3 things Latin American VCs should learn from founders

July 10, 2014

This article was originally published on Medium

 

 

‘Now, our challenge is to learn faster about media platforms, mobile advertising, video and how our users interact with them. That way we will be able to keep enhancing our marketing efficiency and sustain our monthly growth rates.’Jimena Pardo, founder of Carrot.mx, largest car sharing company in the region, at ALLVP’s founders meeting.

 

One of the things we most regularly see (and admire) in successful founders is their ability to learn fast not only about their core capabilities but also about how to scale and run a larger company. That factor seems to be one of the key attributes that separates them from the pack. Collectively Latam’s founders have been learning intensely in the past few years. As VCs, we need to catch up as their local partners. For that, we can start with three of the most important aspects successful entrepreneurs have figured out.

 

Collaborate

 

First, it’s worth defining collaboration. For me, it represents the uninterested efforts founders or VCs make to help their colleagues become more successful. Founders know that in the long run helping others win, enhances their own chance of winning, by building a network of trust and accelerate the ecosystem as a whole. Unfortunately, VCs rarely make honest efforts to help other VCs win. Most seem to think they know better that the next. Only time and the challenges of defending with founders and limited partners a track record rather a promise of track record will provide them the wisdom to recognize the reality. Let’s start collaborating now. Let’s share data and experiences. Let’s recognize and talk about our strengths. Let’s hold each other to high standards. In the end, we all represent each other as an asset class to our founders and our investors.

 

Pivot

 

In the past two years, dozens of new VC firms have raised a first seed capital fund. Most launched with the vision of positioning a VC firm with multiple funds and the investment strategy it requires to be successful. Today, in particular in Mexico, dozens of new investors are running the equivalent of a MVP. Any founder will tell you, that’s only a good idea if the MVP is the way to create a better product.. That requires continuous tweaking and in some cases a pivot or two before getting it right. As a co investor with many VCs in the region, I am not seeing that. We see our colleagues follow the same investment process over and over and sending the same term sheets to founders. On strategy, only a handful of funds have recognized saturation in some spaces and are focusing on one or two industries. None seem to adapt their strategies. Most of us are in the first or second fund. We should be adapting our process, our terms and our strategies as we learn.

 

Embrace failure

 

Failure seems to be the favorite concept investors love to agree on (so much so that we might need to re position the concept of success :). So Latam VCs love to love the brave founders that recognize their failure. Unfortunately, it is as rare to find a VC that embraces failure as it is to find a Unicorn in the region. I remember that when Fernando and I started fundraising our first fund four years ago, Alvaro Rodriguez, founder of Ignia and our go-to-mentor at the time, spoke about his failed investments with great detail and to whom ever asked. We learned that from him and probably avoided a couple of ill-advised investments. Today, with more VCs fighting for attention and more investments being closed than ever, it’s implausible that no VC has had a bad investment. Some of those investments misteriously disappear from portfolio sections in websites when they go sour! Others start fundraising for a new VC firm while promoting and representing an empty logo. Let’s walk the talk and share our learnings when things go wrong. A future founder or a future VC will learn from that and avoid making the same mistake. Our credibility grows as we share the good as well as the bad.

 

As a venture capital industry, we are all about creating value: add value to the founders that will create value to our limited partners. I think we can create more value by adding value to each other and to ourselves by learning from the founders we love. Any successful ecosystem needs a vibrant local venture capital industry. Let’s start learning together.

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