ArpexCapital Venture Fund Has Launched

I’m extremely excited to report that ArpexCapital has officially launched its venture fund.

Here’s an overview, followed by some explanation:

- ArpexCapital invests in early and growth-stage web-based businesses targeting the Brazilian market.
- We partner with driven, ethical entrepreneurs to build disruptive businesses.
- We seek to help build a sustainable, successful startup ecosystem in Brazil.

By “early and growth stage” businesses, I mean that our investments range from the concept stage (the business is still just an idea) all the way up to businesses that have revenue of $R15 million or even more.

By “web-based” business, I mean any business that uses the web to leverage its business model. This includes but is not limited to ecommerce/social commerce, e-financial services, advertising technology, and software-as-a-service (SaaS) businesses. It also includes mobile applications and geo-location businesses.

Our focus does not include device-based businesses (e.g., medical devices), biotech (e.g., pharmaceuticals) or cleantech businesses (e.g., renewable energy, etc.). These businesses tend to be capital intensive, technologically complex and dependent on intellectual property protection. These characteristics do not fit our profile.

We seek to partner with high-energy entrepreneurs that share our philosophy of meritocracy, accountability and “ownership”. A small group of partners capitalized ArpexCapital and all of those partners, including the fund managers, have entrepreneurial experience. We understand the immense challenges to entrepreneurship and we seek to use that experience to help others, including our invested companies.

We hope that our efforts contribute to the establishment of a sustainable startup ecosystem in Brazil and we look forward to working with the investors, entrepreneurs and businesses that have already started this process.

Vamos em frente!

Here We Go…

Greetings from Sao Paulo, Brazil, population 22 million.

No time for a long intro on this blog – it’s on venture capital in Brazil (and some other stuff).  I’m starting right in because if I try and structure this thing I’ll never get started.  I’ll probably go with some stream of consciousness posts, some quantitative stuff, and lots of in-between .. I’m hoping the end result is an interesting and useful picture of the venture capital ecosystem in Brazil.

My buddy warned me not to be a perfectionist with this – I’m known for sitting down and writing two hour emails, complete with Strunk and White seal of approval.  Can’t happen here, given that I already have three kids headed for therapy because their dad is trying to do too many things too much of the time.  (Actually, they’re good to go, solely because of their mom.)

It’s been a whirlwind few days.  I arrived Sunday night in Rio, twelve hours late, as the Saturday overnight from Dulles got canceled.  Turns out I actually prefer a day flight; you can get a lot done. I dislike, however, arriving at night. I like emerging in the morning to Brazil – new day in a new country, seeing the incredible landscape in all its colors, shapes and sizes. 

Instead it was midnight and I headed for my uncle’s place to sleep.  Actually, my wife’s uncle – I am 100% gringo, my wife is 50% Carioca, i.e., from Rio.  More on the family tree later: suffice it to say, our nuptials were the Big Fat Greek Wedding on steroids – I couldn’t shake a stick at everyone who was there on her side and only needed two hands to count the those on mine.  But the bottom line is that I am one very lucky WASP: I married into a big warm Brazilian family, great people, and I have grown very close to them.  They and their extended network of friends have been generous to me in every way, Exhibit A being my aunt and uncle letting me lumber into their apartment at 1am on a Sunday night to crash for a few hours.

I woke up extra early the next morning to run along Ipanema and Leblon beaches, one of my favorite things to do. Taking in the Cariocas exercising and chatting, the lush mountains that crowd right up to the beaches, the favelas spilling down the mountains, deep blue sky, inhaling the toxic plumes of exhaust from the hundreds of buses sputtering past (hey, it’s not all good here).  Btw, most “public” transit here is actually run by private mom and pop companies – thus the hundreds of vans and buses.   Kind of an unexpected free market twist.

At the end of the run I jumped in the ocean, then bought an “aqua de coco” – a chilled coconut with the top cut off and straw stuck in it – cold coconut water is great to drink after a run.

I showered then cabbed it to Centro (Rio’s downtown) to meet with a fund management company.  These folks are more private equity and public market investing than venture capital but one of the founding partners is big in the Brazilian VC community and has taken an active role in trying to build the VC ecosystem here.  Turns out he is close with my family, something I realized only after I met with him the first time, in December.  Back then, after the meeting, I casually mentioned his name to one of (my wife’s) uncles and he said, “Thomas?  He was one of our best friends growing up…” then proceeded to regale me with stories of their families vacationing together in the mountains of Petropolis as kids.    That kind of “small world” stuff happens all the time here.  Rio is a small town, socially, and Sao Paulo isn’t much bigger.

After Thomas’s partners leave the meeting we chat about a startup company, PVInova, that I am helping to enter the US market – he is helping them as well.  More on that company later. 

I have been trying to set up a meeting with a well-known VC in Belo Horizonte, one of the first VCs in Brazil.  No luck so far, so I ask Thomas to help me and he kindly agrees.  Very nice guy.

I have lunch in Botafogo – near downtown – with a consultant that’s doing deals up in the Northeast of the country.  He is an experienced CFO and has a good network in the northeast part of Brazil.  So much happens in the Southeast – Rio, Sao Paulo and Minas Gerais – that you forget that plenty goes on in the massive area to the north.  And not just agriculture – he is doing hospitality deals and education.  He clues me in the education market and it blows me away. I didn’t know the margins were so high (25% EBITDA).  It reminds me that Advent and GP recently made some acquisitions in that space – those guys aren’t dumb.

Next meeting was at 2pm with Criatec – the largest seed fund in Brazil. 

(Now, however, I’m taking a break.  All this grammatically-deficient writing was done leaning over a plate of bacalhau (fish and potatoes) at the hotel restaurant.  It’s time for desert and some things are more important than writing.) 

Ok, I’m back. Stuffed.  One of the mysteries of the universe is how Brazilians stay so thin while downing some of the most luscious food in the world.  Doesn’t work for me.

So the 2pm meeting… Criatec deserves more than I can give them right now so I am going to do a full post on them later.  They are the largest, some would say the only, seed fund in Brazil. 

After that meeting I head for Genesis, the incubator at the Catholic University of Rio, known by it Portuguese acronym, PUC (pronounced “pookie”).  I meet with the guys from PVInova (I am staying away from using people’s names and, in some cases, companies, until I get permission from them – don’t know what the protocol is but figure that’s a safe way to go).

PVInova also deserves its own post and they will get it – they are a case study in why I think VC has a good future in Brazil. 

While the PVInova CEO and I are having a cafezinho (small coffee), his phone rings and he hands it to me. It’s Thomas from the morning meeting.  He has set up the meeting with the well-known VC in Belo Horizonte.  “And Ted,” Thomas says, “Something funny.  It turns out that he [the VC] was at your wedding.”  Small world.