LAVCA Conference
I am at the Latin American Venture Capital Association conference in NY today. Most of the conference has been about private equity – PE still dominates investors' mindset about Latin America and especially certainly Brazil. Personally, I think the wave of private equity in Brazil is cresting. If you are going to raise a PE fund, you better do it quickly, because the market is getting very, very crowded. Six months ago, my cousin (he works in a highly respected PE firm in Brazil) told me that deal flow was strong and valuations healthy. Then, just last month, he told me that a ton of foreign PE firms had jumped in and driven valuations to unreasonable levels. It happened quickly but the market has changed – there is still deal flow but valuations are high and getting higher. More ominously, many, many managers want to raise new PE funds for Brazil – I ran into a friend today who works as a placement agent and he told me that his firm cannot keep up with all the requests from groups wanting to raise Brazil-focused PE funds. So the market is not going to get less saturated anytime soon. In sum, We we are well into a private equity bull market in Brazil. This is a problem, since how a fund performs has a lot to do with when it enters a market – historically, the best time is (of course) when prices have been beaten down. You don't want to invest into a bull market. What about venture capital? Yes, there are more people aspiring to do VC in Brazil than a year ago – but still not very many. (I see the same three Brazilian VCs here that attended the conference last year.) Seed VC (as opposed to growth and late stage VC) still feels completely open. No one seems to want to admit that they do early stage VC, for fear that institutional Investors will run away (they might). Well, we like helping entrepreneurs build companies from the ground up: we do seed VC, we like it and we think a fund that executes on it can be very, very successful.
