Emergence Capital invested in Restorando in 2012, leading their Series A round. It was an interesting investment for us, as we had never invested in Latin America before. I get asked this question a lot: were you guys looking to invest specifically in Latin America? The answer is “no.” We invested in Restorando because it was an awesome SaaS company, and it happened to be in Latin America. In addition, we knew we would really be able to help this company succeed.
I was born and raised in Argentina, so that gives me not only an understanding of Latin America, but also an interest in supporting entrepreneurs from the region. I’m also one of the few Silicon Valley investors who speak the language, so I get to see almost every company in the region. Every now and then I connect with a group and help them out, primarily with strategy and fundraising tips. That’s how I met Frank and Franco of Restorando.
They were planning to raise their Series A in Silicon Valley, so I helped them refine their pitch. I also set up a meeting with my Emergence Capital colleagues to give Frank and Franco a sense of what a partners meeting could look like. After the presentation, we gave them some feedback and pointers. As our team was debriefing, we realized that Restorando could be an interesting investment for Emergence. We liked their model, we were impressed with the team, the product looked great, and we felt we could help them build a successful company. Like the old saying goes, ask for money and you’ll get advice, ask for advice and you’ll get money…
Restorando just raised its Series B financing, and it gave me a chance to reflect on what got us hooked back in 2012. Here are some of the themes that Frank and Franco were able to communicate in their pitch:
- Think big: this is probably the pre-requisite, and without the “think big” mindset, nothing else matters. Most of the entrepreneurs I talk to from Latin America, get caught up by the restrictions and the resources they don’t control. They are missing the point. You need to start with the big vision and then figure out how to get those resources. If you expect to build a company and sell it for $10M, then that might be a great outcome for you, but don’t waste time talking to VCs, who are looking for multi-billion dollar outcomes!
- Build all-star team: this is very much in line with thinking big. Don’t hire the people you can afford, strive for the people you want to have on your team. If your idea is big enough, you should be able to convince them to join. Don’t get caught up in the “how to slice the pie” dilemma and focus on the “how to grow the pie” opportunity. Hire and partner with the best people: it will pay-off!
- Partner with locals: it is hard for Silicon Valley investors without a local presence in Latin America to get a full picture. It is also hard to provide the day-to-day value required on the early days. With this in mind, it will be much easier to raise money in the US when you have a strong local investor. Unfortunately there are not that many, but if you have a great company, you should be able to get them.
- Move fast: if you have a great idea, you can assume other people have not only thought about it but are probably executing as well. Don’t downplay competitors and be complacent. Build the best product, regardless of the fact that a “good enough” product might be better than what competitors currently have.
- Understand your unit economics: you need to understand your idea is not just a great idea, but it is also a great business. Sounds obvious, but you would be surprised to see many of the companies I talk to with negative unit economics, even in the out years! If you don’t understand your numbers, and the key underlying drivers, it will be hard to scale and build a successful business.
- Build a moat: when you are starting a business, think carefully about the defensibility you are building as you scale. This is particularly true for Latin American startups, as there a lot of me-too models, some of them without any defensible asset. It makes no sense to build the “Dropbox” for Latin America. Even though Dropbox might not be focusing on Latin America, when they decide to focus, they can take the entire market, so Dropbox will be the “Dropbox” for Latin America. Other businesses that require local relationships (i.e. Opentable) or involve local regulation (i.e. Intuit) will enable local players to build a big enough moat.
Working with Frank, Franco and the rest of the Restorando team has been a pleasure. The Board is also an all-star team. The company has made tremendous progress in these last 18 months, and now with a new partner with deep understanding of the business, the opportunity for the company is even bigger. It’s hard not to get excited when a portfolio company shares a chart like the one below:
I expect great things from this company and team, and I look forward to having lots of fun helping build one of the most successful companies in Latin America. I also expect to see more “think big” entrepreneurs coming out of Latin America. There’s always capital available for top-notch companies, even for those based outside of Silicon Valley!
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