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1Mby1M Virtual Accelerator Investor Forum: With Nathan Lustig of Magma Partners (Part 2)

Posted on Sunday, Mar 11th 2018

Nathan Lustig: I got a call from one of the founding members of the founding team of Startup Chile who said that there was a family office that was looking to diversify and get into tech. I met up with my now partner Francisco Saenz whose family had done well.

They were the co-founders of one of the biggest mall companies in Latin America. They did a bunch of traditional things like retail and banking. They were ready to get into this next wave of technology that was just getting started in Latin America. They also wanted to give back to the next generation of entrepreneurs.

In 2014, we founded Magma Partners, which was $2 million of our own money that we invested across 32 companies. The founders were from 10 different countries. The companies, in total, sell more than $10 million a year. There’s now 350 or so employees from 15 different countries. We’ve been building the base along with some of the other funds in Latin America of the entrepreneurship ecosystem here.

Sramana Mitra: So these companies that you’ve invested in out of the $2 million fund are all from Startup Chile?

Nathan Lustig: Only 10 or so had gone to Startup Chile first. Maybe another seven or so went to Startup Chile after we invested. Many of our best companies were from all over the region or potentially had already gotten traction and didn’t go through Startup Chile.

Startup Chile is a great deal flow magnet because 200 companies come every year from all over the world to Chile. We’re able to pick the ones that fit our investment thesis and where we really like the entrepreneurs. We also invest in a lot of companies across the region that don’t go through Startup Chile.

Sramana Mitra: You said you already invested the $2 million fund. What is the current fund?

Nathan Lustig: Six months ago, we started raising our second fund which we’re going to close in the next month. It’s going to be $15 million. All private capital with family offices from Chile, Colombia, Mexico, US, and China, along with some interesting entrepreneurs who have done well in their careers. We’re going to be focusing on the same investment thesis but with the addition that we can continue to follow on up to, what I call, a Latin America Series A which is about a million and a half.

Sramana Mitra: What types of ventures are you focusing on? What did you focus on in the in $2 million fund? What are you gong to focus on in the $15 million fund?

Nathan Lustig: We started out with two niches. One was B2B companies that operate in Latin America. The second was the companies that had their tech and sales team in Latin American but target the US market. The reason why we chose those two instead of B2C that operates in Latin America is Latin America is not a poor region. It’s actually fairy wealthy. It’s just unequally distributed.

When you look at building B2C companies in a country like Chile where 50% of the people make minimum wage and about 70% make only about 150% of minimum wage, the market for B2C along with infrastructure aren’t there yet. For us, these businesses have lots of money. They’re doing well, but many of the US and worldwide tech companies don’t get to Latin America either because of pricing, culture, or even just the language.

We focused on B2B to start and also on companies that were real businesses with things that could actually bring in sales and revenue rather than hoping for that next round of funding at a higher valuation.

Sramana Mitra: Talk a bit about some of your portfolio companies that have done well.

Nathan Lustig: I’ll tell you about some from each of the two different niches. Our best company so far is a company called Property Simple. They launched in Latin America with a company called PropiedadFacil. It’s like the Zillow of Chile. They had a couple of million people using it every month.

What they found out was that the real estate agents in Chile and in other parts of Latin America just didn’t have the money to make it a big business. They could only pay about $35 a month. The tech was great. It was generating really high quality leads for very low price. What we asked ourselves was, “Can this company play in the US market? Is the tech good enough?” We found out that it was.

We translated everything into English and made some changes for the US market and also made some additional tweaks. It’s, more or less, the same product with the same business model launched in the US. It sells SaaS at $2,500 a month instead of $35. Now they have 20 people in Chile and four people in the United States. They raised a $3 million Series A in the US about six months ago.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Nathan Lustig of Magma Partners
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