25 things your startup will hate from investors in Latin America
So these 25 rants are based solely on the experiences we have lived in the process of creating a start-up with 70% of its team in Medellin, Colombia and the rest in San Francisco. It is by no means a “statistical” representation of all investors in the region but “oh-boy!” does it represent our personal frustration and experience. Here are the things investors have said to us while discussing Tareasplus in no order whatsoever:
- Hey do you have a pitch deck we can see? -of course, here it is its on Angel List or I can forward a PDF, PPT to you. Also do you have an executive summary? -sure thing, I’m attaching it to our deck email. Anything else its where it starts to get really stupid, my suggestion to any entrepreneur who is on his first date is to discard as quickly as possible any investor that asks for anything more than your deck or app (due diligence is a different story). Pain starts here: Oh by the way our investor committee needs a business plan, do you have one? And also don't forget to attach financial projections for the next 5 years. Before we hang-up or meet send me an email with a short blurb that describes what your company is about.
- You are already pissed from #1 but then you get a call back from the “potential” investor where they mention they need you to fill out a form in order to really start looking at your company. Sounds like a diabolical exaggeration but it happened to me twice once with investors in Mexico and the other with investors in Colombia.
- Investors in Latam have no sense of time zones or punctuality. I live in SF and I will do whatever it takes to adjust to my investors time, hey I have had calls at 3am, 1am, 11pm. Reality is, about 80% are never on time and are usually late by 20min to 30min, to which they apologize by saying they will get back to you in an hour or. -Great! now what do I do from 3am to 4am?-
- “You need to have a gust profile” -Sorry I couldn’t do it, I left it half baked, still don't understand why they wouldn't they accept AngelList-
- “Our $120K requires a 50% ownership stake, at least in your company”. -Oh yeah? well .|. (that was actually my 2nd start up, it ended bad)-
- “Super expedite due diligence” -that takes more than 6 months.-
- “We will be delighted to invest if you get a Silicon Valley investor, but remember we saw you first ;)” ……….. -yeah, I remember they even winked when finished our meeting.-
- “We only believe in discounted cash flow valuations.”
- “If you pass the selection process will invest in your startup in exchange for 15% equity and access to a 2 man desk in our co-working/accelerator space + our glorified network of contacts”. -Meh!
- The prophet investor: Reads an article in Techcrunch -so now he knows- has never been a tech entrepreneur, gets confused by terms like LTV, CAC, Churn, etc but with all confidence will tell you what is going to happen with your startup in the next 6 months
- Somehow they are all family related to Carlos Slim or belong to his special circle of friends, this assures them they will be able to make him invest in your startup.
- They like “tranched” investments, that way they can secure a low valuation for a longer time and have the option to bail out if things get complicated.
- They often say: “It works like that in Silicon Valley, but the not here” specially when you are talking valuations and money ask.
- Their portfolio mandate is that they are not allowed to “own” less than 30% of a company.
- What is a convertible note?
- We have decided to invest in your company but we need a personal guarantee.
- “Your “traction” is not quite there, you need to prove more.” -It’s irrelevant that you have 500,000 registered users, 1M uniques just because they think it sounds “smart” to say you need more traction-. I guess they just like the word, -sigh!
- “Lets begin the process but we haven't closed our fund yet”. -2 years later they still haven’t closed their fund yet-
- “Can you send a brochure?” -Really? haven’t you seen our website or apps?-
- “And how much will that be in Colombian Pesos?” -You know what? f(*&!-off you piece of nim-witt.
- “How many jobs will your startup generate for the city?” -I understand the social implications but what does that have to do with my startup?-
- “Lets meet at the “X” club, remember to wear a tie for the meeting” -Ha,ha,ha,ha,ha, they usually are abhorred by me now and me from them-
- “Our fund is one of the top 5 five funds in the country, we are going to raise USD$3M in total” -Nice, welcome to the little league.-
- Family Offices that brand themselves as Venture Capitalists.
- You talk to Pedro, then to Maria, then to Juan Pablo then back to Pedro. Juan Pablo doesn’t get it so you have to call Maria. Maria can only explain it to Pedro, who later explains it to Juan Pablo. As a result now Pedro and Juan Pablo don’t get it and Maria who really understood you was fired last week.
So there you have it 25 reasons why I don't like raising capital for my startup in Latin America.