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1Mby1M Virtual Accelerator Investor Forum: With Nathan Lustig of Magma Partners (Part 3)

Posted on Monday, Mar 12th 2018

Nathan Lustig: Another company that fits that model is a company called GroupRaise, which went through Startup Chile. They’re originally from Houston. They now have an office with eight people in Houston, about 15 people in Santiago, and about 40 in the Philippines. What they do is they allow anybody to book an event at a restaurant. Anybody knows how to book one to eight people restaurant reservation. You can go to OpenTable or something similar.

What if you want to have a group of 20 or 100? They have 10,000 or so restaurants in the United States where you can book a big group event. The cool part is the restaurant actually competes over your business by donating 5% to 20% of the bill to the group or charity of your choice. They raised a nice sized seed round in the US from investors in the Valley and also from Tech Stars. Those are our top two in the Latin America to the US model.

In the Latin American B2B market, we invested in a company called Portal Finance. They have a SaaS document platform for the factoring industry. If you need to borrow against an invoice that may be net 60 or net 90, you can go to a factoring company to make that happen. It’s a huge business in Latin America. In the US, it’s about $100 billion per year industry.

They took down the time for these factoring companies and banks to make a decision on funding and invoicing from two weeks to 20 minutes just with their SaaS platform. What’s cool about them is, on top of that, they were able to get access more than 150 million invoices just in Chile to be able to build a map of who owes what to whom to be able to start to give grades to invoices.

They now have a decision engine on top of it, which offers the highest quality invoices to their SaaS clients. Then they get a portion of the invoice when a deal happens. They’ve done deals with some of the biggest investment banks in Latin America and are operating in Chile and Colombia today, and will open Mexico and US in 2018.

Sramana Mitra: Very cool. This company, I presume, you have funded Series A in Latin America.

Nathan Lustig: We will be funding their Series A from our second fund which will close in the next month. We funded their seed and pre-seed. We’ll be doing the Series A shortly.

Sramana Mitra: The next question I have is actually about the ones that you are funding in the US. Have you experienced the Series A financing in the US yet?

Nathan Lustig: Yes, we’ve raised $6 million for our portfolio companies in the US. PropertySimple is $3 million. At the end of 2015, we started bringing our first portfolio companies to the US and have been meeting with US investors to get them to follow on.

Sramana Mitra: What is the appetite for US investors to work with these Latin America companies? What are you learning?

Nathan Lustig: We learned a lot. When I went with the companies in 2015, I thought that having some traction in Latin America would actually be a bonus. What we found was a negative value for most investors in the US. Their line of thinking was two-fold. One is, if it really is this good, they’d be in the US already.

The second was they were worried that even though there was a product that was working in Latin America and you’re raising for the US version, you might take half of that and just operate your business in Latin America. There also was a huge amount of ignorance about Latin America. Our founders got questions like, “Is there Internet in Chile?” We would show a video to different people before the meetings that shows some drone footage of our office in Chile.

Many of them would be surprised and say, “There’s a real city. There’re a lot of buildings.” It wasn’t that anybody was trying to discriminate against Latin American entrepreneurs. It was just they haven’t vetted the thesis yet. Most people had seen companies that had their tech or sales team in Eastern Europe or potentially in Russia. There haven’t been that many success stories with this model from Latin America. There are some. There have been multiple Silicon Valley companies that have acquired Latin American teams to have their dev offices there and continue to do it. It’s just not something that you see everyday.

Only 1% of money that is coming out of Silicon Valley is going to Latin American founders. There was only $2.3 billion of venture capital invested in all of Latin America including Brazil, which is less than what Uber got from the Saudi royal family in one round. It’s an under-funded region. It took a lot of convincing for us even though all of our companies that are operating in the US have an office in the US. It was hard to convince people that they are actually a US company.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Nathan Lustig of Magma Partners
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