Venture capital continues to flow into Latin America at a staggering rate. Just over $15 billion went into startups in 2021, according to LAVCA. That was three times more than the association recorded in fiscal year 2019.
Brazil and Mexico continue to lead as regions where many startups are getting funding, but as LAVCA’s statistics show, some of that investor love is being spread around to other countries like Colombia, Argentina and Chile. Venture firms in those countries are also raising funds; for example, this month, Colombia-based Marathon Ventures announced its first fund of $26 million.
H Twenty Capital (H20) co-founders Daniel Lloreda and Mauricio Porras recall getting into the region in 2018, a time Lloreda considered pretty early to be the investment space.
“The market wasn't so established and meal companies, such as Rappi, were just getting started and reaching their growth phase,” Lloreda added. “Mauricio and I had this bold vision of backing as many disruptive entrepreneurs as we could, and leveraging our previous backgrounds and experiences.”
In 2018, the pair set up a friends and family fund that had about $15 million that Lloreda referred to as “proof of concept fund” that enabled them to invest in the region and establish the thesis of backing pre-seed and seed entrepreneurs in Latin America and in the Hispanic U.S. market in the verticals of e-commerce, marketplaces, fintech and software.
Some of H20’s early investments from that fund went into companies like Tül, a construction material e-commerce marketplace that is now valued at $800 million after raising a $181 million Series B round in January. It also invested in Brazilian social grocery commerce company Favo, which raised a $26.5 million Series A last October.
For Tül in particular, Lloreda said he and Porras were instrumental in helping the company expand regionally, secure its first country manager in Ecuador and make key strategic partnership introductions to suppliers and investors.
The firm strategically went after a seed and pre-seed market that Lloreda said is going downstream. As a result, the firm is positioned to provide what the entrepreneurs need, and with SoftBank and other growth equity funds coming into the region, it has opened up an opportunity to start investing at the Series A level.
“When we first started doing pre-seed and seed, it was out of necessity,” Porras added. “We were not the biggest or the most seasoned fund, but were emerging managers. We understood that if we wanted to get into the best deals, we needed to come in early and be super aggressive with the value-added support. We honestly had to earn our pricing table.”
H20 is now armed with its second fund, of which they say is poised to reach $65 million. The firm already closed on $50 million toward that goal.
The fund is supported by G Squared Management Co.; Scott Shleifer, co-founder and partner of Tiger Global Management; Sebastián Mejía, co-founder and president of Rappi; Fabián Gómez, co-founder and CEO of Frubana; Roger Laughlin, co-founder of Kavak; and founders of iFood and Mercê do Bairro.
H20 is also backed by board or advisor members, including Laughlin; Stevon Darling, who led the VC team in LatAm for the IFC and is the chief investment officer of H20; Javier Villamizar, operating partner of SoftBank Vision Fund; and Ricardo Martínez Finger, co-founder of Jüsto supermarket.
Eight investments have already been made from the second fund, including into hiring and payments startup OnTop, which raised $20 million in Series A funding led by Tiger and SoftBank.
“We work very closely with Tiger so we've become the go-to fund for pre-seed investments in Latin America,” Lloreda said. “The reason why Tiger invested in H20 is because we have identified these early talents in companies, and we're now working very closely to co-invest with them in the region. We have been very good at not only investing, but bringing the best access to investors and advisors and establishing an operating framework around how H20 adds value — from talent acquisition to go-to-market planning to fundraising connections to strategic partnerships.”