Are Angels Flocking to or Emerging in Latin America? August 28, 2008Posted by jgarciaalvarez in Access to Capital, Angel Investors, Colombia, Latin America, USA.
In November 2005, the University of Virginia´s Batten Institute published a study on what the state of Latin America´s angel investment industry was. Angel Investing in Latin America (“Inversionistas Angeles en Latinoamérica”) profiled those pioneers in Brazil, Mexico, Argentina, Colombia, Chile, Central America, and U.S. Hispanic market, passionate about building growing successful businesses and interested in encouraging the flow of early-stage capital financing.
Almost three years later, I am curious to know what the current state of the angel investment industry in Latin America and U.S. Hispanic market is. Are individual private investors formalizing their investment process by importing and adapting the concept of angel investment groups? How are entrepreneurs going about polishing business plans, power point presentations, and knocking “rich uncles” doors? Are entrepreneurs culturally welcoming of mentoring relationships typically offered by angel investors?
Some take-aways of what is happening in Colombia may be replicable, at various degrees, across Latin America and U.S. Hispanic market.
- Angel investors have limited number of exit strategies. Few opportunities exist via strategic investors. IPOs currently represent an uncertain scenario. Thus, recently founded venture capital and private equity firms have to potential to work with angel investors to increase their pipeline of deals. (Click here to read more on Colombian VC/PE funds raising institutional capital – in Spanish).
- Minority rights and legal protections remain a challenge. Unlike their U.S. Hispanic market counterparts, Colombia´s “inversionistas ángeles” operate in an up and coming early-stage capital financing environment.
- Education will boost the development of the angel capital industry. For instance, educational tools will improve entrepreneurs´ understanding on what it means to have an angel investor take a minority equity position in the company, and what it is like to manage and grow your business with a degree of managerial and/or board level oversight.
- Angel investors remain a mystery. Access to the few informal angel investors, most of whom are seasoned and successful executives interested in supporting entrepreneurship and the formation of new ventures, is correlated with close-tied social networks. Little to no information is publicly available about angel investors´ profile, evaluation process, expectations, and track record.
Despite the challenges, momentum in the angel investment industry in Colombia is picking up!
Destapa Futuro, Red de Emprendedores Bavaria, and Fondo Emprender, recently launched their “annual recruiting season” for business ideas that have the potential to become sustainable entrepreneurial initiatives.
Established local angel networks are emerging. Angeles de los Andes, may be the first formal angel investment group in Colombia. Capitalia Colombia, the investment center of the Incubadora de Empresas de Base Tecnológica de Antioquia (IEBTA), has made publicly available the profile of five companies seeking early-stage capital financing.
U.S. angel investment groups are flocking. A Maryland-based angel investment group is exploring high growth technology opportunities in Medellin and conducting educational workshops to understand and to scope the size of investment opportunities available.
Do you know what the state of the angel investment industry in Brazil, Mexico, Peru, Argentina, Chile, Central America, and U.S. Hispanic market is like? Your comments are very welcome. Let´s connect!