I have had a number of discussions with people this year about when venture will take off in Latin America. Venture capital is clearly going global. We have added affiliates from our own network not only in India and China as many are doing, but also in Russia and Eastern Europe. We are in discussions with several firms in Latin America about expansion down there. With the boom in commodities, there will be increasing economic activity and resources flowing south of the border. There are pockets of activity in energy and telecom specifically in Latin America. The following article describes Intel’s recent expansion. Much like the railroads opened up economic activity across all regions of the United States, the internet is doing so across the globe whether it be chip design in China or game development in Estonia. Our business has definitely scaled well beyond it cottage industry roots and will become more international in nature. This will increasingly reward the firms with the largest global networks and put pressure on smaller regional players. It is the next phase in the institutionalization of the business.
venture market summary
By VentureWire Staff Reporters
Continuing its trip around the world in search of venture deals to seed nascent technology markets, Intel Capital, the venture arm of the world’s largest chip company, has launched a new $50 million fund for investments in Brazil.
The burgeoning economy was one of the determining factors in the decision to launch the latest fund, according to Dave Thomas, managing director for Intel Capital Latin America. There were "significant improvements in the investment arena in the last 18 to 24 months," he said.
Foremost among them "is the strength of the public capital markets," he said. Investments in Brazil can look to the Nuevo Mercado as a viable place for a public offering, and changes in the ways that venture investments are taxed also make the investment climate much more favorable, Thomas said.
For National Venture Capital Association President Mark Heesen, it’s surprising that more investors don’t make the trip south. "The venture market in Latin America is still not a particularly great market," he said. "I continue to kind of be surprised by that when you look at the growing middle class in Central and South America and you look at the stability of the governments."
Intel’s launch of its Brazilian venture capital fund comes a little over three months after it announced a $250 million venture fund for India and four months after the announcement of a $50 million fund for investments in the Middle East. Though Intel has invested in Brazil since 1999, the new fund represents its strongest commitment there to date. Intel Capital has invested more than $35 million in 13 companies in the country since it began committing capital there.
Conditions in the Latin American market have definitely picked up. I remember a couple years back when J.P. Morgan’s Latin America fund(s) were having trouble due to the weak local economies which created an unfavorable investment climate in Latin America.
Funds that are entering into foreign markets are going to have to have people on the ground that know the political and economic landscape in order to make the right moves. In these markets a political change can have a lot of affect on portfolio companies.
It is good to see a lot of firms partnering with locals who will know the climate best rather than trying to do one off opportunistic investments from their offices here in the States. This isn’t to say that VCs doing the opportunistic foreign deals aren’t very smart individuals. I feel that it is just hard for anyone based here in the States focusing mainly on US investments to really have enough time and energy to understand a foreign market to the extent they need to in order to make a solid investment (not to mention that the cost of understanding the market enough in terms of time/effort expended would probably outweigh the benefit of the deal). The VC is also forced to be less hands on than a local affiliate could be.
I am very excited to see what companies and technologies will come out of the Latin American market. It certainly appears poised for growth and the capital flowing in from VCs should help fuel that growth!
Conditions in the Latin American market have definitely picked up. I remember a couple years back when J.P. Morgan’s Latin America fund(s) were having trouble due to the weak local economies which created an unfavorable investment climate in Latin America.
Funds that are entering into foreign markets are going to have to have people on the ground that know the political and economic landscape in order to make the right moves. In these markets a political change can have a lot of affect on portfolio companies.
It is good to see a lot of firms partnering with locals who will know the climate best rather than trying to do one off opportunistic investments from their offices here in the States. This isn’t to say that VCs doing the opportunistic foreign deals aren’t very smart individuals. I feel that it is just hard for anyone based here in the States focusing mainly on US investments to really have enough time and energy to understand a foreign market to the extent they need to in order to make a solid investment (not to mention that the cost of understanding the market enough in terms of time/effort expended would probably outweigh the benefit of the deal). The VC is also forced to be less hands on than a local affiliate could be.
I am very excited to see what companies and technologies will come out of the Latin American market. It certainly appears poised for growth and the capital flowing in from VCs should help fuel that growth!
Great points, Eric. The key challenge is that venture is predominantly a local business…knowing the right entrepreneurs, building out service networks, being nearby for recruiting help. As you mention, you can’t just parachute into the region. However, competition (and customers) is coming from all over the globe now. I am on the board of one company whose two main competitors are in France and England and who receives 30% of its revenue from Asia. We are truly heading towards thinking global and acting local…
Great points, Eric. The key challenge is that venture is predominantly a local business…knowing the right entrepreneurs, building out service networks, being nearby for recruiting help. As you mention, you can’t just parachute into the region. However, competition (and customers) is coming from all over the globe now. I am on the board of one company whose two main competitors are in France and England and who receives 30% of its revenue from Asia. We are truly heading towards thinking global and acting local…
Good point. I hadn’t thought of that while replying. We definitely live in a global economy so a lot US companies will be doing deals overseas pretty much right out of the gate.
Good point. I hadn’t thought of that while replying. We definitely live in a global economy so a lot US companies will be doing deals overseas pretty much right out of the gate.
It looks like FeedBurner is locking down global domination. 🙂
It looks like FeedBurner is locking down global domination. 🙂
We’re trying our best! 🙂
We’re trying our best! 🙂