With tech giants like Google making a push to foster LatAm startups in 2018, and a number of unicorns emerging in the region over the last 4 years, Latin America is fast becoming a contender in the global startup arena.
Lima-based Founders Network member and 4-time serial entrepreneur Pedro Neira Ferrand has been at the forefront of this shift. Having grown 3 of his 4 startups in LatAm, Pedro has witnessed the changes to the local startup ecosystem with pleasure. “4 years ago, there was no startup community in Peru, as for the rest of LatAm, the community was very early stage. Now, local communities have grown amazingly.”
After founding 2 startups— one immediately before, the second immediately after the dot-com bubble, Pedro sold his 3rd startup (adondevivir) to Tiger Global Management, a firm out of NYC with investments in Spotify, Nextdoor, Chargebee, & InVision.
After the acquisition, Pedro stuck with Adondevivir for 2 more years before moving on. “The company had started to make a lot of money, but I got really bored. It became more revenue driven instead of tech driven. We weren’t creating anything anymore. That’s when I discovered I was a serial entrepreneur. I build things and once they work, I leave.”
Now Pedro has secured his 4th round of funding for his current venture, Mi Media Manzana, the #1 most downloaded app in the dating category in LatAm, with over 1M downloads.
With 4 startups under his belt, Pedro is now dedicated to educating budding entrepreneurs in LatAm through his involvement in organizations like Founders Network, BlackBox Connect and Endeavor. “I try to take care of my network very carefully, it’s very important to me.”
Below, Pedro’s advice for LatAm founders on:
- Starting-up in LatAm vs. in the United States
- Why it’s important to not aim small when raising in the United States
- Why LatAm founders need to raise funds locally before raising globally
- How a visit to Silicon Valley is critical
- The importance of picking the right co-founder
- Why investing in your local and global network will pay dividends over the course of your career
Starting Up in LatAm vs. United States
Costs in LatAm are obviously much lower than The Valley. So if you need a small team of 5-10 technical employees, you can pay them about ⅓ of what you would in the United States. So if you’re starting a company in LatAm, hire locally.
However, we have no funding available in LatAm. Especially in countries like Peru and Ecuador. Venture Capital is more prevalent in Mexico and Argentina. It’s also dependent on state-run programs. For example in Mexico, the state has funds available for startups, but you have to be a Mexican citizen to qualify.
Don’t Aim Small When Raising in the United States
If you’re raising in LatAm and think too big, you won’t get funding. If you’re raising in the United States and think too small, you won’t get funding.
Investors in LatAm are very, very, risk averse. So you have to approach investors with a clear, low risk business model.
However, if you take that same low risk pitch to an investor in the United States, you won’t get past 30 seconds in that meeting before they turn you away. Because nobody in the United States wants to fund a startup that is risk averse and aiming too small. Investors in the United States want your TAM to be massive— they want you to think big.
Raise Locally First, Globally Second
If you haven’t raised a single dollar in your country, it’s tough to raise abroad. So start local. The good thing is that there is a ton of money in Latin America. We have lots of people here with an extra $50-$100K who are not traditional angels, but they can invest in startups if the founder is able to explain the kind of investment that a startup is— high risk, high reward. That’s where the low hanging fruit is in LatAm. You can get away with about 1 to 4 of those checks, and get a small round started.
Once those initial funds are secured, that’s when you approach investors in the United States. And once you hit Series A, you can raise from anywhere in the world.
It’s important to note that at the end of the day, if you are fundable, you’ll get funding. I’ve received investments from seed funds in both New York City and South Korea. Both of those funds had never invested in a LatAm startup before me. If you have a good enough team and go for a big enough opportunity, investors want to fund you, regardless of if the fund is from Nigeria or San Francisco.
Visit Silicon Valley
I’ve been to Silicon Valley 3 to 4 times since 2013. The first time, I went for the BlackBox Acceleration Program. And it was mind blowing. I came back from that trip with a completely different mindset— it was critical for me.
I can’t stress enough how making the trip to Silicon Valley is so important for any LatAm entrepreneur. Because in LatAm, we don’t think big enough. Visiting The Valley changes your perspective as a founder, and gets you thinking bigger. Even if you don’t move there, it’s going to expand your mindset. That’s why I continuously go back, to open-up my perspective and make sure I’m at the forefront of technology and entrepreneurship.
Finding the Right Co-founder(s) Is Critical
In all 4 of my startups, I’ve been lucky to choose my co-founders well. The main reason is now I know that starting up is a rollercoaster. You’re going to have so many ups and downs. And you’re choosing who you want to have those ups and downs with. It’s like a marriage. You’re deciding that ‘this is the person I want to live this experience with’. Of course they need to have the necessary skills, but you’re choosing who you want to spend your time with, your passion with. If that relationship doesn’t work, everything else will fall apart.
Invest Time In Your Local and Global Network
My network is the single most important thing I have as an entrepreneur. For example, I would not have the amazing co-founders I do without the strong network I’m a part of. You don’t start a company then just spontaneously pick a co-founder. You need to have experience working with that person before building a startup with them. It’s like a marriage— you’re not going to marry someone before dating them. You need that strong network to choose your co-founder from.
A strong network can also help with your raise. In the past and still today, I intentionally set aside time to help my fellow entrepreneurs. So when it was time to raise funding, those same founders that I helped in the past were eager to help me with introductions to investors. And that’s happened for me again and again and again. I try to take care of my network very carefully, it’s very important to me.
4 years ago, there was no startup community Peru, and very very early stages in the rest of LatAm. Now, local communities have grown amazingly. Argentina and Mexico have the most developed ecosystems. But it’s starting to happen all over LatAm, and that’s amazing. Latin American entrepreneurs need to make sure to tap into their local and global startup networks, because those relationships pay dividends in the future.
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