Totally different energy and optimism from what one feels in the US at the moment. Although there is a healthy dose of caution here, too.
Lots of energy here – it seems like everyone knows that the crisis has been a temporary interruption in an inevitable ascent…
Biggest concern for LPs looking at Latin America is the perceived lack of experienced General Partners. Brazil has the most experienced GPs
regardless of the crisis. Risk premium has gone down from 2008 – only country in the world where that has happened.
Take away from first session this morning: Limited Partners view Brazil as increasingly attractive regardless of the crisis…
I am headed to Sao Paulo tonight for the Brazilian Association of Venture Capital (ABVCAP) conference. Unfortunately, I will miss the opening dinner tonight but I will catch all of the conference Wednesday and Thursday. Should be interesting…
I will actually re-activate Twitter updates for the blog so I can send live updates of what is going on in the sessions.
Here is the link to the conference:
Program Schedule
I saw this interesting article from Red Herring on Brazil as a source for raw materials for VC-backed energy startups.
Khosla-Backed Biodiesel Startup Eyes Brazil
on 25 March 2009, 16:05
by Justin Moresco
Biofuels startup LS9 is looking to build a beachhead in Brazil.
The South San Francisco company is in search of partners in the South American country for its first commercial-scale biodiesel plant, LS9 Chief Executive Bill Hayward said Wednesday at the ThinkGreen conference in San Francisco.
LS9 is looking to Brazil because of the wide availability and cheap prices for so-called energy cane, a feedstock that at least initially the startup plans to use to produce its fuel, Mr. Hayward said. The country also has a robust market for diesel.
Mr. Hayward said he hopes to break ground on the plant by 2011 and complete it the following year. In the meantime, he said he is looking to temporarily use an existing plant in North America as a stepping stone to full-scale production. This demonstration plant should produce about 1.5 million to 2.5 million gallons per year.
“The main goal is to get it done quickly,” he said.
LS9, which is backed by Khosla Ventures, uses engineered microbes to produce fuels from raw materials like cane and cellulosic biomass. The startup is initially targeting the diesel market and some chemical markets for products like soap, detergents, and resins. Mr. Hayward said the company will be cost-competitive with petroleum at crude oil prices as low as $45 per barrel.
LS9 wouldn’t be the first U.S. biofuels startup to look south toward Brazil. Emeryville, California-based Amyris Biotechnologies announced that it is building a plant there to be ready by spring 2009. The company has formed a joint venture with Crysalsev, a major Brazilian ethanol marketer and plans to have commercial production of its biodiesel by 2010.
Yesterday, the Emerging Markets Private Equity Association (EMPEA) held a webcast on private equity in Brazil. It was part of their series entitled “Broken BRICs: How the Global Economic Crisis Is Impacting Private Equity in the Largest Emerging Economies”.
I was particularly interested in knowing the thoughts of Marcus Regueira (FIR Capital), since he was the lone VC on the three-person panel.
Here are some notes from the call (please forgive the syntax):
Marcus Regueira’s key points were:
Cash is king
No exit prospects at moment “the road to exits has been lengthened” (but keep this in perspective as before 2004 there were few IPOs anyway. So this is not an overwhelming issue.)
What causes him to lose sleep is: the LP/GP cycle, meaning the need to return capital to investors and raising the next fund.
He did say that if most portfolio companies are serving a real need, e.g., saving users money, then the portfolio can be in a good position.
Marcus referenced a “survival guide” that was sent out to all portfolio managers late last year. (Sounds similar to Sequoia’s “Good times R.I.P.” presentation to their portfolio companies.)
Marcus spoke of cleantech, his ethanol business. As well as organic chemicals. Spoke a little about Nano.
Other:
Roger Leeds (host; Chairman of EMPEA) noted that their could be a groundswell of fund raising activity in early 2010 when all fund managers go out at the same time. Roger also asked about “tourism” as a sector – surprising — not many answers.
Q: What are reasonable multiples in the services sector (middle-market)?
A: significantly down (30-50%), now 3-6 x EBITDA, use to be 6-9x.
Roger Asked what other markets are of interest to the three: Colombia, Peru, and Chile (but Chile can be expensive. Mining, fish are appealing)
Had about 100 participants on the call.
I just spent the last 1 hour and 45 minutes adjusting the font, margins and look and feel of this blog. This is after spending a bunch of hours doing the same thing earlier in the week. (You may notice the font size now allows for reading of the blog from Outer Space.)
What did I gain from this? I am still not satisfied with the look and feel and, frankly, there are a lot of other things I could be working on at 5:45am (including completion of a REM cycle or two). I gained experience, however, in how to control my blog and, more broadly, in accessing content, information and help from the Web.
The best way to learn on the Web is to spend time on it. To “do” it. I am convinced that many of the technically savvy among us are no smarter and, in fact, not much more technically savvy than the rest. They have simply spent more time experimenting online. Of course, there is a difference between those who have degrees in computer science, programmers and the rest of us but, in a way never before possible, the Web allows shortcuts to technical proficiency. Type your problem haphazardly into Google and see how quickly you find the answer on a random forum…
This explains why, when my wife asks for help on this or that tech issue I either 1) yell from the couch “You have to experiment with it!”, 2) Yell from my desk “Look it up on Google!” or 3) call out “Coming, dear…” at a brisk jog. Her responses are, respectively, 1) six-hours of brutal silence until penance is made, 2) a five minute tongue-lashing followed by a six-hours of brutal silence until penance is made or 3) “Thanks, baby. Sorry to bother you.”
It’s amazing that I often pick option #1 or #2 but my point, however boorishly made, is that, unless she goes to the Apple/Mac support forums or searches for help on Google or, worst case scenario, calls customer service, she is always going to be dependent on others and intimidated by tech.
Better to plow through with trial and error and learn from doing…
Why does the US have a different perspective on profit than many other countries? IMHO, it starts with the people that founded this country. The people that came over from Europe 400 years ago were generally fleeing repressive religious and/or governmental authority. When they came here, the suspicion of strong centralized authority continued and, in fact, continues with many Americans to this day. The corollary to this suspicion was a zealous defense of individual rights, including the right to make a profit without being interfered with by the state (or anyone else).
Also, the Puritans, because they were the first ones off the boat, formed a basis for our culture and they, though suspicious of the sin that wealth could induce, tended to view wealth as a sign of God’s divine blessing. In other words, if you were successful it was a sign that God was pleased with you. Other Protestant religions that followed to the New World felt much the same way and Protestantism and capitalism, for better or worse, became intertwined in America.
It seems fair to say that Catholic countries, or perhaps countries that have an official state religion, have a more ambiguous relationship with capitalism. The free market is trusted less and the well-being of the individual is secondary to the well-being of the whole.
I am not alone in this observation: I attended a webinar a year ago where a professor from PUC-Rio mentioned the Catholic culture of Brazil as something that restrained aggressive entrepreneurialism and pursuit of profit. I thought he was exaggerating and, in fact, that he was engaging in stereotyping. Of course, in retrospect, he knew a lot more about his home country than I did.
Again, I am not opining on the right way or the wrong way. My wife is a Brazilian-American Catholic and my kids are being raised Catholic (I am Episcopalian, i.e., “Catholic-lite”). I am just observing some important cultural differences that effect the VC ecosystem in Brazil and the US.
