We recently announced the closing of our fourth fund for US$115M to invest in the best companies in the Spanish-speaking world. This is our promise.
With the closing of DILA IV, DILA is now one of Latin America’s largest and most active venture capital funds. We have been extremely lucky to have raised capital now, as well as in the past. Managing and investing capital comes with a lot of responsibility and must be managed with respect and humility.
2022 was a very tough and turbulent year for all markets. Inflation, supply chain issues, wars, political risks, and high interest rates made this a disastrous year for the financial industry. The public markets have taken very strong hits and those have been reflected in the private markets as well, and venture capital is no exception. We are dealing with a very challenging environment.
From a venture capital investment in Latin America perspective, we expect funding to remain below 2021 levels, 2022 was LatAm’s second-best year ever. 2022 surpassed 2020’s annual total for both deal count (1,019 vs. 578) and deal value (US$7.9 Bn vs. US$5.4 Bn). However, we have been seeing many lay-offs and bankruptcies and we know there will be many more companies announcing they will be closing. TechCrunch, LinkedIn and Twitter feeds will continue to be filled with bad news about startups and tech in Latin America.
This is not the news we were expecting nor is it the news we want for our portfolio companies, and we are going to have to remain patient, waiting for the best time to invest and exit. And yet, we know that the unwinding of an unhealthy and unsustainable growth at all costs/cheap capital environment was necessary and will be healthy in the long run. Here is why:
- Good companies, with good unit economics, and sane fundamentals, offering better products and services are going to remain in the market. There is still capital out there for those great businesses.
- Companies are now focusing on profitability, which will allow more sensible cost structures with clear paths to profitability even with much lower growth rates.
- The venture capital model assumes many of our investments will fail, and they will. This current situation has simply accelerated this process.
- Problems to be solved have not gone away: banking services and credit penetration, insurance needs, access to healthcare, access to quality education, amongst many others.
- VC funds across LatAm and the US have raised record amounts of capital, with US$5.7 Bn and US$298 Bn, respectively, of dry powder set to be deployed over the next few years.
So, with this context, this is OUR PROMISE:
To the founders of our portfolio companies:
- We promise to be an active partner and support you through the life of the investment.
- We promise to be very transparent and communicate openly.
- We promise to partner with you, not just invest. We will offer you and your company our network, which we have been constructing for the past 20 years.
- We promise to be there in the good and, very importantly, in the tough times.
To prospective portfolio company founders:
- We promise to review every company we receive. We ask that you understand that we receive more than 1,000 pitches per year, so we might not be able to answer all requests, but we will review all of the projects that approach us.
- We promise to be on time to meetings, always respectful of your time.
- We promise to analyze your businesses thoroughly. We promise to do so in a timely fashion and be very conscience of your precious time.
- If we do not invest, we promise to provide detailed feedback.
- If we look to invest, we promise to present terms and conditions that are fair, aligned with the market conditions, as well as the micro macroeconomic variables.
- Once we invest, we promise to align with your startup’s vision, we will do everything on our power to create more value than the dollars we bring to the table. We promise to serve as an authentic, objective sounding board for CEOs.
To our investors:
- We promise to invest in founders that truly believe in what they are doing. Our experiences have led us to believe that the secret to high performance in entrepreneurs is in the deep desire to direct their own lives, to extend and expand their abilities, and fill their life with purpose.
- We promise to to invest in diverse teams that are achieving these desires and passions through their companies. DILA looks for entrepreneurs who start a company because they see a problem they feel compelled to fix. DILA has noticed that there is an extra something going for a founder who starts with a mission. It leads to more tenacity, more passion, more feel for the product and market, and ultimately a higher probability of success.
- We promise to be diligent.
- We promise to invest in the founders that are insanely passionate about their idea. As an investor, you must measure how far a founder is willing to go.
- We promise to analyze trends, conduct research, and try to determine where certain sectors will or will not be in 10 or 20 years.
- We promise to go out and find the best companies in the market.
- We promise we will not stay behind our desks and wait for the deals to come to us, we promise to be in constant communication with incubators, accelerators, earlier-stage funds, and college programs, keeping our ears to the ground for the best and brightest startups.
- We promise not to gamble but rather to make calculated risks. We will try to project what kind of revenue and profitability a company can generate down the line. This means understanding growth and burn rates, cap tables, financial modeling, supply chain issues, and much more.
- We promise to invest only in companies we are confident about the market, the team, and the business model. We will invest in huge markets with innovative business models led by top-tier teams. We will invest only in companies that can become fund makers.
It has been 10 years since we started DILA and began investing venture capital in Latam and it has been the thrill of a lifetime. We have had ups and downs, but by far the best part of this journey has been the people we have met along the way. We want to take this opportunity to thank all of you: our investors, the founders we have invested in, the founders we have not, the people that have worked in DILA, our advisors, consultants, bankers, and most importantly our families that have supported us along the way.