Local Latin American private equity and venture capital firms are missing out on opportunities in the region’s growing technology sector, trumped by more tech savvy developed market managers, said panelists at a Latin American Venture Capital Association and Americas Society – Council of the Americas event Wednesday.
“In terms of the locals, I think that they’re very good investors locally in all these countries. In technology, there’s a lack of understanding. They’re more generalist,” said Francisco Alvarez-Demalde, a founding partner of Riverwood Capital. “When you have investors that … bring global experience, and also have local experience in Brazil and experience in all these countries, it’s very helpful. Especially in technology, which is a very global industry, it’s good to have that global perspective.”
Riverwood, which is headquartered in the US, targets technology investments in the US, Europe and emerging markets.
Alvarez-Demalde’s comments were echoed by technology entrepreneur Andres Barreto, who said that while the availability of technology opportunities in local markets has grown in recent years, many Latin American start-ups are going to Silicon Valley, New York and Boston for venture and private equity backing.
“I think a little bit of what needs to be done now … is to educate local investors on how to compete if they want to participate in this new opportunity,” Barreto said.
Even without expertise in the technology sector, Jon Karlen of Flybridge Capital Partners said international firms need to partner with local teams to navigate the region’s diverse, and complicated, culture, legal and regulatory framework.
According to LAVCA, one-third of the region’s 56 reported transactions in the first half of 2011 were in technology-related businesses. According LAVCA’s first half report, Brazilian companies in particular have benefitted from a growing presence of US and European firms, as well as a “renaissance” in early stage investments in the region.