Greg Mitchell

Managing Partner


April 2021


2021 Letter to investors

2021 Letter to investors

Dear Investors, Last year was one of action in the face of a crisis for both our portfolio companies and our investment team. Our portfolio companies reacted quickly to cut costs and extend the cash runway, allowing them to enter 2021 in good shape. Our investment team implemented a methodological approach to portfolio company support that has given us a playbook to replicate in the future. We maintained our consistent deal flow efforts and invested in companies that saw growth accelerate during 2020. I will begin this letter with a description of actions taken last year and a summary of portfolio performance. Then, I will outline our proven process of accompanying startup founders through the challenges of getting from seed stage to regional scale. Finally, I will turn to the state of venture capital in Peru and our expectations for this year.

Covid-19 action plan

Following lockdown in Peru on March 15, 2020, and shortly thereafter in the rest of Latin America, we built a Covid-19 strategic framework for portfolio company support based on industry impact and startup cash position. We enacted a customized support plan for each startup and a portfolio-wide cash management dashboard. All 11 companies that started the year in our portfolio were able to extend cash runway to at least 12 months through a combination of cost cutting and capital raising. Additionally, 6 companies reached breakeven at some point during the year and 7 raised an aggregate of $3.7 million, in each case at the same or a higher valuation compared to the fund’s entry point. Along with supporting the portfolio, we took a thoughtful look at our deal flow in order to understand how Covid-19 was affecting different sectors. This intentional effort resulted in an analysis of our entire investment process and three sector studies that have informed our investment decision-making over the last twelve months.

Portfolio performance

As of December 31st, 2020, AVP Seed Fund I had invested in 14 startups led by diverse and complementary founding teams. Our portfolio spans Latin America, with startups from Peru, Colombia, Mexico, Argentina and Chile. Seven of our portfolio companies have female co-founders. During 2020, we invested $250,000, including new investments in three startups and follow-on investments in one portfolio company. Our investments in 2020 were in three later stage startups, Descifra, Slang and Viapool, that all operate outside of Peru. We aim to support their growth of corporate clients in Peru and neighboring markets. We believe that promoting sound Environmental, Social, and Governance (ESG) policies across our portfolio will lead to better company performance and fund returns. In 2020, we developed, and began tracking, ESG metrics based on three main areas: (i) gender balance in founding teams, (ii) independent and diverse boards, and (iii) transparency of information. You can review our fund ESG metrics and status here. We would appreciate any feedback you have for us in this area as we seek to be at the forefront of ESG practices in the Latin American venture capital community.

As of December 2020, we had deployed $1,050,000, representing 55% of total committed capital. Below are some of the significant events from 2020: -Fitco became the first Latin American startup to participate in the prestigious Techstars Boulder accelerator program -Slik raised $250,000 from Vulcano, a Chile-based venture capital fund -The Quantum Talent team was selected as Endeavor Entrepreneurs -Quantum Talent raised $2.6 million in a Series A round led by Clout Capital. We participated in the round. -Rebus entered Techstars Sports Accelerator in Indianapolis, Indiana. Additionally, in the first quarter of 2021: -Rebus signed a term sheet from US-based investors in order to support the next phase of growth. -We invested in Lumu, a cybersecurity US-based startup led by proven founder, Ricardo Villadiego. The investment round was led by Softbank. Overall, our portfolio companies’ growth did not meet our pre-Covid-19 expectations. We remain confident that, over the long term, investing a portfolio of startups building digital solutions for the Latin American market will prove a sound investment strategy. We will be successful if our portfolio companies grow revenue, scale geographically and raise subsequent rounds of capital.

Our primary value proposition to startup founders is to be proactive in providing capital and hands-on support.

Portfolio support playbook

Our primary value proposition to startup founders is to be proactive in providing capital and hands-on support. As such, we have developed a portfolio playbook for hands-on seed stage investing in Latin American startups. The playbook involves leading investment rounds, enabling beneficial corporate governance practices, and helping portfolio companies raise the capital that will fuel growth and open new avenues for achieving success. Below are the steps of our seed stage investing playbook: Source: We proactively cultivate relationships with founders, partner with key regional accelerator programs, and implement an inclusive selection process. Lead: We seek to be a first institutional investor and lead seed rounds at attractive terms in order to achieve a multiplier effect with our investment. Support: We work with our investors and fund advisors to strengthen corporate governance, contribute to business development efforts, and promote effective fundraising strategies for each startup in the portfolio. Next Step: We make warm introductions to top global accelerator programs and next stage venture capital funds in order to increase each startup’s probability of success. To date, three portfolio companies, Culqi, Quantum Talent and Rebus, have completed each step of the playbook.

Venture capital trends and the year ahead

In 2020, Peru continued its rapid pace of venture capital investment. Total investment in startups with a significant part of their operations in Peru increased to from $21 million in 2019 to $46 million in 2020, with the large majority of the increase due to international investors [1]. Across Latin America, total investment in startups decreased slightly to $4.1 billion, although the overall strength of the technology sector remains [2]. Credicorp Capital expects the tech sector to “catch-up” to traditionally relevant sectors in the region and reach 35% of public equity markets by 2025 [3]. Within this context, we enter the last year of our investment period. This year, we expect to gain clarity on the potential performance of our portfolio as many companies are ramping-up growth and raising capital. We will focus our efforts on implementing our portfolio support playbook and capitalizing on new opportunities in order to support startups as they scale out of, or enter, Peru. This will extend our portfolio’s reach from Peru to the rest of Latin America and back.

Thank you for trusting us to invest behind the technology entrepreneurs that are building Latin America’s future. Saludos, Greg

[1] Reporte de Inversiones de Capital Emprendedor en Perú 2020, PECAP.
[2] Latin American Startups Had Record Venture Capital Deals in 2020, Bloomberg.
[3] Latin American Equities The Great Catch Up, Credicorp Capital Asset Management.