We’ve used The Villain Test as part of the investment philosophy at Collaborative Fund for more than 10 years by asking ourselves: would a ‘villain’ invest in this company if their motive was one of pure self-interest? Thinking through the financial and social implications of a company’s success have led us to invest in industry-defining companies led by teams that are pushing the world forward.
In 2020, COVID-19 shook our routines to their core and we still don’t have a line of sight into what the “new normal” will hold.
As our physical world became smaller, our digital world grew with every Zoom meeting. Work became less constrained to where we could physically visit, and so our aspirations at Collaborative grew beyond the U.S. borders.
We’ve had some experience investing in companies with operations outside the U.S. with Tala, Zoomo, and Socar. However, we are excited to intentionally explore opportunities to partner with mission-driven Latin American companies within our core categories.
Why Latin America?
The market: The region benefits from a young and growing population of 650m+ that is increasingly leaning into digital economies. Internet penetration has reached 70%+ in many countries and e-commerce is expected to continue growing at 30%+ at least until 2025
Role models and talent mafias: Mercado Libre , OLX, and StoneCo bred the first generation of role models for LatAm entrepreneurship, creating an unprecedented network effect for tech talent development and investment in the region. Companies like NuBank, Kavak, and Rappi are examples of the next wave of role models shaping the local tech ecosystem with their talent mafias
Momentum: Kaszek and Monashees standout as the most notable local players in the earliest days of the ecosystem. Up until 2015, fundraising was hard, and exits were few and far between. One of the pivotal moments was Softbank’s announcement of their $5bn Latin America fund, in March, 2019. Seemingly “overnight”, the region became flooded with new local and international institutional funds interested in investing in LatAm
The increased access to capital has been matched with incredible teams seizing the opportunity to build and disrupt the status quo. According to Crunchbase, LatAm venture-backed companies raised $19bn in 2021 (3x+ the previous year). In the same year, Nubank went public at a $52bn market cap and the region now counts with 42 startups with known unicorn valuations.
Regional grit: Most Latin American countries have a “messy” economic and/or political past. With cycles of hyperinflation and wavering democracies, founders that emerge in the region truly take on the unknown. For example, Yummy is a super-app launched in Venezuela in 2020, a year where the country reported an inflation rate of 2,553%.
Being an entrepreneur in Latin America requires a relentless pursuit of survival and a particular ambition to build - not because of the economic environment but despite it.
Categories: The last decade of innovation has been instrumental in democratizing access to financial products and services in the region. In addition to the new wave of neobanks like Nubank and Uala, companies like Graviti, Konfio, and ADDI are inviting people and businesses to tap into alternative credit models. Beyond fintech, we believe that there are and will continue to be incredible opportunities for innovation in sectors pushing the world forward including Food, Health, and Climate tech
When we ask ourselves:
“If a startup becomes massively successful, will it make the region a better or more interesting place?”
Yes. LatAm is a place where 70% of the population earns less than minimum wage, but also a place where gig economy startups can offer carriers the opportunity to earn 2x+ the minimum wage. At least 1/3rd of the population in Latin America still lives below the poverty line, and we truly believe that high impact entrepreneurship has the potential to change that by reshaping the financial, food, health, and education systems of the past.
However, the real test for us at Collaborative is when we run the Villain Test and ask ourselves:
“Would a ‘villain’ invest in this region if their motive was one of pure self-interest?”
The answer is unequivocally, yes.
We could not be more excited about the opportunity, talent, and momentum in the region and expect these underlying tailwinds to translate into compelling opportunities for outsized returns.
If you’re a founder building something that will push the region forward, please reach out. We can’t wait to meet you!
The Collaborative Fund Team
● Atlantico 2021 Digital Transformation Report
● Financial Times: Latin American VC investments triple record to pass $15bn in 2021
● Crunchbase: Latin America’s Rank As The World’s Fastest Region For Venture Funding
● Pitchbook: Why 2021 Was A Breakout Year For Latin America’s VC Ecosystem
● Pitchbook: Latin America’s IPO candidates