beverages and has since expanded into meals, groceries and even tech and medicine. You can, for example, have a pair of AirPods delivered to you using Rappi’s app. The company also has a popular cash withdrawal feature that allows users to pay with credit cards and then receive cash from one of Rappi’s delivery agents.
Rappi charges $1 per delivery. To help keep costs efficient, the company’s fleet of couriers use only motorcycles and bikes.
Simón Borrero, Sebastian Mejia and Felipe Villamarin launched the company in 2015, graduating from Y Combinator the following year. From there, Rappi quickly captured the attention of American venture capitalists. A16z’s initial investment in July 2016 was the Silicon Valley firm’s first investment in Latin America.
The new capital will likely be used to help Rappi compete with Uber Eats, which is active across Latin America.
The round for Rappi is notable for a Latin American company, as is its new unicorn status. Only one other Latin American startup, Nubank, has surpassed a billion-dollar valuation with new venture capital funding so far in 2018. São Paulo-based Nubank makes a no-fee credit card and is also backed by DST.
Investment in Latin American tech continues to reach new highs. In the first quarter of 2018, more than $600 million was invested. That followed a record 2017, which was the first time VCs funneled more than $1 billion into the continent’s tech ecosystem during a 12-month period.
The rise in investment is mostly due to sizable fundings for companies like Rappi and Nubank, as well as Brazil-based 99, which sold to fellow ride-hailing business Didi Chuxing in a deal worth $1 billion earlier this year.
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LG Mobile’s losses continue but now sales are falling too
Korean electronics giant LG is soaring to new heights, but its mobile division continues to lag well behind the rest of the company and the signs aren’t promising.
LG’s latest financials released today recorded another quarter of success with operating profit jumping 16 percent year-on-year to hit KRW 771 billion ($715.1 million) as overall sales rose 3.2 percent across the group. LG said its sales and profit for the first half of 2018 are at all-time highs but — and you knew a but was coming… — its smartphone division remains a significant loss-maker.
The company’s mobile and communications division — which houses LG Mobile — posted yet another quarter in the red. Sales of KRW 2.07 trillion ($1.92 billion) represented an annual drop of 23 percent, while the division carded an operating loss of KRW 185.4 billion, or $171.95 million.
That’s compared to a quarterly profit of KRW 407 billion ($377.48 million) for LG’s home entertainment business and a KRW 457.2 billion ($424.04 million) profit for its home appliance unit, which are LG’s two stand-out business units.
There’s nothing new here, losses are commonplace for LG Mobile.
It hasn’t been break-even or profitable since 2014. Those losses have been cut by some degree since the company shook up the division with new leadership in November 2017, but there’s plenty to worry about with sales dipping noticeably over the past two quarters of business.
This time around in Q2, LG put its mobile losses down to “the slowing growth of the global smartphone market and a decline in mid- to low-end smartphone sales in Latin America.” While it claimed that the size of the operating loss was down to investments in sales and marketing ahead of the release of its next flagship devices.
There’s a hint a reorganization — perhaps even layoffs — as the company added that it would “seek to further improve its business structure” as it aims prepares to push its LG G7 ThinQ and LG V35 ThinQ devices worldwide and get ready for those new launches.
More changes are on their way, you’d imagine, as LG is surely looking for a way to stem the bleeding but also retain a mobile business has certainly been iconic despite its struggles in recent times. Perhaps the answer is a downsizing in a similar style to Sony in 2016. Back then, the Japanese firm was losing even more than LG is per quarter but it began to be more strategic with its new device launches and target sales markets. The end result of that strategy was an end to the big losses and a more sustainable mobile business.
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Brazil’s tech startups begin to expand globally
Startups in Brazil, Latin America’s largest entrepreneurial ecosystem, are no longer solely focused on Brazil as their only frontier to conquer. Based on conversations with founders and in tracking the news, dozens of startups born in Brazil have realized they can compete on a global scale and expand their companies quickly by exporting their business models to other regional markets around the world, including Canada, Colombia, Europe, Japan, Mexico, the U.K. and the U.S.
Traditionally, many Brazilian startups have been content to focus on growing their revenues and market share on the “Ilha de Santa Cruz” (Island of the True Cross, as Brazil was named by a Portuguese sea-captain in 1500). There is plenty to feast on here with a growing middle class, the citizens’ voracious appetite for social and digital media consumption and a population of nearly 211,000,000. More so than other major entrepreneurial centers, Brazil’s founders are known for bootstrapping early-stage companies and avoiding global expansion, as the capital can be costly and lead to a dilution in shares in their startups.
Yet, as the country that is home to the world’s eighth largest economy slowly pulls out of a long recession with its first annual uptick in GDP last year, increasingly the “Brazilians are coming” to compete in more international markets — and more rapidly than ever before. Entrepreneurial expansion outside the country is on the rise as the startup ecosystem becomes more mature, and against a backdrop of unprecedented levels of global investment coming into Brazil from China, Japan, Europe, Silicon Valley and beyond. Indeed, international investment in LatAm startups has “more than doubled since 2013.”
Another trend that’s providing more Brazilian companies with the capital needed to fuel their global expansion is the “flurry of equity deals” during the first part of 2018, “ahead of the presidential elections in October that are expected to prompt volatility in the markets,” according to Bloomberg Markets. For example, NYSE’s biggest IPO since Snap earlier this year raised nearly $2.3 billion for Brazilian fintech PagSeguro (NYSE:PAGS), a payment processing company similar in business model to Jack Dorsey’s Square. It was the largest IPO of a Brazilian company since 2011.
Brazil’s export of fast-growth startups is on the rise
There has been a growing stream of Brazilian startups that have begun to shift focus to the U.S. during the last two years. Mosyle, founded in 2012 by Alcyr Araujo, is now based in the U.S. and used in more than 4,000 schools to help ensure that kids’ mobile device experiences are fun, safe and educational with more parental and teacher involvement.
Pipefy, which announced $16 million in Series A funding last month and was originally based in Curitiba, Brazil, has recently relocated its global HQ to San Francisco. More than 8,000 companies in 146 countries around the world use its operations-excellence platform today.
Similarly, PSafe, a mobile security, privacy and performance platform company, moved its global headquarters to San Francisco last August and now has more than half of its revenues from the U.S.
A fast-growth Brazilian startup called Gympass, which offers a corporate benefit plan to keep employees fit and healthy, has quietly grown into a global business in less than six years. Born in the country that places second in overall number of gyms, Gympass lets a company’s employees make unlimited visits to a growing network of multiple gyms and pay less than half the normal monthly fee. Last month, the company announced its launch in 12 key markets in the U.S., adding 3,000 new workout facilities to its global network of 30,000. Its corporate partners include Accenture, Deloitte, Metlife, PayPal and P&G.
The spirit of entrepreneurism in Brazil is as infectious as its natural resources are vast.
Belo Horizonte-based Hotmart, a comprehensive platform to sell digital products like e-books, online courses and software that was founded in 2011, has expanded into Europe, including opening new offices in Madrid, Paris and the Netherlands. It’s also expanded into Colombia.
São Paulo-based Movile, a leader in mobile marketplaces with a big dream of making life better for a billion people through mobile apps, has seen tremendous growth since its founding in 1998. It now employs more than 1,500 people and impacts the lives of more than 100 million people around the globe. Its food-delivery market, iFood, is now booming on all continents, and Naspers and the fund Innova Capital invested a new $82 million round last December, with a singular focus on growing iFood’s market share.
Since its foundation, Movile has raised more than $250 million to accomplish more than 20 mergers, acquisitions and investments in startups beyond iFood, including Maplink, PlayKids, Pointer, Rapiddo, SuperPlayer and Sympla, among others.
Smart strategy and networking resources boost success
With the advent and growth of SaaS platforms, a fast-emerging global on-demand economy and some entirely original business models, many Brazilian startups are poised for success as they scale from being regional plays to any number of international markets. Typically, when more than a quarter of a startup’s business is coming in from international markets — as was the case with Pipefy and its cloud-based platform — the timing is ripe to land and expand outside a company’s home country.
In choosing international markets, a smart strategy for tech startup founders is to analyze those regions that possess high broadband and mobile-device adoption, readily available payment infrastructures, political stability, level socioeconomic playing fields, fair tax requirements and an easy-to-navigate regulatory environment. One useful rule of thumb to help obtain a basic understanding is to compare the overall internet population by country versus GDP per capita. This exercise will generate a model to prioritize countries with larger numbers of prospects with high levels of disposable income.
Another critical element for optimizing success is a solid understanding of regional differences and key variances across international markets — from cultural nuances to regulatory impacts to diverse approaches to conducting business. Identifying and tapping local network resources early on can make a world of difference.
The maturing startup ecosystem in Brazil has benefited hugely from access to Cubo, the largest entrepreneurial hub in Latin America, and its constant intermingling and exchange of ideas between startup founders, investors, academics and government officials.
In Silicon Valley, BayBrazil has been hugely impactful in connecting and building a tight-knit community of Brazilian and U.S. professionals, founders and scholars living and working in the San Francisco Bay Area. On a global scale, organizations like Endeavor have sparked high-impact entrepreneurship and success around the planet.
The spirit of entrepreneurism in Brazil is as infectious as its natural resources are vast. A recent rise in startups born and bred in Brazil that are being exported to international markets around the globe to further scale and propagate is a trend to be celebrated.
Saúde! (Cheers)
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YC-backed Ropeo brings on-demand fashion to Latin America
As ecommerce grows here in the United States, there are still some significant hurdles for the Latin American market. Credit card penetration is lower than the U.S. and there isn’t the same infrastructure for shipping, meaning that returns are far more tedious. That’s where Ropeo comes in. Ropeo was founded by Alejandro Casas, Santiago Gomez, and Luis Huertas, who saw that the… Read More
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Latin America’s Groupon Mafia
The founders of PayPal and its employees have produced many highly successful companies over the years. Often referred to as the “PayPal Mafia” because they’ve had such an impact on the startup ecosystem, this serial entrepreneur success story is reminiscent of a similar phenomenon taking place in Latin America. The story starts with another U.S. company, Groupon. Read More
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Copycats versus disruptors in Latin America
A majority of the most successful startups coming out of Latin America have fallen under the “copycat” business model. On the other hand, there’s been a rise in truly disruptive ideas coming out of Latin America, as well. Certainly, “copycat” startups can be innovators, but not all innovators are disruptors. Read More
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A new era for startup investing in Latin America
Startups in Latin America are using creative solutions to address not just local but also global problems. For investors outside the region, the prospect of working with these startups can appear attractive, yet complicated. Investing in early-stage startups in Latin America can present challenges; however, time and time again I’ve found it can be well worth the effort. Read More
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