Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Nathan Lustig was recorded in October 2017.
Nathan Lustig, Managing Partner of Magma Partners, a Latin-America-focused fund. He talks about their strategy, as well as the dynamics of the LatAm market.
Sramana Mitra: Tell us about Magma Partners. What is the focus of the firm? How big is the fund? What size investment do you make?
Nathan Lustig: We’re a US-Latin American venture capital fund. We got started in 2014. In our first fund, we had $2 million of my money and a family office’s money from Chile that wanted to diversify into tech. We started out investing in pre-seed – $25,000 to $75,000 – in companies that had their tech and sales teams in Latin America but targeted the US market. In the best companies, we could follow-on with up to another $300,000 on top of it.
Sramana Mitra: What is the genesis? Are you from the technology industry? I imagine you are from Chile?
Nathan Lustig: No, I’m from Wisconsin.
Sramana Mitra: Why Chile then?
Nathan Lustig: When I was in school, I went to University of Wisconsin. In my sophomore year, I started a tech company with two partners. It was a marketplace to buy and sell textbooks and student tickets for sports and concerts on campus. I knew that I didn’t want to get another job after that. I knew that I had to start something new. Another friend of mine and I started a business.
We were in Wisconsin and, at that time, it didn’t have all that much tech going on. We were looking to move either to Austin, Texas, or San Francisco to get into a spot with more tech going on where you could get more feedback and more access to capital. It didn’t hurt that we could skip the Wisconsin winter and go somewhere else with a nicer climate. Back in 2010, we had already launched our product. We had raised some money. We had been in the press all over the world. We were looking to get out of Wisconsin.
We saw this article in Forbes that said that the Chilean government was giving $40,000 of equity-free money to startups to move down to Chile for six months. They give you a visa, office space, mentorship, and connections to the local economy. My partner and I moved to Chile in November of 2010 as the fifth company to take part in the program. We were in the pilot round. Now, there have been 1,800 companies that have gone through it. After our business was acquired, I went back to Chile.
Sramana Mitra: Who acquired your company?
Nathan Lustig: We got acquired by a company called SecureSafe, which is a spin-off of a Swiss bank.
Sramana Mitra: When you were doing the company, you were based in Chile?
Nathan Lustig: We came to Chile for six months. We got to know people in the industry. We ended up changing our business model a little bit and then we went back to the US after the program and spent another nine months in the US before we sold.
Sramana Mitra: What year does this bring us up to?
Nathan Lustig: This is the end of 2011. I’m now back in the US. My partner and I sold the company. I wasn’t sure what I wanted to do next. I had started to learn a little bit of Spanish and had gotten a really good network in Chile. I decided that I wanted to go back, at least, for a year to explore the opportunities and also to learn the rest of Spanish.
I ended up working at a Chilean startup for about nine months where I got to help them open offices in Argentina, Brazil, and Colombia. I got to see how different the business culture is in each one of the countries. I learned Spanish. By the end of 2012, I was ready to go back out on my own again. I started teaching the entrepreneurship class that I wish I had before I started my business at a couple of Chilean universities. In addition to teaching, I was doing some consulting.
I realized that I was doing everything that an investor does except for investing money. I had also seen what the investment climate was like in Latin America and not just in Chile. Most of the investment firms from 2010 all the way through 2014, and even still today, were run by people whose background was in finance, private equity, or in mining. They were structuring deals that were like private equity or like mining.