Greg Mitchell

Managing Partner


April 2022


2022 Letter to investors

2022 Letter to investors

Dear Investors, This past year brought new challenges as we faced the growing pains of a maturing startup portfolio. Our portfolio companies worked hard to raise capital in order to re-activate growth following the difficulties of 2020. In the end, we had some good news and some bad news. One highlight was the announcement of the acquisition of Viapool, the second exit of our portfolio. On the fund management side, we raised our standards by hiring KPMG as our auditor. This led to a more rigorous audit process than previous years. Thank you for participating by providing confirmatory information to KPMG. The audit was expensive, so we have been working to keep our costs down in other areas, and are still on track to reach our goal of investing 80% of the total fund size. I will begin this letter with a summary of aggregate portfolio performance and highlights from the last year. Then, I will mention some actions taken in fund governance. Finally, I will turn to the state venture capital in Latin America and what it means for our fund going forward.

Portfolio performance

As of December 31st, 2021, AVP Seed Fund I had invested in 17 startups led by diverse and complementary founding teams. Our portfolio spans Latin America, with startups from Peru, Colombia, Mexico, Argentina and Chile. While we have a sector agnostic approach, our companies mostly fit into three categories: future of work, fintech, and enterprise technology. We have invested $1,325,000, representing 69% of total committed capital. We have invested at an average Enterprise Value to Annualized Revenue multiple of 6.6x [1]. To date, on a weighted basis, our portfolio companies have grown revenue 1.5x since investment and achieved an average compound monthly growth rate of 2.0% [2]. The average hold period across the portfolio is 22 months. During 2021, we invested $275,000, including new investments in three startups and follow-on investments in two portfolio companies. Our new investments in 2021 were in two regional startups, Lumu and Hunty, and one Peru-only startup, Prestamype. Our investment in Prestamype got us back to our strength of leading seed stage rounds in Peru. We helped create a multiplier effect for Prestamype’s seed round by acting as an active lead investor. We invested alongside Inca Ventures and supported founders Carlos Ferreyros and Laure Schlesinger in raising funds from angel investors in Peru to reach a total round size of $800,000. This ability to price rounds and raise additional co-investment capital has allowed us to invest behind great founding teams that trust us.

Our investment in Prestamype got us back to our strength of leading seed stage rounds in Peru.

On the portfolio side, we have a few companies in our portfolio that have limited cash runway. These include our largest investments, Quantum Talent and Fitco, as well as some early investments, SeguroSimple and Somos Moto. These companies are pivoting and seeking new products, markets, and business models in order to achieve take-off growth. Below are some of the significant events from 2021: -Viapool signed an agreement to be acquired by Swvl, a global mobility company in emerging markets. -Slang raised a Series A round led by DILA Capital and ALIVE Ventures. This is our fund’s most significant subsequent round yet, and puts Slang in a solid position to grow in Brazil and Mexico. -Get on Board raised $1.1 million in seed funding from existing investors Fen Ventures and new investor 500 Luchadores III, at a valuation cap significantly above our investment.

Additionally, in the first quarter of 2022: -LQN raised $1.9 million from Colombia-based Pegasus Capital. -Hunty raised an additional $2 million from Cometa, a large Mexico-based venture capital fund. Below are some significant setbacks from 2021: -Clout Capital defaulted on its Series A investment in Quantum Talent, leaving the startup with an unexpected cash need of $900,000. This was a debilitating event for our fund’s largest investment. -Potential acquisition talks with three portfolio companies, one that had reached the due diligence phase, did not materialize. -Many portfolio companies failed to raise the capital they needed to execute their growth plans. The ones that did raise money spent more time fundraising than planned.

I am continually impressed by our founders’ ability to accomplish more with limited resources and re-energize their companies towards new paths to value creation.

We will have distributions in 2022 due to the Viapool exit. Going forward, our portfolio companies need to raise capital in order to grow fast and compete regionally. Raising capital has proven to be very hard, but I am continually impressed by our founders’ ability to accomplish more with limited resources and re-energize their companies towards new paths to value creation.

Venture capital trends and our positioning

In 2021, venture capital funding across Latin America reached a frenzied pace. LAVCA reported $15.7 billion in investments in Latin America in 2021, compared to $4.1 billion in 2020 and $4.9 billion in 2019. This large increase was not spread across all countries and startups equally. Between 2020 and 2021, funding increased $2.7 billion in Mexico and $1.1 billion in Colombia compared to a less than $100 million increase in Peru. At the seed stage, where we participate, funding in Mexico and Colombia has accelerated, while in Peru it has stagnated. The investment gap between Peru and its neighbors is widening.

These trends have, thus far, presented more challenges for our fund than opportunities. On the investment side, valuations have increased and it has been harder to source deals. On the portfolio side, none of our portfolio companies have been able to capture the investment dollars that are coming into Latin America from the United States. Additionally, our startups are faced with an entirely new challenge to regional expansion in the form of much better funded competitors. Within this context, we are finishing our investment period and focusing our efforts on portfolio support. Due to the low number of clear success cases for our portfolio over the past year, we still don’t have clarity on the potential performance of the fund. Our startups need to raise money in order to break out and compete. If a few of them can accomplish that this year, the fund will be in a good position. Thank you for trusting us to invest behind the technology entrepreneurs that are building Latin America’s future. Saludos, Greg

[1] Annualized revenue = Prior month revenue x 12.
[2] Revenue growth includes portfolio companies invested in during 2021.
[3] 2022 LAVCA Trends in Tech, LAVCA.