Greg Mitchell

Managing Partner


April 2020


2020 Letter to investors

2020 Letter to investors

Dear Investors, We started 2020 with a focus on dedicating time and resources to help portfolio companies grow. Now, we are doubling down to help them get through the current crisis. The impact of the Covid-19 pandemic on our portfolio will be significant and some startups may run out of cash. However, we remain confident that over the long term investing a portfolio of startups building digital solutions for Latin America will prove a sound investment strategy. I will begin this letter with an overview of the venture capital asset class in Latin America and potential fallout from Covid-19. Then, I will turn to our fund progress, portfolio support and plan for taking on the coming year.

Venture capital trends and Covid-19 fallout

Last year was a breakout year for the Peru startup ecosystem. Over $20 million was invested in startups, more than double 2018 [1]. Importantly, various international venture capital funds made their first investments in Peruvian startups. Across Latin America, more money is being invested in larger investment rounds. In the first half of 2019 alone, $2.6 billion was invested in startups in Latin America, surpassing the entire 2018 amount [2]. This upward trend will be put on pause as Covid-19 debilitates Latin American economies. Funds across the region will focus on contingency plans for current portfolio companies and make fewer investments [3]. In the event fund do invest in new startups, it will likely be smaller investment amounts at lower valuations [4]. This macro environment will put a strain on startups’ cash position and hinder their ability to raise capital at increasingly higher valuations. All in all, it will extend startups’ timelines to accelerate growth and achieve exits.

Fund Investments

AVP Seed Fund I has invested in 11 startups led by diverse and complementary founding teams. Six of our portfolio companies have female co-founders. Our portfolio spans Latin America, with startups from Peru, Colombia, Mexico, Argentina and Chile. We have carried out our plan to invest in startups that are building the tools of digital transformation in Latin America. This investment thesis has resulted in a portfolio organized across three verticals: (i) empowering small and medium enterprises, (ii) improving the job market and workplace, and (iii) facilitating financial inclusion. We have remained consistent in our plan to invest initial tickets of $50,000 and subsequently capitalize on opportunities to make follow-on investments. In 2019, we invested $600,000, including new investments in seven startups and follow-on investments in three portfolio companies. To date, we have deployed $800,000, representing 42% of total committed capital. We have invested at an average annualized revenue multiple of 6.3x [5].

We will be successful if our portfolio companies grow revenue, scale geographically and raise subsequent rounds of capital.

Performance of our portfolio companies

We will be successful if our portfolio companies grow revenue, scale geographically and raise subsequent rounds of capital. To date, on a weighted basis, our portfolio companies have grown revenue 1.4x since investment and achieved an average compound monthly growth rate of 3.9% [6]. Below are some of the significant events from 2019: -Our participation in Culqi was sold to BCP for a 40% gross return -Emptor began operations in Brazil and raised $250,000 from DILA Capital -Fitco became the first Latin American startup accepted to the prestigious Techstars Boulder accelerator program -Quantum Talent reached $1 million in annual recurring revenue -We made a write-down on our investment in SeguroSimple after the company raised capital at a lower valuation in order to extend its runway. Additionally, in the first quarter of 2020: -The Quantum Talent team was selected as Endeavor Entrepreneurs -Get on Board received investments from Fen Ventures and 500 Startups This year we have begun to send monthly portfolio emails to keep you updated on our progress and interaction with portfolio companies.

The year ahead

We have managed the fund in a way that permits us to move forward strongly, despite the economic recession. Our priority is to provide hands-on support in order to help portfolio founders navigate through the crisis and come out the other end in a position to thrive. First, we have developed a portfolio handbook that will include best practice toolkits. Second, we will make introductions to venture capital funds in order to help startups raise bridge rounds of capital and extend their cash runways. Third, our fund advisors will meet one-on-one and in group settings with founders to offer specific guidance. In addition, we will be selective with new startup investments. We continue to source attractive investment opportunities that fit within our investment criteria. Going forward, we will prioritize startups with proven market validation and the potential to grow given the rapid changes in our society. This will not be a high growth year for our portfolio of startups. However, we have invested behind outstanding leaders. They are working quickly to adjust and adapt. We will double down on our strategy to support them and find new startups that are using technology to solve problems in our region. Thank you for trusting us to invest behind the technology entrepreneurs that are building Latin America’s future. Saludos, Greg

[1] Reporte Capital Emprendedor en el Perú, PECAP.
[2] As Billions Flow Into Latin America, Its Startup Scene Scales, Mary Ann Azevedo, Crunchbase. [3] Status of the Latin American startup and venture capital ecosystems during the COVID-19 crisis, Diego Serebrisky. March 30th, 2020.
[4] This is how much harder it is to raise capital during a downturn. Collin West, Nihar Neelakanti, Gopinath Sundaramurthy. Kauffman Fellow Journal. March 27th, 2020.
[5] Annualized revenue = Prior month revenue x 12.
[6] Simple weighted average of each portfolio company’s compounded monthly revenue growth.