1Mby1M Virtual Accelerator Investor Forum: With Nathan Lustig of Magma Partners (Part 4)

Sramana Mitra: I think it was in 1997. I was funding a company of my own that I had founded. We did all our product development for very little money in India. It was before the trend where you could be building companies in India. I met with 36 venture capitalists before I could find one to actually do this with me. That was NEA.

It was hell. People were telling me, “We don’t fund companies with product development in India.” A decade later if you were in Silicon Valley and not doing product development in India, you were a fool. These kinds of 

trends require education and require breaking people in, but it eventually happens. I’m thrilled to see that you’re doing this in Latin America.

Nathan Lustig: Thanks. What was the turning point for you that you got someone to do it?

Sramana Mitra: This is not true for Latin America, but it is very true for India. There are tremendous numbers of Indians in the technology industry in Silicon Valley. There were also a lot of angel investors in Silicon Valley from India. I got a bunch of Indian angels to come into the company.

Some of those angels had the relationship with NEA. It was they that convinced NEA to come in. You have to surround yourself with Latin American success stories in Silicon Valley who have those connections and bridges into the VCs who can provide the comfort around your deal.

Nathan Lustig: That’s exactly right. You’re starting to see a bit of an inflection point in Silicon Valley starting to invest either in companies with Latin American tech teams or even just companies operating in Latin America itself. Most of the top 10 venture capital firms did their first couple of deals in Latin America in the last six to 12 months.

Andreessen Horowitz did a deal in Colombia. Excel did a deal in Mexico and Colombia. Valuations are a lot lower in Latin America than they are in the US. Plus you’re starting to see some of the first success stories. You’re exactly right. It’s going to take time.

Sramana Mitra: What about the Latin American investors investing in the model that you’re talking about? Of course, Latin America has seen more B2C investments focused on Latin America. There have been some B2B investments. I’ve known the MercadoLibre guys for a long time. What are you seeing? What is the response to your two models? One is B2B Latin America facing and the second is B2B US market facing.

Nathan Lustig: There have been a lot of good VCs. Kaszek is great. They’ve been doing really well, but generally they’re doing Latin America-focused deals with a lot bigger check sizes. We are filling a niche that is lower down on the amount of money and stage.

Sramana Mitra: You’re doing the Series A gap essentially. You’re doing the pre-seed, seed, post-seed and bridging it into Series A. In your new fund, you’re going to try to do Series A as well.

Nathan Lustig: There’re a couple of different funds across the region that are starting to do similar structure to us of Latin American tech and sales teams. There’s one in Colombia. There’s one in Mexico. There are some interesting Mexico-focused cross-border funds. They’re investing in not only Latin founders in the States but also Mexican founders for the Mexican market. It’s starting to be interesting.

Sramana Mitra: You will have a few syndication opportunities around these new funds.

Nathan Lustig: Exactly. It would be great to have even more people starting to invest in the region so that we can do more co-investments. We’ve done some with some of the funds in the region, but it would be great to get more people who are learning about the region and bring other skillsets that maybe we don’t have here.

Sramana Mitra: Excellent. It was very nice to hear your story. Thank your very much.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Nathan Lustig of Magma Partners
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