A new era for ICO investing in Latin America
The managing partner of InvertUP Seed Capital Fund, Marcelo Lebendiker — an investor with 15+ years of experience, discusses how his team helps tech startups scale their businesses, raise funds and prepare to access the global markets. Thanks to a partnership with Mango Startups, the InvertUP team now provides the chance for everybody to participate in venture deals through an ICO opportunity.
– You are one of the first in the VC space who has come up with an idea to use blockchain technology to support startups. How did this come about?
We were looking for solutions regarding a clear exit strategy for our investors, then we follow the most promising trends, and it’s clear that blockchain is just such a trend that will allow those exit strategies through blockchain smart contracts.
– What is an ICO and how does it work for Mango Startups?
An ICO is — in some ways — similar to an IPO (Initial Public Offering), but conducted on a cryptocurrency platform.
In a classical VC model, you have to make a significant investment and wait for a long time to see any returns. Previously, there was no way to make such an investment without a bank check for at least $100,000, maybe $1 million, and there was no way for you to diversify your investment without big money flowing in at some point in the future. With the advent of the ICO, smart contracts will allow investors with $10,000 or far less, to also do this. Mango Tokens issued by the Mango Startups SPV, will cost $0.10 at the initial offering in the framework of our project.
The mechanism is attractive in its openness. This is the model that all venture funds should strive for. Transparency and market liquidity are maintained; while investors can exit at any time.
The system allows investors to choose their strategy: accrue tokens from outstanding Startups’ profits (i.e airdrops), wait for an exit (i.e M&A, sale of the startup to a bigger player), or make a decision based on expectations on the token’s secondary market. If a significant event for the startup occurs and the price of the token in the market goes up, investors can react to it and exit with assured earnings at any point.
– Investors do not always want to invest in startups. They find it difficult to assess prospects. How are you doing this? What criteria do you use to find out whether the companies are ready to scale to global markets
We emerged as a seed venture fund and invested in companies at a stage when institutional money wasn’t ready to invest. The startup has no market facing performance indicators that can be analysed — the investment decision is a conjecture of the team’s ability and the technological innovation that they are proposing. For this reason, you’ll find the same broad phrases and figures in any pitch: about the team, potential market size, and so on.
We use a similar method to evaluate our companies. We look at the startup founders and their potential: whether they are able to achieve the goal of moving from A to B. We conduct multiple interviews. We find out how well people know the sector and whether they are ready to hear and listen to others. Of course, we are looking at the market and scaling opportunities too, but first of all we evaluate the potential of the team.
Our Accelerator Network (RETEI) has a pool of more than 1,000 startups from Latin America. Accelerators like CIE, ParqueTec, FIDE from countries like Argentina, Colombia, Uruguay, Chile and Costa Rica (8 accelerators in total) serve as our pipeline for talent. In order to minimize risk we require the Startups to have graduated from one of the renown accelerator programs, as well as maintain a positive cash flow for at least 6 months. Only the best ones get selected to participate in the fund.
– What future do you see for VC and ICO?
ICOs are a threat to the traditional VC model. Clearly, ICOs may save a lot of headaches to entrepreneurs and investors, compared to the usual VC fundraising processes. Shorter time to market, scalability, no liquidity clauses, etc. Some funds, like InvertUP, make it even easier for a group of startups to raise money while minimizing the risk for investors. In the years to follow we will see more VCs climbing aboard, eager to be a part of this brave new financial segment.