LatinFinance - November/December 2015 - 50

Growing in scale
Such growth is just what the Inter-American
Development Bank (IDB) expects. Susana
García-Robles, principal investment officer
at the IDB's Multilateral Investment Fund
(MIF), says the business environment for
fintechs is promising and that the startups
working today will likely have a multiplying
effect in the coming years.
"I think the future is quite ripe in applying technology to solve problems that are
common to many of these countries. The
solutions that we are going to see will be
scalable and the ecosystem will expand,"
she says.
The MIF does not directly support fintechs but it does provide resources to venture capital funds and seed funds. The MIF
has allocated approximately $250 million
to 54 funds so far. "We support local fund
managers and first-time fund managers or

Interview

Hernán
Fernández

fund managers who are not 100% invested
by the private sector because our mission is
to catalyze the investment of the private sector. Our participation helps private investors feel more comfortable about investing,"
García-Robles says.
The MIF and other institutions are trying to get angel investors to focus on SMEs
and, more importantly, add fintechs to
their portfolios. Venture capital firms are
focusing on building the ecosystem and
bringing in angel investors. Universities are
also working on building investor networks,
and a number of governments in the region
are creating SME incubators that include
fintechs.
One pioneering firm, Angel Ventures
México, started as a venture capital fund in
2008 to serve as a matchmaker for startups
and investors. It has since created a $20 million co-investment fund that provides 50%

The co-founder and managing partner of Angel Ventures Mexico spoke to
LatinFinance about the role of venture capital and angel investors in Latin
America.

LatinFinance: Who are your angel investors?
Fernández: Many of the investors in the US and Europe are
fintech executives who have exited, but this is not the case in
Mexico or the rest of Latin America. We mainly have executives
of large companies who have disposable income and were
entrepreneurs at some time. The individual angels have investments of $25,000 and $50,000. We can fund projects from
$250,000 or more, which makes us relevant because with
co-investment we can leverage up to $2 million.
LF: How many investors do you have?
HF: The network has 250 angels in the region, but the number is not really as important as the investment.
LF: How many requests are there from fintechs?
HF: Right now the fund is invested in 18 entrepreneurial
projects with around one-quarter in fintechs.
LF: What kinds of fintechs are looking for funding?
HF: There is a little of everything. What you find today in
Mexico and Latin America in general is basically a copy of what
is going on in the US and Europe. But we are supporting fintechs that are geared to this market. We are invested in Kueski,
which is an instant online lender, and Clip, which is like Square
for transactions. Clip uses anti-fraud technology because fraud
is rampant in Latin America. It has technology tailored to our
reality. There is also a real estate company that is changing
the way mortgages are evaluated. It uses big data to provide a

50 L ATINFINA NCE.COM - November/December 2015

of capital up to $2 million per company.
Angel Ventures now funds some of the major fintech startups in Mexico, including the
mobile payment app Clip. Angel Ventures
has also set up a company in Peru and is
part of a joint venture in Colombia.
With support from the IDB's MIF, the
business school at the University of Montevideo in Uruguay has created the platform
Xcala to develop startups in the region
through angel investor networks. Prior to
launching Xcala in 2014, research conducted by the business school concluded that
angel investors had not been active in Latin
America and the Caribbean. The university
found that angel investors had invested a
total of $26 million between 2005 and 2011
for an average amount of $250,000. The 31
networks identified by the university had
slightly less than 700 investors. "We have a
lot of potential angel investors who require

profile of how a neighborhood is trending, making traditional
methods obsolete.
LF: Have there been any successful exits?
HF: Not with fintechs. There have been some in the past
in the region, such as MercadoLibre.com, but I think it is still
too early in the cycle to talk about fintech exits. Many of the
startups that are breaking out are capturing the attention of
the establishment, so the trend is definitely in the direction of
exits.
LF: Where do you see things by the end of the decade
for angel investors?
HF: I think there is increasing interest among investors to
focus on startups. An ecosystem is developing and governments
are supporting angel investors and providing funds at the seed
stage. It is a question of the maturation of the investors. The
investors who are 40 years old and have disposable income have
lived through the history of technology companies like Apple,
Facebook, Google or Microsoft, which are now among the dominant players in the Fortune 500 in the US. I think that we are
going to see a natural appetite among these investors for fintech
startups. It is important for Latin America to start having exits,
even if they are small, to attract capital from investors. It will have
a snowball effect. I think another important step for the fintechs
is the need for internationalization. Crowdfunding platforms
have done it, but the rest are focused on just one market. LF

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