A Venture Capitalist's Top Picks in Latin America Unicorn Hunt

(Bloomberg) -- Hernan Kazah co-founded MercadoLibre Inc., the $12.7 billion e-commerce company. And since turning venture capitalist in 2011, he’s been looking for other Latin American startups with a chance of becoming billion-dollar businesses.

Seven years later, he’s found what he says is the strongest group of prospects.

Online lending platforms Konfio and Creditas, real estate company Quintoandar, global fitness company Gympass, and Loggi Tecnologia, a Brazilian logistics company, are the picks of the 55 investments made by his firm, Kazah says. Just one of the businesses in Kaszek Ventures’ portfolio, Brazilian lender Nubank, has reached a $1 billion valuation so far.

“These will hopefully be the next generation of great companies in the region,” Kazah said in an interview in Medellin, Colombia. “It took longer to take off than maybe some people thought it would. But it’s happening."

Successful tech startups have been few and far between in Latin America: just three of the world’s roughly 260 unicorns tracked by research company CB Insights hail from the region, while a handful more have reached a $1 billion valuation and then gone public or been acquired. Kazah said that’s because countries outside of Brazil are too small to offer scale, international investors had showed little interest in providing financing, and, until recently, broadband Internet penetration was low.

That’s starting to change, he said. Latin America received a record $1.14 billion in venture capital funding in 2017, an eight-fold increase from 2011 when Kazah started his fund, according to the Latin American Private Equity & Venture Capital Association. The bulk of that went to Brazil, the region’s most populous country.

Kaszek Ventures, one of Latin America’s largest VC firms, has spent about two-thirds of the $430 million it has raised. Some of that was on an investment in Nubank, which provides financial services and credit cards in Brazil. It recently received an investment from Chinese Internet giant Tencent Holdings Ltd. that valued the company at more than $4 billion, Kazah said.

As a graduate student at Stanford University during the dot-com days of the late 1990s, he met fellow Argentine Marcos Galperin and worked to start MercadoLibre. Commonly referred to as the eBay or Amazon of Latin America, the company went public in 2007 in the U.S. and is in the Nasdaq 100 Index.

“After we started the fund in 2011 and said we wanted to find the next MercadoLibres, for a while we had very few other companies,” he said. “But clearly the ecosystem has evolved to the point where we’re starting to create big companies.”

To contact the reporter on this story: Ezra Fieser in Bogota at efieser@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Sarah Wells

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