Venture capitalists tap Miami as Latin America springboard
By Scott Blake
With a tightened market in the US, those in the venture capital business are taking a closer look at opportunities in the burgeoning economies of Latin America, with Miami serving as an ideal base for doing business.
Matthew Cole, a partner at North Bay Equity Partners, a Miami-based venture capital firm, said Internet-driven technologies, such as social media and mobile services, are an increasing focus in the venture business.
And, he said, Miami is a good location to link US and foreign investors with entrepreneurs in Central and South American markets with high potential for growth.
"I do think Miami is an important intersection of capital and technology," Mr. Cole, a speaker at last week's 2011 Americas Venture Capital Conference at the Biltmore Hotel in Coral Gables, told Miami Today.
Hosted by Florida International University, the conference's goal was to bring together companies from Latin America and South Florida with financiers who can help them grow their businesses.
Places such as California's Silicon Valley and the Boston area continue to be hotbeds of entrepreneurial activity, but Miami is starting to carve out a niche in the business, Mr. Cole said.
One advantage of the Latin American venture market is there is less competition, he said, and it is less expensive to start an Internet-based company than it was 15 or 20 years ago.
"When people were developing Internet websites in the '90s, they'd have to have a web development team and other things," he said. "Now, we have those pre-existing tools, so you don't have to start from scratch anymore."
Mr. Cole said his firm looks for investors who have experience in a given field and, in addition to funding, can bring their expertise to a start-up company.
"We want people who can bring to the table more than just money," he added. "And Latin America is clearly a growth play. You can still make money in the US, but you have to understand what the [economic] undercurrents are."
Those in the venture business see Internet and related technologies as a bright spot in an otherwise tight market, hampered by US and European economic troubles.
According to a Price-WaterhouseCoopers report, 45 technology mergers and acquisition deals were recorded in the third quarter this year — the highest level in two years.
The flurry of deals has some venture capitalists saying that cloud computing and Web-based services represent a shift in the high-tech industry. However, high valuations of Web-based companies such as Facebook, Twitter and others have stirred discussion that the current trend might be another version of the dot-com bubble of a decade ago.
Overall, the venture capital market is not flying high, data show.
According to the Cambridge Associates US Venture Capital Index, returns declined across most time horizons at the end of the second quarter. For example, 10-year returns, the most widely watched metric in the venture business, were down 4.2% at the end of June.
Mark Heesen, president of the National Venture Capital Association, issued a warning last month: "The venture industry will likely see several more quarters of declining performance overall until distribution to limited partners begins to flow more readily in the coming year."
Florida International University organized last week's venture capital conference as a way to stir growth in the economy.
"Successful venture creates jobs and other vital signs of economic growth," Irma Becerra-Fernandez, the conference's founder and co-chair, said in a statement. "By bringing promising ventures together with financiers, the conference plays a critical role in growing the economic infrastructure of South Florida and Latin America."
Allan Jarry, a partner at DAD Neos, a Madrid-based venture capital firm that opened a Miami office in August, said his firm provides seed money to companies valued from $700,000 to $2 million.
A focus of the firm is Internet and e-commerce businesses, Mr. Jarry said, and the investors they work with are often people with experience in such fields.
He said the ideal investor has been successful and wants to apply his or her knowledge to fledgling companies in Latin America, where that expertise otherwise might not be available.
Mr. Jarry said his firm has offices in Miami and Chile that serve as bookend-operations for the firm's focus on Latin America.
He said one strategy is to look at successful businesses and ideas, follow their example without infringing on their copyrights or patents, and "tropicalize" them — or custom-build them — for the Latin American market.
He said his firm chose to focus on the venture market in Latin America, with South Florida as a connection point, as an alternative to more competitive and established venture markets such as the Silicon Valley, Boston and New York.
"You'll find fewer start-ups in Latin America," Mr. Jarry added, "but if you find the right one, the price will be right."
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