Dear Investors, Last year, we invested additional capital in our best performing portfolio companies and made the fund’s final capital call. Our investment period ended in September and we finished the year having invested 78% of committed capital. Over the fund’s first five years, we have done the heavy-lifting of investing in, and supporting, our portfolio companies. After initially focusing on new investments, we then re-organized our team to support startups, first to manage cash through the Covid-19 pandemic, and then to raise subsequent rounds of capital. Now, we enter a new phase of the fund, as we transition from adding value to seeking opportunities for exits.

Going forward, we will be on the lookout for opportunities to return cash to investors. We have created a long term plan that includes prioritizing activities that impact fund returns and ensuring an adequate budget to cover fund expenses. This will allow us to maintain a sound operation until the end of the fund’s divestment period.

During 2022, we conducted a full re-branding of our management company, including a new name, logo, and website. This process allowed us to better define our thesis of unlocking the potential of relentless founders in Latin America. Through AVP Seed Fund I, we have acted as a catalyst for seed stage rounds and accompanied founders throughout their startup journeys. Our work starts with founders and extends across our broader network, allowing us to achieve success together. The new website explains this investment approach and highlights our portfolio companies. We invited you to read and share the stories on the website and look out for new ones each quarter. Recently, we fortified our team by naming Elizabeth Acuña as Partner. Elizabeth has been a mainstay for the fund since the beginning and has led some of our most successful investments. During 2022, the main governing bodies of the fund evolved. Harold Marcenaro and Nicolas Polar joined Juan Jose Cardenas on the Limited Partner Advisory Committee (Comité de Vigilancia). Thank you to Jenny Esaine and Jose Garcia Herz for your five years of dedication to the committee! Jorge Kuryla joined the Investment Committee, adding experience as a private equity investor to help us manage exit options. In December, we held our end of the year event, where we were got back together in person with investors and founders. After a long, rigorous, audit for the 2020 fiscal year, we quickly completed the 2021 audit to get back on track. For the 2021 exercise, we were able to address all the issues raised in the previous exercises and complete the audit with no observations. We now have two years of audited financial statements from KPMG.

Last year was not a good year for our fund’s performance. We wrote-down our investment in Quantum Talent did not have an investment that achieved a significant increase in value. On a positive note, we recently made the second distribution of fund proceeds following the sale of Viapool. This puts our Distributions to Paid-In Capital at 0.1x [1]. While we still have a long way to go to achieve a healthy risk-adjusted return, this distribution marks an important milestone: two profitable exits within the fund’s first five years. Below are some of the highlights from 2022: -We made distributions from the sale of Viapool following the partial sale of the company. -Lumu raised a round from existing investors, and brought on Forgepoint Capital as a new investor. We participated with a $25,000 follow-on investment. Forgepoint is a leading cybersecurity and infrastructure software fund led by two Peruvian venture capital investors, Alberto Yépez and Leoncio Casusol. -Prestamype raised a bridge round in which Salkantay Ventures became the company’s largest investor. We helped set the terms for the round and participated with a follow-on investment of $100,000. This round will provide cash as the company transitions to balance sheet lending. -Hunty raised an investment round led by Cometa, a Mexico-based venture capital fund. We participated with a $50,000 follow-on investment Below are some significant setbacks from 2022: -Quantum Talent was sold to Wonolo for cash consideration in an acquihire. Members of the Quantum Talent team were given the opportunity to work for Wonolo. The company finalized a dissolution process in December. -Seguro Simple raised needed capital at a significantly reduced valuation, further diluting our position. -Multiple startups in our portfolio made difficult reductions in headcount in order to conserve cash.

As we take stock of the portfolio, we can divide the fund into four categories based on: (i) our ability to affect the outcome, and (ii) the startup’s probability of raising subsequent capital or achieving an exit. The first category includes companies where we serve on the board and in which we hold the investments at relatively large estimated unrealized values.We will continue to actively support these startups. The second category includes companies that are performing well, although we are minor investors. We will be following them closely and evaluating opportunities to exit our positions. The third portfolio category includes startups where we can offer support on an as-needed basis. Finally, in the fourth category are those startups that are underperforming and where we have minimal ability to impact returns. Over the remaining years of the fund, we will prioritize our portfolio support efforts, and focus on those companies where we can make the most impact.

The venture investment climate in Latin America and Peru is bleak. Startup funding in Latin America 2022 was $7.8 billion, a 51% decline from 2021 [2]. The recent failure of Silicon Valley Bank may serve to further slow down venture investments. Locally in Peru, the uncertain political situation has led investors to look outside the country for investment opportunities. The result is a lack of options for startups to raise money, compelling them to conserve cash and lower growth targets. This context, along with the advanced timeline of our fund, lead us to encourage our portfolio companies to grow revenue and achieve exits, rather than raise venture capital money. The fund’s two exits are a validation that strategic exit options exist in Latin America.

Going forward, we have taken steps to ensure that the necessary fund operations are provided for, and portfolio support will occur when it can positively impact returns and distributions. We maintain our belief that great things can happen when local capital works together to unlock the potential of the startup founders who are building the region’s future. Thank you for trusting us to invest behind the technology entrepreneurs that are building Latin America’s future. Saludos, Greg