Sequoia Ramps Up Focus on LatAm Startups After Successful Bets
(Bloomberg) -- Sequoia Capital is hunting for new investments in Latin America, likening the region’s startup scene to the early days of Silicon Valley.
Sequoia, one of the most prestigious venture capital firms in the world, has assigned partners Sonya Huang and Stephanie Zhan to “actively meet with founders on a daily basis,” Huang said in a video interview. The duo is preparing to announce a new investment soon, part of a model to invest anywhere from $50,000 to $500 million on a limited group of companies and work closely with them as they grow.
“We are seeing the startup ecosystem starting to ignite in Latin America,” Huang said. “It’s similar to Silicon Valley in the early days— there’s something in the air when it comes to optimism with technology and founders wanting to go big.”
Sequoia doesn’t have a quota of how many companies it will invest in the region but generally looks at “a few” per year, Zhan added. Themes include fintech, real estate tech, delivery companies, software, and infrastructure companies.
Latin America has lagged behind the U.S. and China in creating giant technology conglomerates out of startups, but that’s starting to change. Venture capitalists have poured $8.8 billion across nearly 400 deals in Latin America in 2021 as of August, according to PitchBook data. That’s more than the capital that was invested in 2019 and 2020 combined.
Sequoia has led just a handful of capital raises in Latin America over the past decade, but it’s already locked in for big gains. It was the first backer of the region’s largest startup, Brazilian digital bank Nubank. Sequoia invested $1 million in Nu Pagamentos SA in 2013 in a seed round and now the Sao Paulo-based company is worth $30 billion and is preparing an initial public offering. David Velez, who founded Nubank, was a partner at Sequoia almost a decade ago, where he was in charge of scouting deals in Latin America. He ended up leaving to create his own startup, with Sequoia’s backing.
The company also led investment rounds for digital travel agency Despegar.com, which completed an IPO in 2017 and delivery services firm Rappi. In July it also announced an investment on Argentine fintech Pomelo as part of a seed round extension.
“We really do want to be a founder’s first and long-term partner, all the way through, leading rounds in the entire journey,” Zhan said. “Nubank is a wonderful example of that.”
The local startup bonanza has given rise to concerns about outsized valuations and increased competition, but Sequoia still sees room to grow.
“We’re willing to pay up for high quality,” Huang said. “These are enormous profit pools, and the market tends to be large enough to support multiple large companies.”
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