Nathan Lustig

Chinese Venture Capitalists and Startups are Making a Splash in Latin America

Category : Latin America Startups and Investing
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Note: a version of this article was originally published in Venture Beat with the title Chinese Investors Target Latin American Startups as US Investors Shy Away. This version has more background and information about Magma Partners.

China, a country with deep roots as an industrial powerhouse, is now determined to center its economy around technological development and innovation. With government support and outward investments on the rise, China is positioning itself to have a much greater role in the global technology market.

According to Yilong Du, Managing Partner at Latham & Watkins, there are many factors stimulating the growth of the technology sector in China. Firstly, economic growth is driving the Internet market and an explosion of Internet-based companies. In China, 731 million people have access to the Internet and 95.1% of these people access the Internet via mobile devices, according to the China Internet Network Information Center. A budding, Internet-savvy middle class, coupled with a strong supply of talent, is driving China’s technology sector and increasing the demand for innovative products and services.

Shenzhen Capital Group Co Ltd, a State-owned venture capital firm, is just one example of a firm increasing its investments abroad to bring new technology to China. Through investments in innovative companies overseas, the firm hopes to strengthen China’s technology and industrial structure, said Ni Zewang, chairman of the SCGC. Zewang also stated that by connecting more Chinese startups with overseas resources, they can help local companies mature faster. While SCGC’s investments overseas account for only 6% of its current total, it plans to increase the figure to 15% by 2020. (more…)

Magma Partners: Supporting Latin American Entrepreneurs

Category : Latin America Startups and Investing
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In 2014, I was sitting in a Manhattan office tower, asking an experienced venture capitalist for advice about Magma Partners, our new seed stage fund that finds the best entrepreneurs in Latin America and helps them launch and scale their US incorporated startups in the states.

The VC’s advice? Leave Latin America. Come back to the US. “You’re going to lose all your money!” Nearly all of my entrepreneur and investor friends said the same thing.

Since 2014, my partners and I have invested $2M of our own money into a portfolio of 32 fast growing companies founded by entrepreneurs from 9 countries that employ 300+ people from 13 countries. All for less than a typical Silicon Valley company’s seed round.

The diverse founders we support are building real US incorporated businesses that generate eight figures in annual revenue. And they’re 90% more capital efficient than Silicon Valley startups. (more…)

What Entrepreneurs Should Expect While Doing Business in Paraguay

Category : Latin America Startups and Investing, Paraguay
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The landlocked country of Paraguay flies below the radar for many entrepreneurs and travelers alike. Home to 6.7 million people, Paraguay has a GDP of $27.44 billion as of 2016, representing 0.4% of the world economy. Minimum wage is 1,964,507 Guaranies per month, which comes out to roughly US$353. Paraguay is a major producer of hydroelectricity, and the Itaipú dam, the world’s largest generator of renewable energy, is on the Paraná river. Paraguay had the highest economic growth in South America from 1970 – 2013, averaging 7.2% per year, albeit from a low base. Paraguay has a moderate inflation rate of 5% on average and international reserves of 20% of GDP, twice the amount of the external national debt.

Paraguay is the second-largest producer of both stevia and tung oil in the world, as well as the sixth-largest producer of soybeans and corn. While unemployment remains low at roughly 4.9%, studies estimate that 30-40% of the population is poor, and in rural areas, 41.2% of the population lacks the monthly income to cover basic necessities.

For investors and entrepreneurs, there are distinct advantages to doing business in Paraguay. By 2015, there were as many cell phones in the country as there were Paraguayans, partly because of poorly run fixed-line telecommunications services. For investors, the agriculture climate is ripe for high returns. The current rates of return in this industry are ~3% plus potential capital growth. (more…)

Doing Business in Mexico: A Look at the Opportunities & Challenges

Category : Latin America Startups and Investing, Mexico
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Mexico’s business opportunities rival those of any other emerging economy in the world. Despite a complicated history with violence and corruption, the country is starting to transform its negative reputation into new opportunities. New initiatives, especially to boost Mexican innovation, and an ever-expanding middle class with disposable income have given way to a new era of business opportunities for residents and foreigners alike.

To attract new investment, the Mexican government is making significant improvements to its infrastructure to compete globally in sectors like telecommunications and transportation. According to a recent PWC report , Mexico will become the 7th largest economy in the world by 2050.

But, to understand how Mexico will get there, it’s important to understand Mexico’s history and some factors that led it to become what it is today. (more…)