Curious about the booming venture capital scene in Latin America?
Join me, Brian Samson, as I sit down with Mitsuru Nakayama, a leading expert in Latin American investments, to unravel the optimism surrounding the region's economic landscape. We dissect the rise of unicorns from 2020 and 2021, which has sparked a new wave of seasoned entrepreneurs and robust business plans.
Together, we unpack Brazil's distinctive position within Latin America, thanks to its vast population, rich resources, and forward-thinking regulatory environment that champions innovation in technology and entrepreneurship.
Our conversation takes a global turn as we compare Brazil's burgeoning startup ecosystem with established hubs like San Francisco and Singapore. Discover how Brazil's startups have transformed since 2018, when they began making waves on the US IPO scene, ushering in a new era of capital and mentorship. I also introduce BVG Capital, the investment firm I launched in 2014, which has played a pivotal role in nurturing tech startups across Latin America. With a presence in Colombia, Peru, and Brazil, we explore the potential for Brazil's tech landscape to rival its global counterparts.
And if you're considering life as an expat in Brazil, we've got you covered!
Our discussion paints a vibrant picture of Brazil's cultural tapestry, from the welcoming nature of its people to its dynamic culinary offerings. Mitsuru shares insights into the Japanese community in Brazil and how expats can immerse themselves in the local scene.
Whether you're interested in fintech, SaaS, or simply curious about Brazil's unique blend of tradition and innovation, this episode promises a rich tapestry of insights and opportunities.
🔗🔗 Guest Information 🔗🔗
Mitsuru Nakayama
LinkedIn: Mitsuru Nakayama | LinkedIn
Company: BVC - Venture Capital for Latin American Startups
📢 Don’t forget to LIKE, SUBSCRIBE, and TURN ON NOTIFICATIONS for more insights on Latin America’s growing tech scene! 🎧🔥
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Brian Samson (00:29):
We'll see you next time.
Welcome everyone to theNearshore Cafe podcast, where we
talk about the stories andpeople doing business in Latin
America.
I'm Brian Samson, your host,and if you're interested in the
investing landscape andecosystem in Latin America and,
(00:53):
in particular, brazil, this isgoing to be a special podcast
for you.
We have Mitsuru Nakayama and heis an expert in this space.
Before we jump right into it,this podcast is sponsored by
Plug Technologies pluggtech.
Plug is a great way to connectall the amazing talent from
(01:16):
Latin America to growing UScompanies.
Let's get right into it.
Welcome to the show, mitsuru.
Mitsuru Nakayama (01:22):
Thank you very much for having me here.
My pleasure to be here.
Brian Samson (01:26):
Amazing.
Well, let's just start.
Let me ask kind of a generaloverview, you know, as you've
been an investor in LatinAmerica for a little while.
What does it look like today?
Do you feel optimistic orpessimistic right now?
Mitsuru Nakayama (01:46):
Well, very optimistic actually because well
, of course, like the same asthe US market, venture capital
market got like some likeadjustment, like after 2022 and
three.
So we are kind of like in aslow mold in these years.
However, I think, as we hadlike a big wave in 2020 and 2021
(02:11):
, the wave made a lot ofexperienced entrepreneurs and
made several unicorns, meaninglike a lot of like people
working in growing startups inLatin America.
I think it's more than 50companies became unicorns at
(02:32):
that time, so that kind of givesus a much better opportunity
for the potential excellentexpert startups and
entrepreneurs in the regions.
So we feel that when we startedinvesting in Latin America in
2014, and as we are looking atthese entrepreneurs today, then
(02:54):
after 10 years, I feel thequality of the or excellence of
the business plan and analyticalperspective of the problem
solutions became much betterthan that of 10 years ago.
Brian Samson (03:10):
I'd like to talk a little more about Brazil as a
standalone country when it comesto the VC tech ecosystem.
How is it maybe the same?
How might it be different fromsome of the other powerhouse
countries like mexico, argentina, colombia?
Mitsuru Nakayama (03:29):
I would love to hear more well, I think first
of all, we kind of divide latinamerica in two different
regions.
One is brazil, which speaksportuguese, and the other is
like a spanish-speaking latincountries.
Um, characteristics of brazilis like a Spanish speaking Latin
countries.
Characteristics of Brazil islike the population, more than
like 200 million people, andalso the country itself is very
(03:53):
strong in terms of like a lot oflike natural resources and
stuff like that.
So the economy is much strongerthan other countries and that's
why it's kind of like anindependent ecosystem, I would
say.
And that's why it's kind oflike an independent ecosystem,
I'd say.
And also thinking like aventure capital industry.
The local government helped alot to invest on startups.
(04:15):
So it means you need toestablish a fund in Brazil and
invest on like a Brazilianstartup.
That was the beginning of theecosystem.
So it means Brazil has a longerhistory of ecosystems and also
the volume of the investment onstartup has been much larger
(04:35):
than other countries in LatinAmerica.
And also people in Latin Americasay Brazil kind of rapidly
adapt new technology or like anew business model.
One good example could be aride share when ride share like
a uber and at the time they werelike a cabified and local 99
(04:59):
taxi started operating in Brazil.
Brazilian government startedcreating regulation for the ride
share, not like adapting ormodifying the taxes regulation,
which is totally different fromthe movement that we see in
Japan, for example.
Japanese government would liketo put these like a new
(05:22):
businesses into some like atraditional business framework
in general, like a regulation,especially that can be kind of
like will prevent theopportunity to take advantage of
having like sorry, let me lookat this again.
That kind of like movement bygovernment can prevent from
(05:45):
local people taking advantage ofnew technology or new business
models and the similar thingsare happening in, for example,
like a drone in agriculturalareas.
Brazilian government like relaxthe regulation of the payload of
the drone, especially inagricultural land.
There's almost like no peopleliving there.
(06:07):
So in many countries if thedrone become like more than 25
kilograms, then the regulationgotta be more strict and it's
kind of tough to really likeoperate the drone in these areas
.
So in a few years back, well,people were like operating drone
(06:28):
within this like a weight limit.
However, a few years ago thegovernment opened up the weight
limit only in agricultural land,without any limit, so you can
have a large drone which can bereplicable to the, for example,
helicopters or sometimes planes.
(06:48):
That reduces a lot of carbonemission because you don't need
to fly this plane and alsodrones can fly very precisely to
spray in a specific location.
For example, that produces likea use of a chemical material by
80%, for example, and this kindof like a movement is like a
(07:13):
continuing.
For example, in stablecoins,brazilian government kind of
decided like how to make aninterbanking transaction using
stablecoin, how to report likeofficially, to make it like an
official transaction.
But before that it wasconsidered kind of like a gray
zone.
(07:33):
People were thinking it's goingto be okay.
However, there might be a riskand as government decides how to
do it, even though it's kind oflike a complicated, that people
kind of safely operate andinnovate the business within the
legal framework, and othercountries probably are seeing
(07:55):
like the tendency will be there.
So many other Latin Americancountries are looking at
Brazilian government regulationpolicy as if it's going to come
to their own countries.
Brian Samson (08:09):
Yeah, interesting, interesting.
And when you talked aboutvolume of investment, I wanted
to peel the onion a little bitin terms of you know how
investors there are, maybethinking about check sizes, size
of rounds, and then how thatmight even be allocated.
(08:29):
For example, we've spoken toentrepreneurs in Lima, peru, and
they need significantly lessmoney than a US startup and
they're also able to pay muchbetter than domestic companies,
so they can attract talent mucheasier, and love to see how that
(08:52):
plays out in Brazil.
Mitsuru Nakayama (08:53):
Yeah, well, that's a very good question.
We see like interesting, like adifferent dynamics among
countries.
So I guess what determines likea valuation, ticket sales and
everything based on the kind oflike a history or like
accumulated experience outsidean ecosystem.
(09:15):
So, for instance, I guess likeif there's like two companies,
same revenue size, like aprofitability and work rate and
everything, I think a valuationin Brazil can be a little bit
lower than other countries inLatin America.
The reason is, as Brazilexperienced a lot of like exit,
(09:39):
mainly by M&A.
Some are like IPO.
People understand how much theycan gain at the end of the
journey of a startup.
So, as we see, we calculate inan inverted way.
So you need to have like aseveral rounds.
Each round should have like adouble or like a triple the
(10:01):
valuation and then at this stagethe valuation should be like x
dollars.
But in other countries in LatinAmerica I see like there are
not so many like exit cases, sopeople don't have numbers.
So that's why kind of like anystartup can be unicorn is the
kind of expectation by investors, especially in the initial
(10:24):
phase.
So people see like, okay, onemillion dollars, three million
dollars, five million dollars,valuation can be similar because
it's going to be like onemillion dollars at the end of
the day, and another differentcharacteristics can be type of
investors in these 10 years fora Brazil kind of created
experienced investors, bothmicro funds and individual
(10:47):
investors like Angel Investor.
However, in other countries inLatin America well, mexico has a
little bit better than others,but in these countries people
are experiencing the first cycleof the investment in stocks, so
there is a very big lack ofexperience of how much will be
(11:08):
at the end of the day.
So people are a little bitoptimistic in these countries,
which doesn't have actualnumbers, and so that's kind of
like a struggle that we may facebecause we know how it's going
to be like in Brazil, a littlebit like in Western Brazil
because of the market size.
But people are more optimisticin Spanish-speaking countries.
(11:30):
So that's why we are trying toshare our experience as much as
possible launching our venturefinancing, online courses in
Spanish, for example, try tolike, establish kind of like a
market standard in a way.
But comparing with the USstartup, for sure, valuation is
(11:52):
much lower and so ticket sizecan be much smaller.
So, for example, we are in thepre-seed round valuation of the
startup can be like $1 to $4million.
Our ticket size could be $100to $200K and startup has, let's
say, the recent investment wemade.
(12:13):
The startup had $35,000 revenueper month, profitable, growing
10% per month, but still like a$4, $5 million valuation.
Brian Samson (12:23):
I guess it might be much lower than, uh, us or
like even the japanese marketare there particular regions
that you see are taking off morethan others, say florianopolis
or sao paulo, rio, you knowwhere, where, where is the
hottest space right now?
Mitsuru Nakayama (12:39):
well, it's a little interesting in brazil uh
Brazil that there's not so muchconcentration.
For example, sao Paulo is thebiggest city in terms of
commercial and population andeverything.
However, as Brazil is too bigto concentrate everyone in one
city, each state has a goodeducational system and good
(13:02):
universities and people tend tostay in the local regions.
If we look at our portfolio,for example, I'd say 40-50% are
in Sao Paulo, but the rest isscattered in several cities.
We don't see much of thegeography, but I think an
(13:23):
interesting area in LatinAmerica in general is the
fintech area and because of that, but as Brazil experienced like
one cycle of the what kind oflike a business model works and
doesn't work, so we see severalsub areas where there might be
(13:45):
more potential than others.
And well, as I kind of commentedabout the stablecoin
transaction, how to like adaptnew technology to like a real,
like a social implementationhappens rapidly in North America
.
So we are like looking at thisarea as well and we are kind of
feeling that SARS business modelkind of started getting
(14:09):
attraction in Latin America, Iguess.
Well, so, as you may see, thiskind of happens like a few I
would say like years after whathappens in other countries.
So as we I know much aboutJapanese startup ecosystem and,
of course, in general we followUS startup ecosystem, so that
(14:31):
can be a very good referencepoint and a benchmark for us to
decide where to look more andhow to make decisions.
Brian Samson (14:39):
Interesting, as you talked about maybe some of
the apps that might be moresuccessful, and I'd love to hear
just more about how consumersmight think about that.
For example, you know, in Chinait's often like the focus on
super apps that you know do many, many things In the US for a
(15:06):
long time it's, you know, pick,like a very singular focus.
Do that excellent.
How might Brazil think aboutthat?
Mitsuru Nakayama (15:09):
Brazil is pretty much similar to US market
in that sense.
So one kind of like particularexample is like Uber.
Uber is the dominant in Brazilfor the ride share and Uber
launched Uber Eats for delivery,for the food services and also
(15:31):
grocery.
But Uber Eats just stoppedoperating in Brazil a few years
ago because there is anotherlocal app like iFood, and Rappi
are very strong in the region.
So and also I know well Asiancountries also have a lot of
(15:51):
like a super app.
However, I don't know why, butsuper app doesn't happen so much
in Latin America.
Brian Samson (15:57):
Yeah, yeah, I've seen that.
I've seen that too.
And also, as we're thinkingabout Asia, you know, I think
about San Francisco as a very,very mature market for startups,
and the way that I mightmeasure it is three things Do
(16:18):
you have capital, do you havetalent?
And then do you have mentorsright, Like people that recycle
their knowledge, recycle theircapital and so forth.
They have exits, they staythere, they reinvest right?
So I look at a country likeSingapore that almost tries to
like, buy their way into it.
You know they don't quite havethe talent or the mentorship,
(16:39):
but they have the capital, youknow.
Let's, let's try to accelerateour, our, where we are, um,
where, where is brazil like?
Is there?
Has there been enough cycleswhere, like, the mentorship and
exits have flown through?
Mitsuru Nakayama (16:53):
well, I think it's still like uh, evolving.
So, uh, I wouldn't say like, uh, it's very much established yet
.
So I'd say like, let's say, 10years ago, when I kind of
started investing in Brazil,there are not so many
(17:17):
entrepreneurs with a highereducation, like a better
background, in general, becausein Brazil there's almost like a
10% interest rate per year.
So once you have like a 1million, you get like 100K
without doing anything and it'svery like a diversified country.
(17:41):
So if you're in like a top tierin terms of like education and
financial status, it's kind ofmuch easier to stay in kind of
big companies or being like apublic employees, to kind of
maintain the status and pay well.
So at that time, there was onlyone exceptional startup made a
(18:05):
very big exit.
However, in general, let's say,you can sell the company at the
$10 dollars and at that timeyou kind of value the 50 percent
.
You have three founders, youget 1.9 1.7 million dollars in
10 years, but if you work at thecompany, you get 200 000 and
(18:26):
that you keep like achievingright and the interest by 10
percent.
So, uh, there was not so bigfinancial incentive at the time.
However, in 2018, threeBrazilian startups made an IPO
in the US and then the value wasa few billion dollars, that
(18:48):
kind of like a totally changedlike mindset of being an
entrepreneur of a startup orlike a tech area in Brazil of a
startup or like a tech area inBrazil.
So before that, I think it wasvery tough to find experienced
mentors in Brazil and that therewere scarce of money, because
when we started in 2014, 400million dollars put the whole
(19:15):
amount of the investment down tothe startups in Brazil.
But eventually, in that kind oftrigger of 2018 and the top of
2021, I'd say $10 billion wentto Brazilian startups.
So big difference in only sevenyears.
And, as I said, there are a lotof unicorns and many people
(19:36):
started making an exit.
Some entrepreneurs becameinvestors, launched some VC
funds.
So VC funds we see a lot ofsuccessful entrepreneurs working
in VC funds, so these peoplenaturally kind of share their
experience, so that flourishesBrazilian ecosystem.
(20:01):
However, I guess it's so muchlimited ecosystem with a very
limited number of people arehere.
So I guess we see a lot of likeopportunity, opportunity in the
future as well.
But comparing with othercountries in Latin America, I
guess we have much better likeexperienced mentors in Brazil
(20:24):
and also the capital as well atthe same time.
Well, so that's kind of likehow we call it, like ecosystem,
right?
So ecosystems started likerolling in Brazil still, but
still some other countries arein the beginning of the
development of the ecosystem.
So we see a very big timedifference between Brazil and
(20:45):
other countries in Latin America.
Brian Samson (20:47):
I'd love to hear more about your firm.
Tell us about are there anysectors that you're particularly
focused on right now, and checksizes, and you know.
If there are entrepreneurs thatare interested in speaking with
you, you know what should theyknow?
Mitsuru Nakayama (21:05):
Okay, yeah, well, we BVG Capital.
We started in 2014 in Brazil.
So first fund only invested inBrazilian startups, so we made
12 investments in Brazil.
So first fund only invested inBrazilian startups, so we made
12 investments in Brazil.
And the second fund we startedin the beginning of 2021.
And from fund two, we expandedto other Latin American
(21:26):
countries as well, well, as theworld in general, became like
online basis, so having someSpanish speakers in the team, we
can cover, like almost all ofthe American countries.
The idea in reality is not thatmuch like an online base.
We still need face to facecommunication and stuff.
So from then, we have teams inColombia, peru and Brazil, and
(21:51):
my colleague, or co-GP, is inPeru as well.
He's a Peruvian.
And then from the second fund,we invested on 25 startups, so
in total, we have 37 investmentin both American startups.
And now we started our thirdfund.
We made the first investment ina Brazilian startup from our
(22:13):
third fund.
So our third fund focuses moreon fintech and SaaS.
And well, I think we're goingto invest 50% to Brazil and the
rest can be divided by otherSpanish-speaking countries, and
our check size is 100K as aninitial investment, but we do a
(22:34):
follow-on and is 100k as aninitial investment, but we do a
follow-on and we would like toenter in the first one I mean,
after family and friends onewith some revenue, even though
small, it's fine, but it doesn'thave to be like a press roll
for sure.
However, we want to invest onthe startup.
It's just like a get out of thekind of prototype mode.
(22:55):
It can be okay with the MVP,but still we need to have some
paying customers for us to enter.
Brian Samson (23:04):
Excellent, excellent.
And then, just aside frombusiness, what's life like as an
expat in Brazil?
And then maybe you can alsocomment on there are a lot of
Japanese living in Brazil.
And then maybe you can alsocomment on there are a lot of
Japanese living in Brazil too.
Mitsuru Nakayama (23:17):
Yeah, Well, it's a very I mean, for me it's
a very good part of the life inBrazil because I think the
recent statistics shows morethan 1.4% of the Brazilian
population is Japanesedescendants.
Brazilian population isJapanese descendants.
(23:39):
So and especially concentratedmuch in Sao Paulo.
So if you like walk around thecity, you see a lot of like
oriental places.
So it kind of like makes mecomfortable, because I don't
like to kind of stand out in themiddle like anyone.
And I would say Brazil has a lotof different cultural
backgrounds, so if you don'tspeak anything you can't be
(24:03):
Brazilian.
I mean, from the physicalappearance you cannot tell who
is Brazilian, who is notBrazilian, literally.
So that's.
And also people are very opento foreigners as well.
So I remember when I startedworking at the band company in
Sao Paulo, I didn't speak anyPortuguese, so I needed to use
(24:25):
like a translator, like a Googletranslator for example, and I
need to repeat questions andpeople kind of like patiently
listen to me, my very poorPortuguese.
But that is totally differentfrom like a cultural acceptance.
In Japan, for example, if Idon't speak Japanese in a
(24:47):
Japanese company's office, maybeI can work in a very 100%
English project with Englishspeaking clients.
However, I cannot be working ina very 100% English project
with English speaking clients.
However, I cannot be working ina Japanese project.
So the acceptance to aforeigner is very warm and very
comfortable.
And also like food is amazing.
(25:08):
I mean not only in Brazil, butmany countries in Latin America.
They have a lot of like goodfood and high quality
ingredients as well.
Peru is also quite famous forits gastronomy, but also other
countries are also improving alot on that, and I can instantly
find Japanese food in Brazil.
(25:29):
So that's a very good part ofmy life, very good part of my
life, and so I think in general,I don't feel like I'm an ex-.
Father.
I kind of immigrated as a firstgeneration.
My wife is Brazilian as well.
I met her after I kind of movedto Brazil.
So and also kind of interestingprobably I'm the only one
(25:50):
Japanese in my firm so and hewas called like a Brazilian
venture capital.
But now we kind of like wascalled like a Brazilian venture
capital but now we kind of likebecame like a B venture capital,
so no one knows from where weare from.
So it's very interesting like amixture of the culture and
people.
Brian Samson (26:08):
Amazing, amazing.
Are there any particularrestaurants you'd like to
mention on the show?
If anyone is traveling there?
Mitsuru Nakayama (26:15):
that, uh, your recommendation oh, I think, uh,
there are a lot of like a gooduh, we call it churrascaria, the
churrasco like a brazilianbarbecue style from like, as you
can see, probably in the usciao let's say how different, I
don't know how to pronounce itin English.
(26:35):
Also, we have a lot of like.
My friend is running a verygood French bistro called Le
Jazz in Sao Paulo.
They offer some very goodFrench bistro dishes and we have
a lot of like Japaneserestaurants as well.
So I mean, it's kind of hard tolike pick one.
(26:58):
But, however, one thing, uh, onedish I'd like to recommend to
everyone is called a mukeka.
It's kind of like a seafoodstew and with uh kind of with
the coconut milk, a lot of likeuh, uh fresh, uh fish or
something uh, seafood likeshrimps and stuff, and also
(27:18):
Kaipirinha, which is a kind oflocal cocktail made by Kashasa.
Kashasa is like a rum made ofsugar cane that is also
delicious, mixed with localdelicious foods as well.
I mean there are a lot ofthings you should try.
So you should try, so youshould come here, not for a week
but for a month or something,but still, you're not tired of
(27:42):
like trying a lot of likedelicious food here.
Brian Samson (27:45):
Amazing, fantastic .
Well, mitsuru, this was such apleasure having you on the show.
Really appreciate your time,learned a lot about the
Brazilian ecosystem.
You're listening to the nearshort cafe podcast, Brian Samson
, your host, and this issponsored by plug technologies,
plu GG tech great way to connecttalent from all over Latin
(28:08):
America, including Brazil, withUS, with US companies.
Thanks everyone for listening.
We'll see you next time.
We'll see you next time.
Welcome everyone to theNearshore Cafe podcast, where we
talk about the stories andpeople doing business in Latin
America.
I'm Brian Samson, your host,and if you're interested in the
investing landscape andecosystem in Latin America and,
(00:53):
in particular, brazil, this isgoing to be a special podcast
for you.
We have Mitsuru Nakayama and heis an expert in this space.
Before we jump right into it,this podcast is sponsored by
Plug Technologies pluggtech.
Plug is a great way to connectall the amazing talent from
(01:16):
Latin America to growing UScompanies.
Let's get right into it.
Welcome to the show, mitsuru.
Mitsuru Nakayama (01:22):
Thank you very much for having me here.
My pleasure to be here.
Brian Samson (01:26):
Amazing.
Well, let's just start.
Let me ask kind of a generaloverview, you know, as you've
been an investor in LatinAmerica for a little while.
What does it look like today?
Do you feel optimistic orpessimistic right now?
Mitsuru Nakayama (01:46):
Well, very optimistic actually because well
, of course, like the same asthe US market, venture capital
market got like some likeadjustment, like after 2022 and
three.
So we are kind of like in aslow mold in these years.
However, I think, as we hadlike a big wave in 2020 and 2021
(02:11):
, the wave made a lot ofexperienced entrepreneurs and
made several unicorns, meaninglike a lot of like people
working in growing startups inLatin America.
I think it's more than 50companies became unicorns at
(02:32):
that time, so that kind of givesus a much better opportunity
for the potential excellentexpert startups and
entrepreneurs in the regions.
So we feel that when we startedinvesting in Latin America in
2014, and as we are looking atthese entrepreneurs today, then
(02:54):
after 10 years, I feel thequality of the or excellence of
the business plan and analyticalperspective of the problem
solutions became much betterthan that of 10 years ago.
Brian Samson (03:10):
I'd like to talk a little more about Brazil as a
standalone country when it comesto the VC tech ecosystem.
How is it maybe the same?
How might it be different fromsome of the other powerhouse
countries like mexico, argentina, colombia?
Mitsuru Nakayama (03:29):
I would love to hear more well, I think first
of all, we kind of divide latinamerica in two different
regions.
One is brazil, which speaksportuguese, and the other is
like a spanish-speaking latincountries.
Um, characteristics of brazilis like a Spanish speaking Latin
countries.
Characteristics of Brazil islike the population, more than
like 200 million people, andalso the country itself is very
(03:53):
strong in terms of like a lot oflike natural resources and
stuff like that.
So the economy is much strongerthan other countries and that's
why it's kind of like anindependent ecosystem, I would
say.
And that's why it's kind oflike an independent ecosystem,
I'd say.
And also thinking like aventure capital industry.
The local government helped alot to invest on startups.
(04:15):
So it means you need toestablish a fund in Brazil and
invest on like a Brazilianstartup.
That was the beginning of theecosystem.
So it means Brazil has a longerhistory of ecosystems and also
the volume of the investment onstartup has been much larger
(04:35):
than other countries in LatinAmerica.
And also people in Latin Americasay Brazil kind of rapidly
adapt new technology or like anew business model.
One good example could be aride share when ride share like
a uber and at the time they werelike a cabified and local 99
(04:59):
taxi started operating in Brazil.
Brazilian government startedcreating regulation for the ride
share, not like adapting ormodifying the taxes regulation,
which is totally different fromthe movement that we see in
Japan, for example.
Japanese government would liketo put these like a new
(05:22):
businesses into some like atraditional business framework
in general, like a regulation,especially that can be kind of
like will prevent theopportunity to take advantage of
having like sorry, let me lookat this again.
That kind of like movement bygovernment can prevent from
(05:45):
local people taking advantage ofnew technology or new business
models and the similar thingsare happening in, for example,
like a drone in agriculturalareas.
Brazilian government like relaxthe regulation of the payload of
the drone, especially inagricultural land.
There's almost like no peopleliving there.
(06:07):
So in many countries if thedrone become like more than 25
kilograms, then the regulationgotta be more strict and it's
kind of tough to really likeoperate the drone in these areas
.
So in a few years back, well,people were like operating drone
(06:28):
within this like a weight limit.
However, a few years ago thegovernment opened up the weight
limit only in agricultural land,without any limit, so you can
have a large drone which can bereplicable to the, for example,
helicopters or sometimes planes.
(06:48):
That reduces a lot of carbonemission because you don't need
to fly this plane and alsodrones can fly very precisely to
spray in a specific location.
For example, that produces likea use of a chemical material by
80%, for example, and this kindof like a movement is like a
(07:13):
continuing.
For example, in stablecoins,brazilian government kind of
decided like how to make aninterbanking transaction using
stablecoin, how to report likeofficially, to make it like an
official transaction.
But before that it wasconsidered kind of like a gray
zone.
(07:33):
People were thinking it's goingto be okay.
However, there might be a riskand as government decides how to
do it, even though it's kind oflike a complicated, that people
kind of safely operate andinnovate the business within the
legal framework, and othercountries probably are seeing
(07:55):
like the tendency will be there.
So many other Latin Americancountries are looking at
Brazilian government regulationpolicy as if it's going to come
to their own countries.
Brian Samson (08:09):
Yeah, interesting, interesting.
And when you talked aboutvolume of investment, I wanted
to peel the onion a little bitin terms of you know how
investors there are, maybethinking about check sizes, size
of rounds, and then how thatmight even be allocated.
(08:29):
For example, we've spoken toentrepreneurs in Lima, peru, and
they need significantly lessmoney than a US startup and
they're also able to pay muchbetter than domestic companies,
so they can attract talent mucheasier, and love to see how that
(08:52):
plays out in Brazil.
Mitsuru Nakayama (08:53):
Yeah, well, that's a very good question.
We see like interesting, like adifferent dynamics among
countries.
So I guess what determines likea valuation, ticket sales and
everything based on the kind oflike a history or like
accumulated experience outsidean ecosystem.
(09:15):
So, for instance, I guess likeif there's like two companies,
same revenue size, like aprofitability and work rate and
everything, I think a valuationin Brazil can be a little bit
lower than other countries inLatin America.
The reason is, as Brazilexperienced a lot of like exit,
(09:39):
mainly by M&A.
Some are like IPO.
People understand how much theycan gain at the end of the
journey of a startup.
So, as we see, we calculate inan inverted way.
So you need to have like aseveral rounds.
Each round should have like adouble or like a triple the
(10:01):
valuation and then at this stagethe valuation should be like x
dollars.
But in other countries in LatinAmerica I see like there are
not so many like exit cases, sopeople don't have numbers.
So that's why kind of like anystartup can be unicorn is the
kind of expectation by investors, especially in the initial
(10:24):
phase.
So people see like, okay, onemillion dollars, three million
dollars, five million dollars,valuation can be similar because
it's going to be like onemillion dollars at the end of
the day, and another differentcharacteristics can be type of
investors in these 10 years fora Brazil kind of created
experienced investors, bothmicro funds and individual
(10:47):
investors like Angel Investor.
However, in other countries inLatin America well, mexico has a
little bit better than others,but in these countries people
are experiencing the first cycleof the investment in stocks, so
there is a very big lack ofexperience of how much will be
(11:08):
at the end of the day.
So people are a little bitoptimistic in these countries,
which doesn't have actualnumbers, and so that's kind of
like a struggle that we may facebecause we know how it's going
to be like in Brazil, a littlebit like in Western Brazil
because of the market size.
But people are more optimisticin Spanish-speaking countries.
(11:30):
So that's why we are trying toshare our experience as much as
possible launching our venturefinancing, online courses in
Spanish, for example, try tolike, establish kind of like a
market standard in a way.
But comparing with the USstartup, for sure, valuation is
(11:52):
much lower and so ticket sizecan be much smaller.
So, for example, we are in thepre-seed round valuation of the
startup can be like $1 to $4million.
Our ticket size could be $100to $200K and startup has, let's
say, the recent investment wemade.
(12:13):
The startup had $35,000 revenueper month, profitable, growing
10% per month, but still like a$4, $5 million valuation.
Brian Samson (12:23):
I guess it might be much lower than, uh, us or
like even the japanese marketare there particular regions
that you see are taking off morethan others, say florianopolis
or sao paulo, rio, you knowwhere, where, where is the
hottest space right now?
Mitsuru Nakayama (12:39):
well, it's a little interesting in brazil uh
Brazil that there's not so muchconcentration.
For example, sao Paulo is thebiggest city in terms of
commercial and population andeverything.
However, as Brazil is too bigto concentrate everyone in one
city, each state has a goodeducational system and good
(13:02):
universities and people tend tostay in the local regions.
If we look at our portfolio,for example, I'd say 40-50% are
in Sao Paulo, but the rest isscattered in several cities.
We don't see much of thegeography, but I think an
(13:23):
interesting area in LatinAmerica in general is the
fintech area and because of that, but as Brazil experienced like
one cycle of the what kind oflike a business model works and
doesn't work, so we see severalsub areas where there might be
(13:45):
more potential than others.
And well, as I kind of commentedabout the stablecoin
transaction, how to like adaptnew technology to like a real,
like a social implementationhappens rapidly in North America
.
So we are like looking at thisarea as well and we are kind of
feeling that SARS business modelkind of started getting
(14:09):
attraction in Latin America, Iguess.
Well, so, as you may see, thiskind of happens like a few I
would say like years after whathappens in other countries.
So as we I know much aboutJapanese startup ecosystem and,
of course, in general we followUS startup ecosystem, so that
(14:31):
can be a very good referencepoint and a benchmark for us to
decide where to look more andhow to make decisions.
Brian Samson (14:39):
Interesting, as you talked about maybe some of
the apps that might be moresuccessful, and I'd love to hear
just more about how consumersmight think about that.
For example, you know, in Chinait's often like the focus on
super apps that you know do many, many things In the US for a
(15:06):
long time it's, you know, pick,like a very singular focus.
Do that excellent.
How might Brazil think aboutthat?
Mitsuru Nakayama (15:09):
Brazil is pretty much similar to US market
in that sense.
So one kind of like particularexample is like Uber.
Uber is the dominant in Brazilfor the ride share and Uber
launched Uber Eats for delivery,for the food services and also
(15:31):
grocery.
But Uber Eats just stoppedoperating in Brazil a few years
ago because there is anotherlocal app like iFood, and Rappi
are very strong in the region.
So and also I know well Asiancountries also have a lot of
(15:51):
like a super app.
However, I don't know why, butsuper app doesn't happen so much
in Latin America.
Brian Samson (15:57):
Yeah, yeah, I've seen that.
I've seen that too.
And also, as we're thinkingabout Asia, you know, I think
about San Francisco as a very,very mature market for startups,
and the way that I mightmeasure it is three things Do
(16:18):
you have capital, do you havetalent?
And then do you have mentorsright, Like people that recycle
their knowledge, recycle theircapital and so forth.
They have exits, they staythere, they reinvest right?
So I look at a country likeSingapore that almost tries to
like, buy their way into it.
You know they don't quite havethe talent or the mentorship,
(16:39):
but they have the capital, youknow.
Let's, let's try to accelerateour, our, where we are, um,
where, where is brazil like?
Is there?
Has there been enough cycleswhere, like, the mentorship and
exits have flown through?
Mitsuru Nakayama (16:53):
well, I think it's still like uh, evolving.
So, uh, I wouldn't say like, uh, it's very much established yet
.
So I'd say like, let's say, 10years ago, when I kind of
started investing in Brazil,there are not so many
(17:17):
entrepreneurs with a highereducation, like a better
background, in general, becausein Brazil there's almost like a
10% interest rate per year.
So once you have like a 1million, you get like 100K
without doing anything and it'svery like a diversified country.
(17:41):
So if you're in like a top tierin terms of like education and
financial status, it's kind ofmuch easier to stay in kind of
big companies or being like apublic employees, to kind of
maintain the status and pay well.
So at that time, there was onlyone exceptional startup made a
(18:05):
very big exit.
However, in general, let's say,you can sell the company at the
$10 dollars and at that timeyou kind of value the 50 percent
.
You have three founders, youget 1.9 1.7 million dollars in
10 years, but if you work at thecompany, you get 200 000 and
(18:26):
that you keep like achievingright and the interest by 10
percent.
So, uh, there was not so bigfinancial incentive at the time.
However, in 2018, threeBrazilian startups made an IPO
in the US and then the value wasa few billion dollars, that
(18:48):
kind of like a totally changedlike mindset of being an
entrepreneur of a startup orlike a tech area in Brazil of a
startup or like a tech area inBrazil.
So before that, I think it wasvery tough to find experienced
mentors in Brazil and that therewere scarce of money, because
when we started in 2014, 400million dollars put the whole
(19:15):
amount of the investment down tothe startups in Brazil.
But eventually, in that kind oftrigger of 2018 and the top of
2021, I'd say $10 billion wentto Brazilian startups.
So big difference in only sevenyears.
And, as I said, there are a lotof unicorns and many people
(19:36):
started making an exit.
Some entrepreneurs becameinvestors, launched some VC
funds.
So VC funds we see a lot ofsuccessful entrepreneurs working
in VC funds, so these peoplenaturally kind of share their
experience, so that flourishesBrazilian ecosystem.
(20:01):
However, I guess it's so muchlimited ecosystem with a very
limited number of people arehere.
So I guess we see a lot of likeopportunity, opportunity in the
future as well.
But comparing with othercountries in Latin America, I
guess we have much better likeexperienced mentors in Brazil
(20:24):
and also the capital as well atthe same time.
Well, so that's kind of likehow we call it, like ecosystem,
right?
So ecosystems started likerolling in Brazil still, but
still some other countries arein the beginning of the
development of the ecosystem.
So we see a very big timedifference between Brazil and
(20:45):
other countries in Latin America.
Brian Samson (20:47):
I'd love to hear more about your firm.
Tell us about are there anysectors that you're particularly
focused on right now, and checksizes, and you know.
If there are entrepreneurs thatare interested in speaking with
you, you know what should theyknow?
Mitsuru Nakayama (21:05):
Okay, yeah, well, we BVG Capital.
We started in 2014 in Brazil.
So first fund only invested inBrazilian startups, so we made
12 investments in Brazil.
So first fund only invested inBrazilian startups, so we made
12 investments in Brazil.
And the second fund we startedin the beginning of 2021.
And from fund two, we expandedto other Latin American
(21:26):
countries as well, well, as theworld in general, became like
online basis, so having someSpanish speakers in the team, we
can cover, like almost all ofthe American countries.
The idea in reality is not thatmuch like an online base.
We still need face to facecommunication and stuff.
So from then, we have teams inColombia, peru and Brazil, and
(21:51):
my colleague, or co-GP, is inPeru as well.
He's a Peruvian.
And then from the second fund,we invested on 25 startups, so
in total, we have 37 investmentin both American startups.
And now we started our thirdfund.
We made the first investment ina Brazilian startup from our
(22:13):
third fund.
So our third fund focuses moreon fintech and SaaS.
And well, I think we're goingto invest 50% to Brazil and the
rest can be divided by otherSpanish-speaking countries, and
our check size is 100K as aninitial investment, but we do a
(22:34):
follow-on and is 100k as aninitial investment, but we do a
follow-on and we would like toenter in the first one I mean,
after family and friends onewith some revenue, even though
small, it's fine, but it doesn'thave to be like a press roll
for sure.
However, we want to invest onthe startup.
It's just like a get out of thekind of prototype mode.
(22:55):
It can be okay with the MVP,but still we need to have some
paying customers for us to enter.
Brian Samson (23:04):
Excellent, excellent.
And then, just aside frombusiness, what's life like as an
expat in Brazil?
And then maybe you can alsocomment on there are a lot of
Japanese living in Brazil.
And then maybe you can alsocomment on there are a lot of
Japanese living in Brazil too.
Mitsuru Nakayama (23:17):
Yeah, Well, it's a very I mean, for me it's
a very good part of the life inBrazil because I think the
recent statistics shows morethan 1.4% of the Brazilian
population is Japanesedescendants.
Brazilian population isJapanese descendants.
(23:39):
So and especially concentratedmuch in Sao Paulo.
So if you like walk around thecity, you see a lot of like
oriental places.
So it kind of like makes mecomfortable, because I don't
like to kind of stand out in themiddle like anyone.
And I would say Brazil has a lotof different cultural
backgrounds, so if you don'tspeak anything you can't be
(24:03):
Brazilian.
I mean, from the physicalappearance you cannot tell who
is Brazilian, who is notBrazilian, literally.
So that's.
And also people are very opento foreigners as well.
So I remember when I startedworking at the band company in
Sao Paulo, I didn't speak anyPortuguese, so I needed to use
(24:25):
like a translator, like a Googletranslator for example, and I
need to repeat questions andpeople kind of like patiently
listen to me, my very poorPortuguese.
But that is totally differentfrom like a cultural acceptance.
In Japan, for example, if Idon't speak Japanese in a
(24:47):
Japanese company's office, maybeI can work in a very 100%
English project with Englishspeaking clients.
However, I cannot be working ina very 100% English project
with English speaking clients.
However, I cannot be working ina Japanese project.
So the acceptance to aforeigner is very warm and very
comfortable.
And also like food is amazing.
(25:08):
I mean not only in Brazil, butmany countries in Latin America.
They have a lot of like goodfood and high quality
ingredients as well.
Peru is also quite famous forits gastronomy, but also other
countries are also improving alot on that, and I can instantly
find Japanese food in Brazil.
(25:29):
So that's a very good part ofmy life, very good part of my
life, and so I think in general,I don't feel like I'm an ex-.
Father.
I kind of immigrated as a firstgeneration.
My wife is Brazilian as well.
I met her after I kind of movedto Brazil.
So and also kind of interestingprobably I'm the only one
(25:50):
Japanese in my firm so and hewas called like a Brazilian
venture capital.
But now we kind of like wascalled like a Brazilian venture
capital but now we kind of likebecame like a B venture capital,
so no one knows from where weare from.
So it's very interesting like amixture of the culture and
people.
Brian Samson (26:08):
Amazing, amazing.
Are there any particularrestaurants you'd like to
mention on the show?
If anyone is traveling there?
Mitsuru Nakayama (26:15):
that, uh, your recommendation oh, I think, uh,
there are a lot of like a gooduh, we call it churrascaria, the
churrasco like a brazilianbarbecue style from like, as you
can see, probably in the usciao let's say how different, I
don't know how to pronounce itin English.
(26:35):
Also, we have a lot of like.
My friend is running a verygood French bistro called Le
Jazz in Sao Paulo.
They offer some very goodFrench bistro dishes and we have
a lot of like Japaneserestaurants as well.
So I mean, it's kind of hard tolike pick one.
(26:58):
But, however, one thing, uh, onedish I'd like to recommend to
everyone is called a mukeka.
It's kind of like a seafoodstew and with uh kind of with
the coconut milk, a lot of likeuh, uh fresh, uh fish or
something uh, seafood likeshrimps and stuff, and also
(27:18):
Kaipirinha, which is a kind oflocal cocktail made by Kashasa.
Kashasa is like a rum made ofsugar cane that is also
delicious, mixed with localdelicious foods as well.
I mean there are a lot ofthings you should try.
So you should try, so youshould come here, not for a week
but for a month or something,but still, you're not tired of
(27:42):
like trying a lot of likedelicious food here.
Brian Samson (27:45):
Amazing, fantastic .
Well, mitsuru, this was such apleasure having you on the show.
Really appreciate your time,learned a lot about the
Brazilian ecosystem.
You're listening to the nearshort cafe podcast, Brian Samson
, your host, and this issponsored by plug technologies,
plu GG tech great way to connecttalent from all over Latin
(28:08):
America, including Brazil, withUS, with US companies.
Thanks everyone for listening.
We'll see you next time.
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