Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Hernan Kazah of Kaszek Ventures was recorded in November 2016.
Hernan Kazah, Co-founder and Managing Partner at Kaszek Ventures, is one of the earliest VC firms to start investing in the Latin American market. Hernan is also a Co-founder of MercadoLibre, Latin America’s e-commerce leader. This discussion features a comprehensive overview of the trends in the Latin American startup scene.
Sramana Mitra: Tell us a little bit about your activities since we last interacted. You were still at MercadoLibre but I know you switched to VC for a while. Tell us what have you been up to since then.
Hernan Kazah: When we met, I think it was 2007. It was probably prior to MercadoLibre’s IPO.
Sramana Mitra: It was right after. You went public in the summer of 2007 and we connected in November.
Hernan Kazah: Right. Since then, the company kept on growing well. At that time, it was mainly a marketplace. We then put a payment platform on top of it. The payment business grew significantly. Today, payment is larger than the marketplace. First, I was COO for nine years and then after the company went public, I became CFO until the year 2011.
In 2011, together with Nicolas Szekasy who had been the first CFO of the company, we started Kaszek Ventures with the idea of creating a venture capital firm focused on Latin America. We saw the big opportunities that technology was bringing to the region. We also saw there was lack of capital and there was lack of experience. We wanted to help entrepreneurs to hopefully build the next MercadoLibre in the region.
We started the first fund at the end of 2011. We invested it in 24 companies. In 2014, we raised slightly larger fund of $135 million. We’re currently investing out of that fund.
Sramana Mitra: Give us an overview. You’ve been at this game from the very beginning in the Latin American market. Tell us a bit about how that startup activity world evolved.
Hernan Kazah: We were the first wave of Internet entrepreneurs in the region. At that time, we benefited from the Internet bubble. It drew a lot of attention in the US and then spilled over into other areas of the world. In the region, we saw not many technology investors getting into Latin America, but we saw lots of banks.
There are big established firms in the US doing venture investing. So banks created, in Latin America, investment arms to play the venture capital role in our region. We benefited because that gave us access to capital. The only misjudgment is, it took longer than everyone expected. In 1999, we started MercadoLibre and got funds from investors that allowed us to start building slowly but surely.
In those times, Internet penetration was around 2%. It was still dial-up. Then, broadband started to become more popular. Today, Latin America is a considerable market in the technology world. Today, you have venture capitalists, angel investor networks, and some accelerators. There’s an ecosystem compared to when we started MercadoLibre, but it’s a nascent ecosystem.
Some people who have a global view try to compare the current status of the ecosystem to that of China in 2006. It’s producing very good opportunities. We feel that it’s at an inflection point. Smartphone penetration is about 50% now but more importantly, faster connectivity is becoming more popular. There are offerings for more affordable data plans. Continuous broadband connection is improving. We feel that in the next two to five years, we’re going to see almost everyone in the region connected.