LatinFinance - November/December 2016 - 21

the creation of a venture capital ecosystem.
"Early stage funds are expensive to run, and
there is little deal flow and few successes, so
it is hard to do it privately," says von Igel.
To get around that, Corfo, the economic
development agency that oversees Start-Up
Chile, has created an early stage tech fund.
It provides capital for Chilean startups no
more than three years old and with net
sales of less than $200,000 per year, and
matches investments at a rate of up to three
to one. It also provides grants to help cover
the costs of running funds or having startups in portfolios.
Company building
For investors, another option is to build
companies from the inside, such as Mountain Nazca has done. "Of our investments,
20% is lost on things that were not planned,
on errors, which is part of venture capital,"
says Amadeo. "But if you work on projects
from earlier on or on ideas generated or
executed internally, there is less chance of
losing so much."
Even so, Mountain Nazca only focuses
half of its capital on company building, with
the rest going to funding outside ventures.
"I want to find the best entrepreneurs,"
Amadeo says. "If I only create businesses in-

house, I won't find the best talent to move
the companies forward."
To expand new companies, another
strategy is to go "transnational as soon as
possible" so they can tap financing opportunities around the region, Amadeo says.
Mexico, for example, has a lot of capital,
and so companies like Chile's Destácame,
a credit-scoring platform, have expanded
there.
Even so, the venture capital market in
Latin America is still tiny compared with
that found in Asia, Europe and the US - and
has declined over the past few years.
SaferTaxi's Raemy, who now lives in
Buenos Aires, says Brazil's economic and
political crisis has dried up the region's
most recent startup hub in São Paulo since
2013. "Latin America is still completely
underfunded," he says.
To motivate investors, a success story
illustrating the big M&A deal or initial public
offering is needed. "If an investor gives you
$20 million, you are going to need to have
a $50-$60 million valuation," Raemy says.
"In order to get that, the startup has to get
quick visibility so it can be sold for $250$300 million." Without any big exits in the
region, venture capital investors "are not
willing to make such big bets," he says.

Even so, business building is expected
to continue. At Magma, the goal "is to build
good businesses, and at some point it's going
to exit or is going to have sufficient cash flows
to pay us nice dividends," Lustig says.
And more financing options are surfacing in Chile. Early next year, the Innovation
Center at the Pontifical Catholic University
of Chile plans to launch an early stage fund
to accelerate startups with up to $500,000,
backed by the government.
The center already runs two idea accelerators, which are building businesses to
increase the flow of deals for the new fund,
says von Igel. The ventures include VACuCh,
which makes a copper and rubber antibacterial liner to reduce losses in milk production,
and Biogusto, which makes packaging out of
rice husks. Another is Algramo, a maker of
vending machines for bulk staples like beans,
rice and lentils,
"We are in this because we feel it is a necessary industry and mechanism that is essential
for the country: a successful and growing and
flourishing entrepreneurship ecosystem,"
von Igel says. "There is high potential to turn
a lot of original scientific projects from this
university and others as well as entrepreneurial technology into actual businesses and
productivity for the country." LF

November/December 2016 - L ATINFINA NCE.COM 21


http://www.msf.com http://www.LATINFINANCE.COM

Table of Contents for the Digital Edition of LatinFinance - November/December 2016

Contents
LatinFinance - November/December 2016 - Cover1
LatinFinance - November/December 2016 - Cover2
LatinFinance - November/December 2016 - Contents
LatinFinance - November/December 2016 - 2
LatinFinance - November/December 2016 - 3
LatinFinance - November/December 2016 - 4
LatinFinance - November/December 2016 - 5
LatinFinance - November/December 2016 - 6
LatinFinance - November/December 2016 - 7
LatinFinance - November/December 2016 - 8
LatinFinance - November/December 2016 - 9
LatinFinance - November/December 2016 - 10
LatinFinance - November/December 2016 - 11
LatinFinance - November/December 2016 - 12
LatinFinance - November/December 2016 - 13
LatinFinance - November/December 2016 - 14
LatinFinance - November/December 2016 - 15
LatinFinance - November/December 2016 - 16
LatinFinance - November/December 2016 - 17
LatinFinance - November/December 2016 - 18
LatinFinance - November/December 2016 - 19
LatinFinance - November/December 2016 - 20
LatinFinance - November/December 2016 - 21
LatinFinance - November/December 2016 - 22
LatinFinance - November/December 2016 - 23
LatinFinance - November/December 2016 - 24
LatinFinance - November/December 2016 - 25
LatinFinance - November/December 2016 - 26
LatinFinance - November/December 2016 - 27
LatinFinance - November/December 2016 - 28
LatinFinance - November/December 2016 - 29
LatinFinance - November/December 2016 - 30
LatinFinance - November/December 2016 - 31
LatinFinance - November/December 2016 - 32
LatinFinance - November/December 2016 - 33
LatinFinance - November/December 2016 - 34
LatinFinance - November/December 2016 - 35
LatinFinance - November/December 2016 - 36
LatinFinance - November/December 2016 - 37
LatinFinance - November/December 2016 - 38
LatinFinance - November/December 2016 - 39
LatinFinance - November/December 2016 - 40
LatinFinance - November/December 2016 - 41
LatinFinance - November/December 2016 - 42
LatinFinance - November/December 2016 - 43
LatinFinance - November/December 2016 - 44
LatinFinance - November/December 2016 - 45
LatinFinance - November/December 2016 - 46
LatinFinance - November/December 2016 - 47
LatinFinance - November/December 2016 - 48
LatinFinance - November/December 2016 - 49
LatinFinance - November/December 2016 - 50
LatinFinance - November/December 2016 - 51
LatinFinance - November/December 2016 - 52
LatinFinance - November/December 2016 - Cover3
LatinFinance - November/December 2016 - Cover4
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