August 19, 2025 • 58 mins
In this episode, Joel Palathinkal and Carlos Torres explore the venture capital scene in Mexico and Latin America. Carlos discusses his path into VC and founding AMG Block, emphasizing its global reach. They cover the shift from the ICO boom to a traditional VC fund, fundraising strategies, and the LP ecosystem. Topics include tax considerations, emerging vs. established managers, and shared challenges. Carlos offers insights on deal flow, key sectors in Mexican FinTech, and AMG's focus on NFTs, collectibles, and DeFi. The episode wraps up with advice for new fund managers and the importance of in-person LP interactions in Latin American finance.
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(00:00):
The reality is that the venture landscape inMexico and Latin America is still being
developed, right?
I mean, it's not as a developed ecosystem as itis in The US.
I mean, The US, every year you have new funds.
I think the statistics are around 200 new fundsevery year get funded, right?
(00:21):
Mean, in Mexico alone, we have probably lessthan 50 VCs investing across the entire nation
in this trend stages.
Welcome to The Investor, a podcast where I,Joel Palafinkel, your host, dives deep into the
minds of the world's most influentialinstitutional investors.
In each episode, we sit down with an investorto hear about their journeys and how global
(00:45):
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
I want to introduce Carlos Torres.
He is the GP at AMG Block and met Carlosthrough a couple other mutual connections.
And he met me earlier in December when Idecided to launch an accelerator for fund
(01:09):
managers.
So initially problem one is it's hard to get ajob in venture.
So getting the right skills, getting hands onknowledge of what to look for in a founder and
actually supporting different venture funds andfinding deals, sourcing screening, and then
(01:32):
taking the deal all the way to execution.
Those skills, those hard skills and soft skillsare part of the pathways to kind of get into
venture.
And it's tough because it's a chicken and egg.
I mean, people don't want to give youexperience if you don't have the experience
already.
They expect you to be the top candidate andalready have the skills.
So that's one of the problems.
(01:54):
I'd say the same thing is relevant for privateequity as well.
But the other problem is, you want to start afund, and this could come from two pieces.
You could just be in venture already and youhave a good experience in venture, you work at
either a mid sized fund or a big fund, and youjust feel that you want to do something in your
(02:18):
own direction.
So maybe you're at a really amazing fund, a lotof assets under management, great leadership,
but you just want to build your ownentrepreneurial platform to invest in maybe a
smaller capacity as an emerging manager or justgo ahead and go institutional.
(02:41):
But I think that's one piece, that's one dropoff point.
And then there's people that come from allwalks of life.
You could have been a founder before thatexited and then you want to start a fund.
So I think the perfect example is the weekendfund.
So the guy from, I forgot his name.
Ryan.
Ryan Hoover from Product Hunt.
(03:04):
Product company, I think they sold to AngelListand then started the weekend fun.
I actually got to meet him and spend some time
with him.
I was trying to get him to pop in for one ofour sessions, but it's great.
That's kind of the pivot.
So Carlos, you're in Mexico, so that's reallyanother piece to it.
How is this ecosystem growing cross border?
(03:26):
One thing that I'm proud of with our firstcohort was that we were completely global.
We had a couple of fund managers from Mexico,from Singapore, from Europe.
We had one or two LPs supporting us fromEurope.
So before we jump into emerging managers, howto start a fund, the trends, let's start with
(03:48):
you.
So let's start with your background.
Where did you start with your career?
And tell us about Mexico and then how youstarted AMG Block.
And then maybe we can navigate into why youhave your certain investment focus and what
your vision is for taking the fund to the nextstage in its journey.
(04:12):
Yeah, thanks Joel for having me, glad to behere.
So I actually started in corporate banking,Started in HSBC here in Mexico working for
large corporations, managing all the banks,products and services.
So that gave me first hand experience on howsort of the banking industry in a country like
(04:37):
Mexico works.
At the time, you know, we're focused onproviding services to companies that had a
specific range of revenue, right?
So initially right out of the bag, we weresegmenting the type of customers that we're
actually able to provide products and services.
Then I continued my journey more on theinvestment side for a fun focused on
(05:04):
sustainable investments, particularly in energyand water projects here in Mexico.
That you know gave me an opportunity to divedeeper into the inner workings and how a
different alternative asset managing firmworks.
(05:25):
I continued my journey working again in as asenior relationship manager at a regional bank
here in Mexico that is currently one of theleading digital adopters in the Mexican banking
system.
Worked, it's a bank based out of the North Partof Mexico and they were expanding into Mexico
(05:51):
City.
That gave me an opportunity to expand obviouslythe bank's presence in a different region and
focus on providing loans primarily to corporateclients.
Around the time I was thinking about my nextstep in my professional career, so I decided to
(06:13):
do my MBA.
I did a one year MBA in Boston and that's whenI decided to jump into the venture landscape.
After my one year MBA, I worked for the venturearm of a family office in Boston that wanted to
tap into the startup community.
So I did that for about a year and then Ireturned to Mexico and joined as investor and
(06:38):
director of finance for a fintech startup thatwas focused on providing loans to the
underserved SME market here in Mexico.
And that's when I realized that there is stilla huge gap ecosystem in Mexico and in Latin
America as a whole.
That's when I decided to focus again on theinvestment side of the equation and launch the
(07:03):
fund.
At the time we were looking at alternativemeans of fundraising.
So we came across this whole ICO boom, theinitial coin offerings and the application of
technology in this alternative asset class andthe evolution of the ICOs into a regulated
(07:27):
market through the what's called securitytokens or digital tokens really cut our
attention.
So we started looking at the space and theapplication of blockchain in venture as a whole
so initially what we wanted to do was tokenizethe fund right so that means providing our
investors with a digital representation oftheir investment in the fund by backed by the
(07:51):
portfolio of the fund itself.
But you know we came to realize that the wewere a little too early I'd say on the industry
the infrastructure required to do these wasstill being developed.
A big part of why we were doing this was toactually provide liquidity to our investors in
the regulated secondary market, is somethingthat is still being developed.
(08:15):
So we decided to pivot a bit and do a more of atraditional VC fund focused right now on seed
stage investment in Mexico and Latin America.
Obviously fintech you know encompassesdifferent business verticals so we're seeing
solutions being built around payments, lending,wealth management, blockchain and crypto is
(08:39):
still one of our industry verticals.
Intritech, some of the exciting opportunitieshere.
And the reality is that the venture landscapein Mexico and Latin America is still being
developed.
I mean, it's not as developed ecosystem as itis in The US.
(09:00):
I mean, The US every year you have new funds.
Think the statistics are around 200 new fundsevery year get funded, right?
Mean, Mexico alone, we have probably less than50 VCs investing across the entire nation in
this different stages.
Do you feel that gives you an advantage fordeal flow because you're not competing so much
on the companies because there's only a fewfunds?
(09:23):
Yeah, I think that's an advantage having aspecific thesis as well, right?
I mean, most funds have a more of a generalthesis.
They invest in e commerce, healthcare.
Most of them invest also in fintech, but theydon't have a solely a fintech specific focus.
So that I think gives us a bit of an edge.
(09:44):
Mean we've been obviously through the hurdles,we understand the opportunities and challenges
because we went through them firsthand, So thatis, I'd say, obviously a competitive advantage.
But the way we see it more than compete fordeal flows, we see it more as collaboration
opportunities, I mean, there aren't that manyfunds investing in these type of opportunities.
(10:08):
So the more the merrier, right?
Yeah.
So it's definitely the right time to be in thespace.
The opportunities are there.
The innovation is there.
All we need is more capital to continue to begoing in some of these great opportunities.
Yeah and how is the LP ecosystem?
Are there single family offices?
(10:30):
Are they interested in investing in emergingmanagers or would they rather just go direct
into deals and co invest?
And how has that conversation been?
Because sometimes, last thing you want is tojust be a funnel for co investing and you want
to really encourage people to invest in thefund and then allow co investment rights.
(10:53):
But what is the culture in Mexico and LatinAmerica as far as the GP and LP ecosystem
considering there's only like 50 funds?
Yeah, it's totally a bit of a challenge, right?
Mean, there's still, I'd say, an educationalgap in understanding on the asset class, the
industry, the technology.
(11:14):
I mean, we're starting to see success cases inLATAM as a whole.
Brazil is a more developed venture ecosystem,but outside Brazil, we're just starting to see
the results of venture as an investmentstrategy, right?
So when we started out reaching out to LPs inMexico, we found this educational gap, right?
(11:36):
LPs want more traditional investments or brickand mortar investments or do direct deals.
So that's why we decided to do more of aninternational strategy in terms of fundraising
and attract international investors with abetter understanding on the asset class, the
potential of FinTech in a region like LatinAmerica, and the one that's happening to an
(12:00):
underserved region, Whilst us providing theground support, the understanding on the market
dynamics, the regulatory landscape, theopportunities and challenges, and that's part
of what we've been doing so far.
Yeah and I've done some cross borderinvestments.
There's always tax considerations.
(12:21):
So what should an international LP know aboutinvesting in Mexico or investing in funds?
Are there tax best practices that they shouldthink about or is it pretty straightforward?
Guess, double taxation or?
Yeah, I mean, Mexico has tax treaties with alot of countries.
(12:41):
So there are ways around that, but what we aredoing is setting up the fund actually in The
US.
In The US, yeah.
Obviously, it's following the SEC's guidelinesand everything, but you know, it's structure
where LPs are familiar with how So that works,we want to simplify obviously the investment
(13:02):
opportunity for LPs as well.
And in terms of the type of investments, nowit's very common for international or Latin
American startups to actually set up a C Corpin Delaware because they want to eventually
attract international investors and this typeof legal structure is the one that they're more
(13:23):
familiar with.
Yeah, some of them even set up the, there's oneinvestment that I made where they set it up so
easy where the wire was actually a domesticwire.
So it's like a American wire.
So I think also just using the typical standardtech stack that everybody's familiar with.
(13:43):
You got First Republic Bank, you got Carta andthen you got whatever the premier lawyer is to
use, but the ones that everybody uses.
Especially if you're using the standard bankthat most funds use, that also helps as well
because then it's kind of okay cool.
It's a typical VC stack when it comes to fundadmin and when it comes to the bank and then it
(14:09):
also comes down to just the accounting andreconciliation and all that.
Yeah and that's something that we also leverageon, right?
This evolution of service providers aroundventure as a whole, right?
I mean, if we wanted to work with the card ofMexico, it doesn't really exist as of today, So
(14:33):
these, I'd say services that a firm like Cartaprovides where they're even getting involved at
the formation of the fund, right?
They have these pre closed services and justhelp you along the way.
That's something that's very useful formanagers that wanna set up in The U.
(14:54):
S.
And that have a might be a little differentinvestment strategy, right?
They've been very helpful, I mean, in terms ofconnecting us with other service providers that
they have experience working with.
And there's a growing interest in emergingmarkets or in emerging fund managers or first
(15:16):
time fund managers, right?
I mean, the numbers don't lie.
Typically, first time fund managers tend tooutperform more established managers because
it's all in for us, right?
I mean, is our opportunity to prove ourselves.
So it's definitely something that, you know,this type of evolution of the venture landscape
(15:41):
in a region like The US, we try to leverage onthat as well.
Yeah, no, I mean, historically there's a lot ofresearch and I've done a lot of analysis on the
data and the emerging managers have tooutperform to survive.
I mean, you have to be really pushing theenvelope while you got somebody else that's out
(16:07):
of pension funds and they're going to still getto 11% at the end of the year where for you to
be relevant and to still stay there, you haveto kind of still push the envelope and you have
to be more scrappy.
There's no communications team, there's nomarketing team, you're doing everything on
(16:28):
LinkedIn posts and Twitter and you're buildingthe logo yourself, you're using Sketch or
something to create your own logo.
So, you really have to kind of be creative andentrepreneurial.
I mean, I've been looking at some LP updatesand you see some of that feedback.
It's kind of like, look, we're working longhours, we're really being resourceful.
(16:53):
So it is a startup essentially, right?
It does take the agility to kind of go throughthat.
And you're balancing different aspects of theprocess, the cycle, right?
Because you could be fundraising, diligencing acompany, and then managing some legal or fund
(17:15):
admin or accounting mistake at the same time.
And then maybe getting ready for a podcast.
So you're really doing all of that plus havingnow two kids and being married.
And it's not only you, it's your family that'salso kind of emotionally supporting you as well
(17:36):
because they're kind of on that journey.
And that's what I love about my emergingmanager program is because I'm also an emerging
manager.
So I'm essentially on the same ride with youguys, building something really from nothing
when we first started.
So I think when you can kind of have at leastcommunity, it's like a support system that
(17:57):
helps that we feel like you're not alone.
Yeah, no, definitely.
I it's something that it's not talked aboutpublicly.
I mean, oftentimes when people think aboutventure investors, they think like you just
appear out of Exactly.
You're rich, you already have the capital tocommit.
We actually go, you know, we also have to goout and fundraise.
We go through the same, you know, ups and downsas an entrepreneur does, right?
(18:21):
So this type of support.
And that's something, a big shout out to you,Joel, for putting this program together.
It's something that we, with our strategy,really appreciate, right, as an opportunity to
connect with others in the venture landscape,like you said, globally, and be able to connect
(18:45):
with potential peers or other serviceproviders.
We try to learn from more developed ventureecosystems because there isn't a lot out there
on setting up a fund.
I mean, there's a lot of information about thestartup journey, but not a lot about fund
journey itself.
I mean, I appreciated about you Carlos is, andthis is what I think is really important about
(19:10):
the community, when you're in a cohort, I'vebeen studying this a lot because I got accepted
into this program.
There's this new program for teachers and it'skind of like online teachers.
And what you realize is when you have a cohort,you have a little more of a sense of urgency.
(19:33):
So my other program, it's obviously yourprogram, so that gives people time to breathe
and absorb the content and learn and take theirtime, which makes sense, because private equity
in VC, understanding the hard skills and thenreally getting enough practice attempts of
sourcing deals, getting feedback, that takestime, right?
(19:58):
When you have like eight weeks, have tomaximize those eight weeks.
So you're kind of forced to make sure you don'tmiss a session.
And I think the urgency of that and also thetime crunch makes you absorb content.
But I think along with that too, what Iappreciate from you is you'll come up with some
(20:20):
article or some other program that has somereally helpful content that maybe we didn't
find.
So I think just storing that somehow or I'mgonna actually create a library to store all of
these links that we have, but that's what youget from the community.
Because somebody was searching something, theyfound something and then they share it.
(20:41):
Just, if you did it on your own, you'd probablyfind stuff, but you won't get everything.
You'll find the things that you look at, butgetting it from other people is always going be
kind of a collective anthology of all thesedifferent helpful artifacts that you can
collect.
I mean there's a lot of really helpful stuff onthe internet I would say.
(21:02):
I'd say a lot of this stuff is free, but thechallenge is making sense of it.
And like having somebody really explain what itmeans because sometimes it's hard to digest and
sometimes it's just too much.
It's just too much content for you tosynthesize.
But if you can kind of be in a community or agroup where maybe there's an LP that can
(21:25):
explain that to you more clearly, then I thinkit's helpful.
Yeah.
And I mean, it's not only that.
Mean, fact that you know for this first cohortyou're able to you know openly talk about the
challenges that everyone has been going throughand understand that you're not the only one
going through the same, right?
(21:46):
Yeah.
I was talking to John the other day and we havepretty much the same problems, right?
I mean, we're setting up weekly calls with LPsand then at the last minute they cancel or they
at the last minute they, you know, for somereason or So not you think you're the only one
(22:08):
going through that, but no, there's others outthere and being able to share that is
definitely helpful as well.
Yeah, no, I agree.
So tell me a little more, switching gears here,tell me about the VC system in Mexico.
So you're saying there's only 50 funds.
So where do you guys find deals?
(22:28):
Do you guys have accelerators?
Do you guys have demo days?
Do they have like a Y Combinator in Mexico orlike an SOSV in Mexico?
And when you talk about FinTech and I spenttime with Anna as well, so she kind of gives me
some insights.
She was on our show also, but just tell meabout the ecosystem.
(22:49):
I mean, what is like the next big sector tofocus on?
Guess what part of FinTech is really growingand scaling quickly in Mexico?
Yeah, so I mean, terms of deal flow, mean, forus, we have a different strategy set in place.
(23:13):
We love connecting with other investors in thelandscape.
I mean, Anna has been a great supporter.
We talk on a regular basis because she and Iwere both solo GPs, right?
So that particular pathway is another foranother topic some other day, but we tend to
(23:38):
share some beautiful opportunities there.
There are some accelerators in Mexico, 500startups this year, Mass Challenge has some
presence here, Techstars has started to lookinto Mexico.
There's a Spanish one called Fino Vista Focussolely on FinTech.
FinTech,
yeah.
(23:59):
But I mean, the opportunities are pretty mucheverywhere.
Mean, some of the exciting sectors that we'retaking closer look at are obviously payments.
When you look at the remittance market thatrepresents a huge opportunity.
The US and Mexico corridor is one of thebiggest in the world but it's still an
efficient process, right?
(24:19):
I mean, the average transaction there is around$300 and the commissions are eight to 10%,
right?
So technology is going to definitely play arole in how these markets evolve.
Lending, believe it or not, is a hugeopportunity.
Some of the biggest fintech companies in Mexicoright now are focused on lending because it
(24:40):
represents a huge opportunity, right?
I mean, when you look at Mexico's businesscomposition, 98% are SMEs right and they
represent over 40% of the GDP they generatemore than 70% of the jobs in the country but
they're being underserved by the traditionalbanking system and when you look at the banking
system in Mexico, know it's 70% or more isconcentrated on five banks right so there's not
(25:09):
a lot of options for lending or alternativemeans of funding for SMEs And that's definitely
a huge opportunity in the space.
Wealth management solutions, being able toinvest not only in the Mexican public markets,
but in other more developed public markets.
(25:30):
That's another interesting opportunity.
We don't have such a dynamic public markets asThe US, right?
I mean, to give you an idea, last year we hadan IPO, but before that, the last IPO was two
years before.
So these type of opportunities to invest in thepublic markets with an international focus
(25:53):
represents a huge opportunity as well.
I mean insurance, a huge market as well.
I'd say every business vertical has some hugepotential, particularly in a region like Latin
America, right?
When you look at the statistics where 50% ofthe population is still unbanked but mobile
(26:19):
penetration is above 70%.
We have a growing millennial generation so thisdigital solutions or tech solutions is
something that's going to disrupt thetraditional finance industry.
The way we look at it, mean you know marketparticipants have to look at technology to
(26:42):
actually solve problems.
So there's definitely an opportunity there andthat's our current focus.
Yeah and tell me about, this could just begeneral information, but just observations when
sitting on the other side at a family office,how has your perspective changed when you were
(27:06):
at a family office and now you're speaking tofamilies?
How do you think that helped you maybecommunicate and maybe help educate families?
I'd say one example I have is you know some ofthe families that had no venture experience
that I used to co invest with, they didn'tunderstand that venture is an illiquid asset.
(27:28):
They're like what do you mean I can't sell myshares?
I'm like, yeah, maybe on the secondary marketbut there has to be buyers and sellers.
So I think the first education and expectationmanagement of illiquidity is important, but
that's just something that I've seen.
(27:50):
But I guess, how has your perspective changed?
Being at an essentially probably an allocator,but now you're talking allocators.
And I guess what do they care about?
Some of the allocators and what do you thinkcauses some miscommunication with the interest
versus what you're offering them?
(28:13):
Yeah, I think what they care about isgenerational wealth, right, for family office,
able to provide for future generations.
And that's where the educational piece comes inhandy, mean, able to diversify across different
asset classes, whether it's a public market,real estate, venture.
(28:37):
Now, we have institutional money coming intocrypto or DeFi solutions, which, you know, is
definitely something that we're excited about.
But it's always about, I'd say, you know, thisgenerating trust, right, with this type of
allocators in the space.
(28:57):
I mean, they're going to be around for not infund one, right?
I mean, typically these type of investors aregoing to be with you for longer than the first
fund, right?
I mean, typically a VC fund has a ten yearduration, but you want to go out and raise fund
(29:18):
two in a matter of years.
So being able to provide value and opportunityto this type of LPs is something that I'd say
they're always looking for, right?
Co investment opportunities, obviously, andknow do what you set out to do right I mean if
I say I'm going to invest in fintech andtomorrow I invest in healthcare then I'm not
(29:42):
saying what I promised them I was going to doright so sure it's definitely interesting being
on both sides of the table.
But I'd say the process is very similar.
At the end of the day, for fund managers,they're investing in the team, The person or
the team that's going to be managing the money.
(30:05):
They're focused on the opportunity, they'refocused on the timing.
So, you know, some of the qualities that us asventure capitals look for in startups, It's the
same process for LPs looking into fund managersas well.
So yeah, that's the way I look at it right now.
(30:26):
And then when it comes to crypto, are you alsoinvesting in blockchain companies or are you
mainly focusing on fintech now?
So we see blockchain and crypto as a businessvertical within fintech, right?
I mean, particularly in emerging markets wherethere is corruption, there's lack of
transparency, there's financial inefficiencies,believe blockchain is one of the technologies
(30:49):
that's gonna, you know, disrupt the traditionalfinance industry.
So it's a core part of our thesis.
We don't do token investments, right?
So we do equity investments.
We look at, the application of blockchain andhow it's solving problems within the financial
market.
Yeah, it's within our thesis as a businessvertical of fintech as well.
(31:13):
And this is an outside question, but what doesAMG stand for?
Yeah, when we started out with thistokenization of the fund, what we want to do is
monetize assets.
So AMG actually stands for assets monetizedglobally through blockchain, It's sort of the
(31:40):
name that we stood by because we do believethat in the medium to long term, tokenizing
assets is going to be a big part of thefinancial infrastructure and that's why AMG
comes from.
Well, what about tokenizing of collectibleslike NFTs?
Is that something you guys are interested in aswell because that essentially could be some
(32:05):
type of store of value.
You have a super valuable unique asset which isa artifact and that is obviously non fungible
and then you can't really copy it, it's superunique.
So that is valuable because of scarcity and itsuniqueness.
(32:28):
So are you guys excited about that?
I mean, I find it to be a very interestingspace, obviously.
It's something that I'm looking at.
We haven't seen particularly in our region, ourtarget region, projects of this nature.
(32:50):
It's something that, I mean, as a fund we wouldinvest in an NFT, right?
Because that's not a particularly equityinvestment per se in a company building
something, right?
But if it's a company providing theinfrastructure required to issue NFTs, that's
something that we would be interested ininvesting, right?
(33:12):
Or maybe like an exchange for NFTs or just theunderlying infrastructure to actually build it,
right?
Exactly.
Exactly.
And for instance, now that we're on sort of theblockchain and crypto space, this whole DeFi
evolution, right, which stands fordecentralized finance, it's something that
(33:33):
we're very excited about, particularly becauseof the macroeconomic environment in regions
like Latin America, countries like Argentina,Venezuela.
They look at these type of solutions foralternative means of sort of value or lending
solutions or even payment solutions, right?
So a lot of it is being built, unfortunately,outside of Latin America, but users come from
(33:59):
Latin America.
So we've started to see, you know,interestingly enough for us is some
international companies that started out in,say, The US or UK, and that want to tap into
Latin America.
So that falls also within our thesis, right?
Being able to have someone on the ground,helping them, expanding to these countries or
(34:25):
regions, that's something that we're interestedin doing as well, right?
Yeah.
And FinTech by nature is global, right?
So we can't afford to close our eyes to what'shappening outside of our region, but we want to
do or provide, you know, local partnership withthis type of startups and that's something that
(34:48):
we've seen a lot recently.
So walk me through an example, So walk methrough the problem and you know how DeFi can
solve it especially in Latin America.
So from my understanding, the issue issometimes, in America, if you have $10,000 in
Bank of America, that will still be there.
But from my understanding with corruption andsometimes some countries, that $10,000 the
(35:15):
government could just block your account forwhatever reason.
Is that true or am I exaggerating like how thepolitical conditions can be in some countries,
maybe not Mexico but like Latin America or likein Venezuela, right?
Some people just couldn't get access to theirbank accounts and there could be money in
there.
Then what you're saying that DeFi does ispeople can just have almost like a bank that is
(35:42):
off of the banking rails.
Is that correct?
And is the magnitude of the issue is that badwhere people's banks just get closed off where
they can't get access?
I mean closed off Temporary
amount of time?
Yeah, it could be.
Mean, that doesn't happen a lot in Mexico anddepending obviously on the sector that you're
(36:04):
operating or what you do, you know, if youcomply with all the regulations that won't
happen, right?
I mean, unless you're doing something illegal.
But yeah, I mean, at the end of the day, thesetype of solutions provide something that the
traditional banking system doesn't, right?
So being able to you know send money from TheU.
(36:30):
S.
To Venezuela you can send through thetraditional banking system right.
I mean there are solutions for instance wherepeople Venezuelans in The U.
S.
Buy through crypto goods for their families inVenezuela.
So there's definitely interesting cases in
what I've also seen is sometimes there'ssynthetic tokens, right?
(36:55):
So they have a store of value that's the sameas a dollar, but it's actually like converted
into a different currency that's like syntheticand that functions as the same value.
I'm not sure.
Mean, it can get kind of complicated but isthat also a use case kind of like just
converting a currency into like a syntheticdollar or a stable coin?
(37:18):
Yeah I think you have to get past theregulations in your home countries.
I mean at the end of the day, our regulationsstill plays a huge role in the asset class.
But I mean, to be honest, there's so much goingon like in the crypto space that you have to
fully commit.
I mean we would have to have a solid cryptofund focus if we wanted to only invest in this
(37:44):
type of solutions, right.
That's why we have more of a broad investmentthesis because we understand other pain points
in the industry as well, not only what cryptocan provide.
There's so much going on that you'd have to bethere 20 fourseven, three sixty five because
(38:04):
crypto doesn't close.
I mean, there's not a nine to five schedule forcrypto.
All the innovation going on and it's definitelysomething to look at continuously.
Switching
gears, back to the emerging manager side, juststarting the fund, thinking about your thesis,
(38:26):
can you share a couple pieces of advice fromwhat you've learned in the last year on how to
envision the fund, how to structure the fund,how do you decide if you want to start with a
$5,000,000 or a $10,000,000 fund and how manyinvestments you want to do?
Did you put together a fund model and anyadvice on kind of a framework for that?
(38:49):
And then the other piece is maybe somelearnings that you learned from LP
relationships.
And I know you and I talk about this a lot, butany just takeaways or learnings maybe like,
hey, you know what?
I can tell this person is a waste of time.
They're not allocating the funds.
So, hey, I'm not gonna burn time taking a call.
(39:10):
So any other just learnings like that thatyou're like, wow, this is a good mental note to
keep in mind as I keep fundraising.
Yeah, so two things like structuring the fund,thinking about like where you start and then
maybe some fundraising tips or best practicesor what you learned.
(39:31):
Yeah, so I mean for the fund structure, I thinkit depends on different factors, I mean what
stage are you investing in?
What industry you're investing in?
So for us, it's a little different, right?
Because we're focused on seed stage investment,right?
But seed stage investment in Mexico isdifferent than in The U.
(39:55):
S, right?
Mean, for us, our average ticket size rangesfrom 250,000 on average, which that gives us
startup runway of at least a year, right?
In a region like Latin America, when The US,that's used to pretty much cover the legal So
(40:16):
that type of thinking also played into how westructured our fund.
So you have to think about, I mean, how manypartners do you have as well?
So for instance, MSOGP.
So if I want to take a hands on approach and beon a board on every company that we invest in,
then there's only so much number of investmentsthat we can actually make.
(40:39):
If we want to take more of a hands offapproach, then we can do obviously more
investments.
We have more of a hands on approach.
So our portfolio construction strategy wasbuilt around doing 15 investments, around
250,000 reserved 250,000 for follow on.
So that know the math were raised a fund of10,000,000 right.
(41:06):
I think
we went through an exercise, I think in likeweek three and was getting the reserve like, I
think like 60% for follow on.
And I was like, that's big, you're betting likehalf the fund to follow on, which is great.
But look, that's their strategy.
(41:27):
Who am I to say anything?
Yeah, you have to think through all of thosedecisions.
Maybe you don't want to follow on.
Like funds like first round, only invest in thefirst, they're like early investor and then
they don't do anything else.
And I don't often follow on either.
(41:48):
So I think maybe answering the question of likefor all of those things like why?
And then I think another big piece is how muchmoney do you think you can actually raise?
So if you're gonna do like portfolioconstruction for like $100,000,000 fund and
it's your first fund, maybe you're reallyconnected and you're able to and that's great
(42:11):
but I guess a good question is do I think I canactually raise that money in nineteen months?
So one quick math tip that someone once gave meis consider your closest friends, people that
you used to work with, how much are you able toraise from them today?
(42:36):
Right.
Yeah.
Let's say if you were able to raise 1,000,000then multiply that by 10 that's your sort of
target initial fund size.
So if you for instance have friends that areable to commit right now 2,000,000 then you
could potentially go out and raise 20,000,000.
So think about
(42:56):
also That's pretty interesting.
If you Because you're able to do a
Those are your tight knit friends and thenyou're thinking that those friends or those
people might have extended networks that couldprobably make warm intros to you.
Exactly, exactly.
Got it, that makes sense.
Makes sense.
But it's not always your five
(43:18):
friends, you just gotta find your five friendsthat'll add up to 2,000,000, right?
Exactly.
Yeah.
Exactly.
But I think going back to your question on howyou build the fund, mean, are a lot of factors
playing in.
If going back to what you said, if we didn'tplan on doing follow on investments, then we'll
probably do initial check size of around 500 kswhich could potentially be pre series a right.
(43:41):
So we're no longer investing at seed states.
So it all depends on all these differentfactors.
Eventually part of our strategy is to go outand have a bigger fundraise, bringing
additional partners because we want to you knowcontinue focusing on seed stage with a hands on
approach right, but we need more peopleobviously to handle that.
(44:03):
So yeah, there are a lot of, I'd say, factorsthat play into how you build out your own fund
and your portfolio construction strategy.
And it's something that LPs are going to ask, Imean, they want to know what you're focused on,
your average ticket size, follow oninvestments, co investments, maybe setting SPVs
for follow on or co investment opportunities.
(44:25):
So yeah, there are a lot of factors playing in.
And going back to your second question onlearnings about pitching to LP.
It's always about I'd say positioningeverything as an opportunity for LPs right.
When for us you know part of our strategy beingfocused on international investors we want to
(44:51):
highlight you know what's going on in theregion the opportunities and we've seen a lot
of you know international investors tappinginto Latin America right so there is definitely
interest there and having someone with anunderstanding on you know the market dynamics
is something that I think is always helpfulwhen talking to investors right and be able to
(45:17):
you know generate that trust I mean issomething that's key part of you know what we
did and obviously to keep communications andcontact on an ongoing basis is having a monthly
newsletter, right?
Similar to what startups do with their investorupdates, keeping them updated on what's going
(45:40):
on with the fund, our investment landscape,which is FinTech in Latin America to highlight
what in some way what they're missing out andwhat they could potentially be a part of.
I mean, it's an ongoing process as well.
We're always learning from other managers inthe space and it's exciting for sure.
(46:09):
Not always easy, but for us, I mean, we knowthat the opportunities there and we wanna
continue funding innovation andentrepreneurship in a region like Latin
America.
And I would say, it's too bad you couldn't comeout here, but I would say the in person
interactions do go really far.
(46:29):
So I think building those connections, I guess,is Mexico starting to slowly open up?
And I guess, could that be an opportunity tobuild more relationships with LPs?
Maybe host small little, maybe educationalseminars where you kind of host, maybe borrow
like a workspace or something and say, hey,guys, I'm going to talk about the future of
(46:52):
FinTech.
That could be a good educational, like yousaid, position it as an opportunity where it
could be a new sector that the LPs haveexposure to.
Because a lot of times, I think there's aninterest from LPs if they can access some type
of sector that they just don't have expertisein.
(47:12):
And it's better for them to allocate tosomebody that gives them that exposure versus
having them try to figure it out and sourcedeals on their own if they don't have that
network to do so.
Yeah, I mean Mexico in some way or another hasyou know always been open for business.
Mean the reality is that most people can'tafford to stay on lockdown or even a week, I
(47:36):
mean they have to go out and make a living Soyou know we have been open with you know all
the necessary restrictions and sanitarymeasures and yeah that's actually something
that I was talking to an investor earlier todayand that's something that he also recommended,
(47:57):
right?
I mean, now that countries and businesses havestarted to open up, it might be a good
opportunity to invest, to invite LPs that areinterested to Mexico, highlight some of the
companies that we're looking at, highlight someof the inefficiencies as well, right?
And all the potential in a market like Mexico.
(48:21):
Yeah, this in person connection is definitelysomething that it's hard to bypass.
Yeah.
But I think the world is starting to get usedto this, I'd say, new reality and eventually
have, I'd say a mix of both, right?
I mean, in person virtual events, but yeah,it's being able to have that connection with
(48:47):
someone in person is definitely something thatgoes a long way for sure.
Yeah, and I mean, as we know, right, I mean, ittakes nineteen months to two and a half years
to actually create pandemic, you're in there,timing could be even longer.
And these LPs, they want to see your behavior.
(49:08):
They want to watch you over time, sometimeseven a whole fun cycle if it's like
institutional, but they want to spend time withyou for a while and get to know you and maybe
see your last couple of investments.
So that might take time.
And that's what I've noticed.
(49:28):
And then there's other ones that are like theVP of product at Facebook or something.
Those are great LPs because they're investingin you almost like you're a startup pretty
much.
And then the benefit is if you invest most GPs,I must assume you do this, and you offer co
(49:49):
investment rights.
So you can get, they can also get direct accessto kind of get some of the direct allocation
into the company alongside you as well.
So that's also attractive too.
But it looks like Tim has a question.
Guess Tim you wanna fire your question off realquick?
Yeah sure, I actually have two but the firstone I was, you're talking about LATAM just
(50:14):
having less developed financial infrastructurebut having five big banks.
And I've kind of wondered in North Americawhether some of the PayPal and Square and their
success with you know digital banking, doesthat almost like sort of slow the adoption for
(50:36):
blockchain based finance and is there maybe anopportunity like I know in Africa it's sort of
like they don't even have five big banks tofight against.
Yeah.
Could you talk to me a little bit about how youthink about that?
Yeah.
I mean, the way I say it, I mean, countrieslike Mexico and Latin America, we don't have
(51:00):
those I'd say legacy technologies that thatwere built on right so we have some flexibility
in being able to adapt new technologies likeblockchain or any other technology.
So there is a lot of innovation going on in thespace because it takes these large banks a lot
(51:23):
to actually pivot or try to adapt the newtechnology.
So these fintech players are having a hugeimpact on the bank's market right and I mean
going back to you know what PayPal or Squareare doing they are actually expanding into
Latin America right and be able to providethose type of services in a region like Latin
(51:48):
America.
Mean when you see and this is something that wealways say to potential piece I mean the
reality is that a lot of the innovation thatgoes on in financial services in developed
markets, they tend to solve convenience issues,right?
In emerging markets, they tend to solvestructural issues rather than convenience.
(52:12):
So there's definitely an interest for thesetype of international players to tap into a
region like Latin America.
Yeah let's go.
Jason you got a question about all peace.
Yeah, sorry if this was mentioned and I didn'thear it.
(52:33):
I know we talked about sort of if you knowsomeone who who have who can invest or 500 then
500 ks then multiply that by 10.
But does that also mean that as you wereforming the fund, you had already identified
these individuals so that you got confident?
Basically, you know, how hard was it to firstto get established at the beginning?
(52:58):
I mean, it wasn't so we started out on adifferent path, right?
I mean, we wanted to do a security tokenoffering as a means to obviously fundraise for
the fund itself, right?
So we didn't start out with the traditionalsort of fundraising mindset as I was telling
(53:18):
you we did you know eventually pivot into thatbut I mean if you're considering raising a fund
you know you have to think about a little bitabout the theses the opportunity that you want
to focus on the geography the states that youwant to invest in and then you're going have to
(53:39):
tap into your network like crazy, I mean withpeople that are either in that space or people
that believe in you or have worked with youbeforehand that know that you're able to say
what you say you're going to do, right?
And obviously, warm interests are always agreat way to connect with potential LPs.
(54:03):
For us, these type of programs like Joel'semerging fund manager program was a great
opportunity to connect with other GPs in thespace with potential LPs.
And going back to Joel's point, we had a coupleof institutional investors participate in the
(54:23):
program.
You have to start building those relations on ameeting to long term strategy, They're not
going to invest in your fund one, so you alsohave to think about the type of LPs that you're
going to be pitching to, right?
I mean, don't focus on institutional investorsbecause they don't typically invest in first
time funds or they don't typically invest infunds under 100,000,000, right?
(54:46):
Because they have certain restrictions in theirminimum investment and how much they're able
represent out of the fund.
So let's say an institutional investortypically invests 20,000,000 but they can
represent more than 20% of the fund, right?
So that means that unless you're raising acertain amount, they won't be able to invest.
(55:07):
So it's important to also sort of, I'd say,circle down around the type of LPs that you're
going to be pitching to.
For us, it's been mostly high net worthindividuals, family offices.
There are some fund of funds investing inemerging managers so we're obviously talking to
(55:28):
those institutional investors more on themedium to long term.
There was for instance in Latin America aninitiative by the IBB bank to fund emerging
managers but part of their investment thesiswas to actually invest in funds that are
(55:53):
raising more than at least 20,000,000.
So that you know eventually put us out of theirbox right.
So we don't waste time pitching to them becausewe're not going to be a good fit for them right
now.
Eventually, know, there might be a great fitfor us but you have to understand what LPs are
investing in sort of their investment strategyas well and focus on those.
(56:17):
Yeah, and we are starting to see a lot ofcorporates invest.
We've seen Bank of America, Carta, Apple, a lotof them have allocated to emerging managers as
well.
And then I think community is a huge thing too.
So I think there is mandates now for diversemanagers and different communities.
(56:37):
So I think if you are part of a certaincommunity, having access to those funding
channels and figuring out who the allocatorsare, I think it helped too.
And then the same thing, it's a long game.
So if you know somebody who's at a pensionfund, they all go to the same events.
So they may actually know somebody that's lowerin the stack that could be a good fit for you.
(57:02):
They may just have a colleague or somebody thatthey've known for years that does invest in
nano funds that are 15 and lower.
Anything else?
I know we're five minutes over but this wasawesome, man.
Thanks for coming out.
(57:23):
I heard the baby a little bit in the backgroundso hope we didn't pull you away from your
family too much but this is a little bit ofdeja vu, seeing you back in Zoom.
I know, I know.
Hopefully we can do it in person soon.
I'm already vaccinated, so hopefully resumetravels in the next few months.
(57:46):
Yeah, well, let's talk about New York.
We'll have some more updates on the LP stuffthat's going on in New York with Sutton
Capital.
So let's keep talking about that.
Again, thanks for your time.
And this is really good learning for me and foreverybody else.
So thanks.
Well, thank you, Joel.
(58:08):
Look forward then to keeping in touch andthanks everyone for being here as well.
Yeah, thanks guys.
The reality is that the venture landscape inMexico and Latin America is still being
developed, right?
I mean, it's not as a developed ecosystem as itis in The US.
I mean, The US, every year you have new funds.
I think the statistics are around 200 new fundsevery year get funded, right?
(00:21):
Mean, in Mexico alone, we have probably lessthan 50 VCs investing across the entire nation
in this trend stages.
Welcome to The Investor, a podcast where I,Joel Palafinkel, your host, dives deep into the
minds of the world's most influentialinstitutional investors.
In each episode, we sit down with an investorto hear about their journeys and how global
(00:45):
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
I want to introduce Carlos Torres.
He is the GP at AMG Block and met Carlosthrough a couple other mutual connections.
And he met me earlier in December when Idecided to launch an accelerator for fund
(01:09):
managers.
So initially problem one is it's hard to get ajob in venture.
So getting the right skills, getting hands onknowledge of what to look for in a founder and
actually supporting different venture funds andfinding deals, sourcing screening, and then
(01:32):
taking the deal all the way to execution.
Those skills, those hard skills and soft skillsare part of the pathways to kind of get into
venture.
And it's tough because it's a chicken and egg.
I mean, people don't want to give youexperience if you don't have the experience
already.
They expect you to be the top candidate andalready have the skills.
So that's one of the problems.
(01:54):
I'd say the same thing is relevant for privateequity as well.
But the other problem is, you want to start afund, and this could come from two pieces.
You could just be in venture already and youhave a good experience in venture, you work at
either a mid sized fund or a big fund, and youjust feel that you want to do something in your
(02:18):
own direction.
So maybe you're at a really amazing fund, a lotof assets under management, great leadership,
but you just want to build your ownentrepreneurial platform to invest in maybe a
smaller capacity as an emerging manager or justgo ahead and go institutional.
(02:41):
But I think that's one piece, that's one dropoff point.
And then there's people that come from allwalks of life.
You could have been a founder before thatexited and then you want to start a fund.
So I think the perfect example is the weekendfund.
So the guy from, I forgot his name.
Ryan.
Ryan Hoover from Product Hunt.
(03:04):
Product company, I think they sold to AngelListand then started the weekend fun.
I actually got to meet him and spend some time
with him.
I was trying to get him to pop in for one ofour sessions, but it's great.
That's kind of the pivot.
So Carlos, you're in Mexico, so that's reallyanother piece to it.
How is this ecosystem growing cross border?
(03:26):
One thing that I'm proud of with our firstcohort was that we were completely global.
We had a couple of fund managers from Mexico,from Singapore, from Europe.
We had one or two LPs supporting us fromEurope.
So before we jump into emerging managers, howto start a fund, the trends, let's start with
(03:48):
you.
So let's start with your background.
Where did you start with your career?
And tell us about Mexico and then how youstarted AMG Block.
And then maybe we can navigate into why youhave your certain investment focus and what
your vision is for taking the fund to the nextstage in its journey.
(04:12):
Yeah, thanks Joel for having me, glad to behere.
So I actually started in corporate banking,Started in HSBC here in Mexico working for
large corporations, managing all the banks,products and services.
So that gave me first hand experience on howsort of the banking industry in a country like
(04:37):
Mexico works.
At the time, you know, we're focused onproviding services to companies that had a
specific range of revenue, right?
So initially right out of the bag, we weresegmenting the type of customers that we're
actually able to provide products and services.
Then I continued my journey more on theinvestment side for a fun focused on
(05:04):
sustainable investments, particularly in energyand water projects here in Mexico.
That you know gave me an opportunity to divedeeper into the inner workings and how a
different alternative asset managing firmworks.
(05:25):
I continued my journey working again in as asenior relationship manager at a regional bank
here in Mexico that is currently one of theleading digital adopters in the Mexican banking
system.
Worked, it's a bank based out of the North Partof Mexico and they were expanding into Mexico
(05:51):
City.
That gave me an opportunity to expand obviouslythe bank's presence in a different region and
focus on providing loans primarily to corporateclients.
Around the time I was thinking about my nextstep in my professional career, so I decided to
(06:13):
do my MBA.
I did a one year MBA in Boston and that's whenI decided to jump into the venture landscape.
After my one year MBA, I worked for the venturearm of a family office in Boston that wanted to
tap into the startup community.
So I did that for about a year and then Ireturned to Mexico and joined as investor and
(06:38):
director of finance for a fintech startup thatwas focused on providing loans to the
underserved SME market here in Mexico.
And that's when I realized that there is stilla huge gap ecosystem in Mexico and in Latin
America as a whole.
That's when I decided to focus again on theinvestment side of the equation and launch the
(07:03):
fund.
At the time we were looking at alternativemeans of fundraising.
So we came across this whole ICO boom, theinitial coin offerings and the application of
technology in this alternative asset class andthe evolution of the ICOs into a regulated
(07:27):
market through the what's called securitytokens or digital tokens really cut our
attention.
So we started looking at the space and theapplication of blockchain in venture as a whole
so initially what we wanted to do was tokenizethe fund right so that means providing our
investors with a digital representation oftheir investment in the fund by backed by the
(07:51):
portfolio of the fund itself.
But you know we came to realize that the wewere a little too early I'd say on the industry
the infrastructure required to do these wasstill being developed.
A big part of why we were doing this was toactually provide liquidity to our investors in
the regulated secondary market, is somethingthat is still being developed.
(08:15):
So we decided to pivot a bit and do a more of atraditional VC fund focused right now on seed
stage investment in Mexico and Latin America.
Obviously fintech you know encompassesdifferent business verticals so we're seeing
solutions being built around payments, lending,wealth management, blockchain and crypto is
(08:39):
still one of our industry verticals.
Intritech, some of the exciting opportunitieshere.
And the reality is that the venture landscapein Mexico and Latin America is still being
developed.
I mean, it's not as developed ecosystem as itis in The US.
(09:00):
I mean, The US every year you have new funds.
Think the statistics are around 200 new fundsevery year get funded, right?
Mean, Mexico alone, we have probably less than50 VCs investing across the entire nation in
this different stages.
Do you feel that gives you an advantage fordeal flow because you're not competing so much
on the companies because there's only a fewfunds?
(09:23):
Yeah, I think that's an advantage having aspecific thesis as well, right?
I mean, most funds have a more of a generalthesis.
They invest in e commerce, healthcare.
Most of them invest also in fintech, but theydon't have a solely a fintech specific focus.
So that I think gives us a bit of an edge.
(09:44):
Mean we've been obviously through the hurdles,we understand the opportunities and challenges
because we went through them firsthand, So thatis, I'd say, obviously a competitive advantage.
But the way we see it more than compete fordeal flows, we see it more as collaboration
opportunities, I mean, there aren't that manyfunds investing in these type of opportunities.
(10:08):
So the more the merrier, right?
Yeah.
So it's definitely the right time to be in thespace.
The opportunities are there.
The innovation is there.
All we need is more capital to continue to begoing in some of these great opportunities.
Yeah and how is the LP ecosystem?
Are there single family offices?
(10:30):
Are they interested in investing in emergingmanagers or would they rather just go direct
into deals and co invest?
And how has that conversation been?
Because sometimes, last thing you want is tojust be a funnel for co investing and you want
to really encourage people to invest in thefund and then allow co investment rights.
(10:53):
But what is the culture in Mexico and LatinAmerica as far as the GP and LP ecosystem
considering there's only like 50 funds?
Yeah, it's totally a bit of a challenge, right?
Mean, there's still, I'd say, an educationalgap in understanding on the asset class, the
industry, the technology.
(11:14):
I mean, we're starting to see success cases inLATAM as a whole.
Brazil is a more developed venture ecosystem,but outside Brazil, we're just starting to see
the results of venture as an investmentstrategy, right?
So when we started out reaching out to LPs inMexico, we found this educational gap, right?
(11:36):
LPs want more traditional investments or brickand mortar investments or do direct deals.
So that's why we decided to do more of aninternational strategy in terms of fundraising
and attract international investors with abetter understanding on the asset class, the
potential of FinTech in a region like LatinAmerica, and the one that's happening to an
(12:00):
underserved region, Whilst us providing theground support, the understanding on the market
dynamics, the regulatory landscape, theopportunities and challenges, and that's part
of what we've been doing so far.
Yeah and I've done some cross borderinvestments.
There's always tax considerations.
(12:21):
So what should an international LP know aboutinvesting in Mexico or investing in funds?
Are there tax best practices that they shouldthink about or is it pretty straightforward?
Guess, double taxation or?
Yeah, I mean, Mexico has tax treaties with alot of countries.
(12:41):
So there are ways around that, but what we aredoing is setting up the fund actually in The
US.
In The US, yeah.
Obviously, it's following the SEC's guidelinesand everything, but you know, it's structure
where LPs are familiar with how So that works,we want to simplify obviously the investment
(13:02):
opportunity for LPs as well.
And in terms of the type of investments, nowit's very common for international or Latin
American startups to actually set up a C Corpin Delaware because they want to eventually
attract international investors and this typeof legal structure is the one that they're more
(13:23):
familiar with.
Yeah, some of them even set up the, there's oneinvestment that I made where they set it up so
easy where the wire was actually a domesticwire.
So it's like a American wire.
So I think also just using the typical standardtech stack that everybody's familiar with.
(13:43):
You got First Republic Bank, you got Carta andthen you got whatever the premier lawyer is to
use, but the ones that everybody uses.
Especially if you're using the standard bankthat most funds use, that also helps as well
because then it's kind of okay cool.
It's a typical VC stack when it comes to fundadmin and when it comes to the bank and then it
(14:09):
also comes down to just the accounting andreconciliation and all that.
Yeah and that's something that we also leverageon, right?
This evolution of service providers aroundventure as a whole, right?
I mean, if we wanted to work with the card ofMexico, it doesn't really exist as of today, So
(14:33):
these, I'd say services that a firm like Cartaprovides where they're even getting involved at
the formation of the fund, right?
They have these pre closed services and justhelp you along the way.
That's something that's very useful formanagers that wanna set up in The U.
(14:54):
S.
And that have a might be a little differentinvestment strategy, right?
They've been very helpful, I mean, in terms ofconnecting us with other service providers that
they have experience working with.
And there's a growing interest in emergingmarkets or in emerging fund managers or first
(15:16):
time fund managers, right?
I mean, the numbers don't lie.
Typically, first time fund managers tend tooutperform more established managers because
it's all in for us, right?
I mean, is our opportunity to prove ourselves.
So it's definitely something that, you know,this type of evolution of the venture landscape
(15:41):
in a region like The US, we try to leverage onthat as well.
Yeah, no, I mean, historically there's a lot ofresearch and I've done a lot of analysis on the
data and the emerging managers have tooutperform to survive.
I mean, you have to be really pushing theenvelope while you got somebody else that's out
(16:07):
of pension funds and they're going to still getto 11% at the end of the year where for you to
be relevant and to still stay there, you haveto kind of still push the envelope and you have
to be more scrappy.
There's no communications team, there's nomarketing team, you're doing everything on
(16:28):
LinkedIn posts and Twitter and you're buildingthe logo yourself, you're using Sketch or
something to create your own logo.
So, you really have to kind of be creative andentrepreneurial.
I mean, I've been looking at some LP updatesand you see some of that feedback.
It's kind of like, look, we're working longhours, we're really being resourceful.
(16:53):
So it is a startup essentially, right?
It does take the agility to kind of go throughthat.
And you're balancing different aspects of theprocess, the cycle, right?
Because you could be fundraising, diligencing acompany, and then managing some legal or fund
(17:15):
admin or accounting mistake at the same time.
And then maybe getting ready for a podcast.
So you're really doing all of that plus havingnow two kids and being married.
And it's not only you, it's your family that'salso kind of emotionally supporting you as well
(17:36):
because they're kind of on that journey.
And that's what I love about my emergingmanager program is because I'm also an emerging
manager.
So I'm essentially on the same ride with youguys, building something really from nothing
when we first started.
So I think when you can kind of have at leastcommunity, it's like a support system that
(17:57):
helps that we feel like you're not alone.
Yeah, no, definitely.
I it's something that it's not talked aboutpublicly.
I mean, oftentimes when people think aboutventure investors, they think like you just
appear out of Exactly.
You're rich, you already have the capital tocommit.
We actually go, you know, we also have to goout and fundraise.
We go through the same, you know, ups and downsas an entrepreneur does, right?
(18:21):
So this type of support.
And that's something, a big shout out to you,Joel, for putting this program together.
It's something that we, with our strategy,really appreciate, right, as an opportunity to
connect with others in the venture landscape,like you said, globally, and be able to connect
(18:45):
with potential peers or other serviceproviders.
We try to learn from more developed ventureecosystems because there isn't a lot out there
on setting up a fund.
I mean, there's a lot of information about thestartup journey, but not a lot about fund
journey itself.
I mean, I appreciated about you Carlos is, andthis is what I think is really important about
(19:10):
the community, when you're in a cohort, I'vebeen studying this a lot because I got accepted
into this program.
There's this new program for teachers and it'skind of like online teachers.
And what you realize is when you have a cohort,you have a little more of a sense of urgency.
(19:33):
So my other program, it's obviously yourprogram, so that gives people time to breathe
and absorb the content and learn and take theirtime, which makes sense, because private equity
in VC, understanding the hard skills and thenreally getting enough practice attempts of
sourcing deals, getting feedback, that takestime, right?
(19:58):
When you have like eight weeks, have tomaximize those eight weeks.
So you're kind of forced to make sure you don'tmiss a session.
And I think the urgency of that and also thetime crunch makes you absorb content.
But I think along with that too, what Iappreciate from you is you'll come up with some
(20:20):
article or some other program that has somereally helpful content that maybe we didn't
find.
So I think just storing that somehow or I'mgonna actually create a library to store all of
these links that we have, but that's what youget from the community.
Because somebody was searching something, theyfound something and then they share it.
(20:41):
Just, if you did it on your own, you'd probablyfind stuff, but you won't get everything.
You'll find the things that you look at, butgetting it from other people is always going be
kind of a collective anthology of all thesedifferent helpful artifacts that you can
collect.
I mean there's a lot of really helpful stuff onthe internet I would say.
(21:02):
I'd say a lot of this stuff is free, but thechallenge is making sense of it.
And like having somebody really explain what itmeans because sometimes it's hard to digest and
sometimes it's just too much.
It's just too much content for you tosynthesize.
But if you can kind of be in a community or agroup where maybe there's an LP that can
(21:25):
explain that to you more clearly, then I thinkit's helpful.
Yeah.
And I mean, it's not only that.
Mean, fact that you know for this first cohortyou're able to you know openly talk about the
challenges that everyone has been going throughand understand that you're not the only one
going through the same, right?
(21:46):
Yeah.
I was talking to John the other day and we havepretty much the same problems, right?
I mean, we're setting up weekly calls with LPsand then at the last minute they cancel or they
at the last minute they, you know, for somereason or So not you think you're the only one
(22:08):
going through that, but no, there's others outthere and being able to share that is
definitely helpful as well.
Yeah, no, I agree.
So tell me a little more, switching gears here,tell me about the VC system in Mexico.
So you're saying there's only 50 funds.
So where do you guys find deals?
(22:28):
Do you guys have accelerators?
Do you guys have demo days?
Do they have like a Y Combinator in Mexico orlike an SOSV in Mexico?
And when you talk about FinTech and I spenttime with Anna as well, so she kind of gives me
some insights.
She was on our show also, but just tell meabout the ecosystem.
(22:49):
I mean, what is like the next big sector tofocus on?
Guess what part of FinTech is really growingand scaling quickly in Mexico?
Yeah, so I mean, terms of deal flow, mean, forus, we have a different strategy set in place.
(23:13):
We love connecting with other investors in thelandscape.
I mean, Anna has been a great supporter.
We talk on a regular basis because she and Iwere both solo GPs, right?
So that particular pathway is another foranother topic some other day, but we tend to
(23:38):
share some beautiful opportunities there.
There are some accelerators in Mexico, 500startups this year, Mass Challenge has some
presence here, Techstars has started to lookinto Mexico.
There's a Spanish one called Fino Vista Focussolely on FinTech.
FinTech,
yeah.
(23:59):
But I mean, the opportunities are pretty mucheverywhere.
Mean, some of the exciting sectors that we'retaking closer look at are obviously payments.
When you look at the remittance market thatrepresents a huge opportunity.
The US and Mexico corridor is one of thebiggest in the world but it's still an
efficient process, right?
(24:19):
I mean, the average transaction there is around$300 and the commissions are eight to 10%,
right?
So technology is going to definitely play arole in how these markets evolve.
Lending, believe it or not, is a hugeopportunity.
Some of the biggest fintech companies in Mexicoright now are focused on lending because it
(24:40):
represents a huge opportunity, right?
I mean, when you look at Mexico's businesscomposition, 98% are SMEs right and they
represent over 40% of the GDP they generatemore than 70% of the jobs in the country but
they're being underserved by the traditionalbanking system and when you look at the banking
system in Mexico, know it's 70% or more isconcentrated on five banks right so there's not
(25:09):
a lot of options for lending or alternativemeans of funding for SMEs And that's definitely
a huge opportunity in the space.
Wealth management solutions, being able toinvest not only in the Mexican public markets,
but in other more developed public markets.
(25:30):
That's another interesting opportunity.
We don't have such a dynamic public markets asThe US, right?
I mean, to give you an idea, last year we hadan IPO, but before that, the last IPO was two
years before.
So these type of opportunities to invest in thepublic markets with an international focus
(25:53):
represents a huge opportunity as well.
I mean insurance, a huge market as well.
I'd say every business vertical has some hugepotential, particularly in a region like Latin
America, right?
When you look at the statistics where 50% ofthe population is still unbanked but mobile
(26:19):
penetration is above 70%.
We have a growing millennial generation so thisdigital solutions or tech solutions is
something that's going to disrupt thetraditional finance industry.
The way we look at it, mean you know marketparticipants have to look at technology to
(26:42):
actually solve problems.
So there's definitely an opportunity there andthat's our current focus.
Yeah and tell me about, this could just begeneral information, but just observations when
sitting on the other side at a family office,how has your perspective changed when you were
(27:06):
at a family office and now you're speaking tofamilies?
How do you think that helped you maybecommunicate and maybe help educate families?
I'd say one example I have is you know some ofthe families that had no venture experience
that I used to co invest with, they didn'tunderstand that venture is an illiquid asset.
(27:28):
They're like what do you mean I can't sell myshares?
I'm like, yeah, maybe on the secondary marketbut there has to be buyers and sellers.
So I think the first education and expectationmanagement of illiquidity is important, but
that's just something that I've seen.
(27:50):
But I guess, how has your perspective changed?
Being at an essentially probably an allocator,but now you're talking allocators.
And I guess what do they care about?
Some of the allocators and what do you thinkcauses some miscommunication with the interest
versus what you're offering them?
(28:13):
Yeah, I think what they care about isgenerational wealth, right, for family office,
able to provide for future generations.
And that's where the educational piece comes inhandy, mean, able to diversify across different
asset classes, whether it's a public market,real estate, venture.
(28:37):
Now, we have institutional money coming intocrypto or DeFi solutions, which, you know, is
definitely something that we're excited about.
But it's always about, I'd say, you know, thisgenerating trust, right, with this type of
allocators in the space.
(28:57):
I mean, they're going to be around for not infund one, right?
I mean, typically these type of investors aregoing to be with you for longer than the first
fund, right?
I mean, typically a VC fund has a ten yearduration, but you want to go out and raise fund
(29:18):
two in a matter of years.
So being able to provide value and opportunityto this type of LPs is something that I'd say
they're always looking for, right?
Co investment opportunities, obviously, andknow do what you set out to do right I mean if
I say I'm going to invest in fintech andtomorrow I invest in healthcare then I'm not
(29:42):
saying what I promised them I was going to doright so sure it's definitely interesting being
on both sides of the table.
But I'd say the process is very similar.
At the end of the day, for fund managers,they're investing in the team, The person or
the team that's going to be managing the money.
(30:05):
They're focused on the opportunity, they'refocused on the timing.
So, you know, some of the qualities that us asventure capitals look for in startups, It's the
same process for LPs looking into fund managersas well.
So yeah, that's the way I look at it right now.
(30:26):
And then when it comes to crypto, are you alsoinvesting in blockchain companies or are you
mainly focusing on fintech now?
So we see blockchain and crypto as a businessvertical within fintech, right?
I mean, particularly in emerging markets wherethere is corruption, there's lack of
transparency, there's financial inefficiencies,believe blockchain is one of the technologies
(30:49):
that's gonna, you know, disrupt the traditionalfinance industry.
So it's a core part of our thesis.
We don't do token investments, right?
So we do equity investments.
We look at, the application of blockchain andhow it's solving problems within the financial
market.
Yeah, it's within our thesis as a businessvertical of fintech as well.
(31:13):
And this is an outside question, but what doesAMG stand for?
Yeah, when we started out with thistokenization of the fund, what we want to do is
monetize assets.
So AMG actually stands for assets monetizedglobally through blockchain, It's sort of the
(31:40):
name that we stood by because we do believethat in the medium to long term, tokenizing
assets is going to be a big part of thefinancial infrastructure and that's why AMG
comes from.
Well, what about tokenizing of collectibleslike NFTs?
Is that something you guys are interested in aswell because that essentially could be some
(32:05):
type of store of value.
You have a super valuable unique asset which isa artifact and that is obviously non fungible
and then you can't really copy it, it's superunique.
So that is valuable because of scarcity and itsuniqueness.
(32:28):
So are you guys excited about that?
I mean, I find it to be a very interestingspace, obviously.
It's something that I'm looking at.
We haven't seen particularly in our region, ourtarget region, projects of this nature.
(32:50):
It's something that, I mean, as a fund we wouldinvest in an NFT, right?
Because that's not a particularly equityinvestment per se in a company building
something, right?
But if it's a company providing theinfrastructure required to issue NFTs, that's
something that we would be interested ininvesting, right?
(33:12):
Or maybe like an exchange for NFTs or just theunderlying infrastructure to actually build it,
right?
Exactly.
Exactly.
And for instance, now that we're on sort of theblockchain and crypto space, this whole DeFi
evolution, right, which stands fordecentralized finance, it's something that
(33:33):
we're very excited about, particularly becauseof the macroeconomic environment in regions
like Latin America, countries like Argentina,Venezuela.
They look at these type of solutions foralternative means of sort of value or lending
solutions or even payment solutions, right?
So a lot of it is being built, unfortunately,outside of Latin America, but users come from
(33:59):
Latin America.
So we've started to see, you know,interestingly enough for us is some
international companies that started out in,say, The US or UK, and that want to tap into
Latin America.
So that falls also within our thesis, right?
Being able to have someone on the ground,helping them, expanding to these countries or
(34:25):
regions, that's something that we're interestedin doing as well, right?
Yeah.
And FinTech by nature is global, right?
So we can't afford to close our eyes to what'shappening outside of our region, but we want to
do or provide, you know, local partnership withthis type of startups and that's something that
(34:48):
we've seen a lot recently.
So walk me through an example, So walk methrough the problem and you know how DeFi can
solve it especially in Latin America.
So from my understanding, the issue issometimes, in America, if you have $10,000 in
Bank of America, that will still be there.
But from my understanding with corruption andsometimes some countries, that $10,000 the
(35:15):
government could just block your account forwhatever reason.
Is that true or am I exaggerating like how thepolitical conditions can be in some countries,
maybe not Mexico but like Latin America or likein Venezuela, right?
Some people just couldn't get access to theirbank accounts and there could be money in
there.
Then what you're saying that DeFi does ispeople can just have almost like a bank that is
(35:42):
off of the banking rails.
Is that correct?
And is the magnitude of the issue is that badwhere people's banks just get closed off where
they can't get access?
I mean closed off Temporary
amount of time?
Yeah, it could be.
Mean, that doesn't happen a lot in Mexico anddepending obviously on the sector that you're
(36:04):
operating or what you do, you know, if youcomply with all the regulations that won't
happen, right?
I mean, unless you're doing something illegal.
But yeah, I mean, at the end of the day, thesetype of solutions provide something that the
traditional banking system doesn't, right?
So being able to you know send money from TheU.
(36:30):
S.
To Venezuela you can send through thetraditional banking system right.
I mean there are solutions for instance wherepeople Venezuelans in The U.
S.
Buy through crypto goods for their families inVenezuela.
So there's definitely interesting cases in
what I've also seen is sometimes there'ssynthetic tokens, right?
(36:55):
So they have a store of value that's the sameas a dollar, but it's actually like converted
into a different currency that's like syntheticand that functions as the same value.
I'm not sure.
Mean, it can get kind of complicated but isthat also a use case kind of like just
converting a currency into like a syntheticdollar or a stable coin?
(37:18):
Yeah I think you have to get past theregulations in your home countries.
I mean at the end of the day, our regulationsstill plays a huge role in the asset class.
But I mean, to be honest, there's so much goingon like in the crypto space that you have to
fully commit.
I mean we would have to have a solid cryptofund focus if we wanted to only invest in this
(37:44):
type of solutions, right.
That's why we have more of a broad investmentthesis because we understand other pain points
in the industry as well, not only what cryptocan provide.
There's so much going on that you'd have to bethere 20 fourseven, three sixty five because
(38:04):
crypto doesn't close.
I mean, there's not a nine to five schedule forcrypto.
All the innovation going on and it's definitelysomething to look at continuously.
Switching
gears, back to the emerging manager side, juststarting the fund, thinking about your thesis,
(38:26):
can you share a couple pieces of advice fromwhat you've learned in the last year on how to
envision the fund, how to structure the fund,how do you decide if you want to start with a
$5,000,000 or a $10,000,000 fund and how manyinvestments you want to do?
Did you put together a fund model and anyadvice on kind of a framework for that?
(38:49):
And then the other piece is maybe somelearnings that you learned from LP
relationships.
And I know you and I talk about this a lot, butany just takeaways or learnings maybe like,
hey, you know what?
I can tell this person is a waste of time.
They're not allocating the funds.
So, hey, I'm not gonna burn time taking a call.
(39:10):
So any other just learnings like that thatyou're like, wow, this is a good mental note to
keep in mind as I keep fundraising.
Yeah, so two things like structuring the fund,thinking about like where you start and then
maybe some fundraising tips or best practicesor what you learned.
(39:31):
Yeah, so I mean for the fund structure, I thinkit depends on different factors, I mean what
stage are you investing in?
What industry you're investing in?
So for us, it's a little different, right?
Because we're focused on seed stage investment,right?
But seed stage investment in Mexico isdifferent than in The U.
(39:55):
S, right?
Mean, for us, our average ticket size rangesfrom 250,000 on average, which that gives us
startup runway of at least a year, right?
In a region like Latin America, when The US,that's used to pretty much cover the legal So
(40:16):
that type of thinking also played into how westructured our fund.
So you have to think about, I mean, how manypartners do you have as well?
So for instance, MSOGP.
So if I want to take a hands on approach and beon a board on every company that we invest in,
then there's only so much number of investmentsthat we can actually make.
(40:39):
If we want to take more of a hands offapproach, then we can do obviously more
investments.
We have more of a hands on approach.
So our portfolio construction strategy wasbuilt around doing 15 investments, around
250,000 reserved 250,000 for follow on.
So that know the math were raised a fund of10,000,000 right.
(41:06):
I think
we went through an exercise, I think in likeweek three and was getting the reserve like, I
think like 60% for follow on.
And I was like, that's big, you're betting likehalf the fund to follow on, which is great.
But look, that's their strategy.
(41:27):
Who am I to say anything?
Yeah, you have to think through all of thosedecisions.
Maybe you don't want to follow on.
Like funds like first round, only invest in thefirst, they're like early investor and then
they don't do anything else.
And I don't often follow on either.
(41:48):
So I think maybe answering the question of likefor all of those things like why?
And then I think another big piece is how muchmoney do you think you can actually raise?
So if you're gonna do like portfolioconstruction for like $100,000,000 fund and
it's your first fund, maybe you're reallyconnected and you're able to and that's great
(42:11):
but I guess a good question is do I think I canactually raise that money in nineteen months?
So one quick math tip that someone once gave meis consider your closest friends, people that
you used to work with, how much are you able toraise from them today?
(42:36):
Right.
Yeah.
Let's say if you were able to raise 1,000,000then multiply that by 10 that's your sort of
target initial fund size.
So if you for instance have friends that areable to commit right now 2,000,000 then you
could potentially go out and raise 20,000,000.
So think about
(42:56):
also That's pretty interesting.
If you Because you're able to do a
Those are your tight knit friends and thenyou're thinking that those friends or those
people might have extended networks that couldprobably make warm intros to you.
Exactly, exactly.
Got it, that makes sense.
Makes sense.
But it's not always your five
(43:18):
friends, you just gotta find your five friendsthat'll add up to 2,000,000, right?
Exactly.
Yeah.
Exactly.
But I think going back to your question on howyou build the fund, mean, are a lot of factors
playing in.
If going back to what you said, if we didn'tplan on doing follow on investments, then we'll
probably do initial check size of around 500 kswhich could potentially be pre series a right.
(43:41):
So we're no longer investing at seed states.
So it all depends on all these differentfactors.
Eventually part of our strategy is to go outand have a bigger fundraise, bringing
additional partners because we want to you knowcontinue focusing on seed stage with a hands on
approach right, but we need more peopleobviously to handle that.
(44:03):
So yeah, there are a lot of, I'd say, factorsthat play into how you build out your own fund
and your portfolio construction strategy.
And it's something that LPs are going to ask, Imean, they want to know what you're focused on,
your average ticket size, follow oninvestments, co investments, maybe setting SPVs
for follow on or co investment opportunities.
(44:25):
So yeah, there are a lot of factors playing in.
And going back to your second question onlearnings about pitching to LP.
It's always about I'd say positioningeverything as an opportunity for LPs right.
When for us you know part of our strategy beingfocused on international investors we want to
(44:51):
highlight you know what's going on in theregion the opportunities and we've seen a lot
of you know international investors tappinginto Latin America right so there is definitely
interest there and having someone with anunderstanding on you know the market dynamics
is something that I think is always helpfulwhen talking to investors right and be able to
(45:17):
you know generate that trust I mean issomething that's key part of you know what we
did and obviously to keep communications andcontact on an ongoing basis is having a monthly
newsletter, right?
Similar to what startups do with their investorupdates, keeping them updated on what's going
(45:40):
on with the fund, our investment landscape,which is FinTech in Latin America to highlight
what in some way what they're missing out andwhat they could potentially be a part of.
I mean, it's an ongoing process as well.
We're always learning from other managers inthe space and it's exciting for sure.
(46:09):
Not always easy, but for us, I mean, we knowthat the opportunities there and we wanna
continue funding innovation andentrepreneurship in a region like Latin
America.
And I would say, it's too bad you couldn't comeout here, but I would say the in person
interactions do go really far.
(46:29):
So I think building those connections, I guess,is Mexico starting to slowly open up?
And I guess, could that be an opportunity tobuild more relationships with LPs?
Maybe host small little, maybe educationalseminars where you kind of host, maybe borrow
like a workspace or something and say, hey,guys, I'm going to talk about the future of
(46:52):
FinTech.
That could be a good educational, like yousaid, position it as an opportunity where it
could be a new sector that the LPs haveexposure to.
Because a lot of times, I think there's aninterest from LPs if they can access some type
of sector that they just don't have expertisein.
(47:12):
And it's better for them to allocate tosomebody that gives them that exposure versus
having them try to figure it out and sourcedeals on their own if they don't have that
network to do so.
Yeah, I mean Mexico in some way or another hasyou know always been open for business.
Mean the reality is that most people can'tafford to stay on lockdown or even a week, I
(47:36):
mean they have to go out and make a living Soyou know we have been open with you know all
the necessary restrictions and sanitarymeasures and yeah that's actually something
that I was talking to an investor earlier todayand that's something that he also recommended,
(47:57):
right?
I mean, now that countries and businesses havestarted to open up, it might be a good
opportunity to invest, to invite LPs that areinterested to Mexico, highlight some of the
companies that we're looking at, highlight someof the inefficiencies as well, right?
And all the potential in a market like Mexico.
(48:21):
Yeah, this in person connection is definitelysomething that it's hard to bypass.
Yeah.
But I think the world is starting to get usedto this, I'd say, new reality and eventually
have, I'd say a mix of both, right?
I mean, in person virtual events, but yeah,it's being able to have that connection with
(48:47):
someone in person is definitely something thatgoes a long way for sure.
Yeah, and I mean, as we know, right, I mean, ittakes nineteen months to two and a half years
to actually create pandemic, you're in there,timing could be even longer.
And these LPs, they want to see your behavior.
(49:08):
They want to watch you over time, sometimeseven a whole fun cycle if it's like
institutional, but they want to spend time withyou for a while and get to know you and maybe
see your last couple of investments.
So that might take time.
And that's what I've noticed.
(49:28):
And then there's other ones that are like theVP of product at Facebook or something.
Those are great LPs because they're investingin you almost like you're a startup pretty
much.
And then the benefit is if you invest most GPs,I must assume you do this, and you offer co
(49:49):
investment rights.
So you can get, they can also get direct accessto kind of get some of the direct allocation
into the company alongside you as well.
So that's also attractive too.
But it looks like Tim has a question.
Guess Tim you wanna fire your question off realquick?
Yeah sure, I actually have two but the firstone I was, you're talking about LATAM just
(50:14):
having less developed financial infrastructurebut having five big banks.
And I've kind of wondered in North Americawhether some of the PayPal and Square and their
success with you know digital banking, doesthat almost like sort of slow the adoption for
(50:36):
blockchain based finance and is there maybe anopportunity like I know in Africa it's sort of
like they don't even have five big banks tofight against.
Yeah.
Could you talk to me a little bit about how youthink about that?
Yeah.
I mean, the way I say it, I mean, countrieslike Mexico and Latin America, we don't have
(51:00):
those I'd say legacy technologies that thatwere built on right so we have some flexibility
in being able to adapt new technologies likeblockchain or any other technology.
So there is a lot of innovation going on in thespace because it takes these large banks a lot
(51:23):
to actually pivot or try to adapt the newtechnology.
So these fintech players are having a hugeimpact on the bank's market right and I mean
going back to you know what PayPal or Squareare doing they are actually expanding into
Latin America right and be able to providethose type of services in a region like Latin
(51:48):
America.
Mean when you see and this is something that wealways say to potential piece I mean the
reality is that a lot of the innovation thatgoes on in financial services in developed
markets, they tend to solve convenience issues,right?
In emerging markets, they tend to solvestructural issues rather than convenience.
(52:12):
So there's definitely an interest for thesetype of international players to tap into a
region like Latin America.
Yeah let's go.
Jason you got a question about all peace.
Yeah, sorry if this was mentioned and I didn'thear it.
(52:33):
I know we talked about sort of if you knowsomeone who who have who can invest or 500 then
500 ks then multiply that by 10.
But does that also mean that as you wereforming the fund, you had already identified
these individuals so that you got confident?
Basically, you know, how hard was it to firstto get established at the beginning?
(52:58):
I mean, it wasn't so we started out on adifferent path, right?
I mean, we wanted to do a security tokenoffering as a means to obviously fundraise for
the fund itself, right?
So we didn't start out with the traditionalsort of fundraising mindset as I was telling
(53:18):
you we did you know eventually pivot into thatbut I mean if you're considering raising a fund
you know you have to think about a little bitabout the theses the opportunity that you want
to focus on the geography the states that youwant to invest in and then you're going have to
(53:39):
tap into your network like crazy, I mean withpeople that are either in that space or people
that believe in you or have worked with youbeforehand that know that you're able to say
what you say you're going to do, right?
And obviously, warm interests are always agreat way to connect with potential LPs.
(54:03):
For us, these type of programs like Joel'semerging fund manager program was a great
opportunity to connect with other GPs in thespace with potential LPs.
And going back to Joel's point, we had a coupleof institutional investors participate in the
(54:23):
program.
You have to start building those relations on ameeting to long term strategy, They're not
going to invest in your fund one, so you alsohave to think about the type of LPs that you're
going to be pitching to, right?
I mean, don't focus on institutional investorsbecause they don't typically invest in first
time funds or they don't typically invest infunds under 100,000,000, right?
(54:46):
Because they have certain restrictions in theirminimum investment and how much they're able
represent out of the fund.
So let's say an institutional investortypically invests 20,000,000 but they can
represent more than 20% of the fund, right?
So that means that unless you're raising acertain amount, they won't be able to invest.
(55:07):
So it's important to also sort of, I'd say,circle down around the type of LPs that you're
going to be pitching to.
For us, it's been mostly high net worthindividuals, family offices.
There are some fund of funds investing inemerging managers so we're obviously talking to
(55:28):
those institutional investors more on themedium to long term.
There was for instance in Latin America aninitiative by the IBB bank to fund emerging
managers but part of their investment thesiswas to actually invest in funds that are
(55:53):
raising more than at least 20,000,000.
So that you know eventually put us out of theirbox right.
So we don't waste time pitching to them becausewe're not going to be a good fit for them right
now.
Eventually, know, there might be a great fitfor us but you have to understand what LPs are
investing in sort of their investment strategyas well and focus on those.
(56:17):
Yeah, and we are starting to see a lot ofcorporates invest.
We've seen Bank of America, Carta, Apple, a lotof them have allocated to emerging managers as
well.
And then I think community is a huge thing too.
So I think there is mandates now for diversemanagers and different communities.
(56:37):
So I think if you are part of a certaincommunity, having access to those funding
channels and figuring out who the allocatorsare, I think it helped too.
And then the same thing, it's a long game.
So if you know somebody who's at a pensionfund, they all go to the same events.
So they may actually know somebody that's lowerin the stack that could be a good fit for you.
(57:02):
They may just have a colleague or somebody thatthey've known for years that does invest in
nano funds that are 15 and lower.
Anything else?
I know we're five minutes over but this wasawesome, man.
Thanks for coming out.
(57:23):
I heard the baby a little bit in the backgroundso hope we didn't pull you away from your
family too much but this is a little bit ofdeja vu, seeing you back in Zoom.
I know, I know.
Hopefully we can do it in person soon.
I'm already vaccinated, so hopefully resumetravels in the next few months.
(57:46):
Yeah, well, let's talk about New York.
We'll have some more updates on the LP stuffthat's going on in New York with Sutton
Capital.
So let's keep talking about that.
Again, thanks for your time.
And this is really good learning for me and foreverybody else.
So thanks.
Well, thank you, Joel.
(58:08):
Look forward then to keeping in touch andthanks everyone for being here as well.
Yeah, thanks guys.
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