The audio and video are in Spanish. These notes are a translation.
In 2023, startups in Latin America raised 3 billion dollars, less than even the investment level of 2019.
That is why I wanted to do a review of the market: why did investment fall so much? What will happen in 2024? How do you raise capital this year?
For that, I invited my friend Tomas Roggio, managing partner of Latitud Ventures, the pre-seed fund of 25 million dollars of Latitud, the largest startup community in Latin America. Tomas has led investments in startups like Pomelo, Finkargo, Yuno, and FUDO.
Over the last three years, Tomi has refined Latitud’s capital-raising playbook, helping more than 1,000 startups raise more than 650 million dollars in aggregate.
Today, we talk about:
- The current state of Venture Capital in Latin America
- What a startup needs in order to be investable in 2024
- And how to raise capital: including the specific strategies and tactics of Latitud’s playbook
- For example, how to talk and how to run the meetings with investors
This episode is full of the most effective practices for raising capital, based on the learnings of Tomas from working with more than 1000 startups.
Youtube Timestamps*
[00:00] - Market Status
- How did Tomás arrive at the fascinating world of startups?
- What do the music business and investing in startups have in common?
Let’s start with a status of the market by putting numbers on it, taking advantage of the fact that Latitud has exposure to more than 1,000 startups through its portfolio and fellowship.
- How long does it take to raise a round? What % of companies that go out to raise capital actually close rounds? What round sizes and valuations is he seeing in angel and seed rounds? How much participation is there from foreign investors?
In 2020 and 21, many employees of big tech and well-known startups left their jobs to start their own companies and raise capital with power points.
- What is the current profile of the company you see going out to raise capital? Are many companies still being seen at the powerpoint stage? Is more bootstrapping being seen?
The question of whether the market is going to come back is always there.
There are cycles, but what we lived in 2020 and 21 probably will not come back… and perhaps it should not come back either.
- What are Tomás’s reflections on what was lived in those years? What excesses were committed that he believes should be “top of mind”? What things does he hold onto?
Between 2017 and 2020, around 3 out of every 10 startups that raised a seed round raised a Series A within 2 years.
In 2022 and 23, that number is fewer than 1 out of every 10 startups.
- In a market where the probability of raising capital is significantly lower, with what mindset does he think entrepreneurs should operate regarding the financing of their business? What is the balance between taking risks and profitability?
Let’s look at the hypothetical case of an entrepreneur who has just raised a seed round and wants feedback on his financial plan for 2024. This year, his priority is to sell and become profitable so as not to depend on more external capital.
There is a certain risk that, by optimizing for sales too soon, he could neglect investing in his product.
- What does the financial plan of the startups Tomás has invested in recently look like? How many months of runway are they aiming for? Do they have plans to pivot toward profitability in case something does not come out as they expected?
[26:23] - How to Raise Capital in 2024
Moving the focus to the first investment round (which is not an accelerator), whether an angel round or pre-seed.
- Today, what is the “right moment” for a business to raise its first round of capital? What is Tomás’s advice both for experienced operators and for first-time entrepreneurs?
Thinking about the ROI of the time invested in raising capital.
Many founders go out to raise capital without being prepared, or before their business is ready, and they end up losing time, energy, and valuable focus for their business.
- How can an entrepreneur, before going out to raise capital, do an honest evaluation of whether their business is investable or whether it is better to stay focused 100% on their business?
Talking about more tactical advice on how to raise capital, based on what Tomás has learned by supporting more than 1,000 startups.
First, in terms of prior preparation:
- What are the minimum materials an entrepreneur should prepare before going out to raise their first investment round?
- Is there anything else an entrepreneur should do before starting to talk with investors?
- How many conversations should they have in order to be able to close a round of 400k to 500k?
- How should the size of the round be defined?
Once the moment comes to go out and talk with investors:
- What is the most effective thing for connecting with those potential first investors?
- Does he recommend mentioning when you expect to be able to close the round?
- Does he recommend talking with people at the fund who are not partners, like analysts or associates?
About the meetings:
- How does Tomás recommend presenting the materials to investors? Is it better to send everything from the start, or share the documents as the process advances? For example, does he recommend sending the pitch before the first call?
- What other recommendations does he think are worth mentioning to close Latitud’s playbook?
[01:01:40] - Rapid-Fire Questions
- If Tomás looks 10 years into the future and puts on the dreamer’s hat, what is the most extraordinary vision for Latitud?
Episode Mentions
You can find Tomás on LinkedIn
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