VC Investing in LATAM

Welcome to the Nearshore Cafe podcast, home to the most interesting stories and people doing business in Latin America.

Welcome everyone to another episode of the Nearshore Cafe podcast. I'm Brian Sampson, your host and first, I want to say a quick thank you to our sponsor, Plug Technologies. Plug provides software developers for growing US Companies and operates all over Latin America. Very excited about our guest today. He is a legendary investor, founder, managing partner of PVC Practical Ventures, prior 500 Startups, early PayPal, and what we'll talk about a lot today is also co founder of 42 Geeks. Welcome, Dave McClure.

How you doing, Brian? Nice to meet you.

Yeah, absolutely. So, Dave, I had the chance to see a presentation of 42 geeks at the Modernist in April back in San Francisco.

Oh, right, yeah.

But not everybody knows 42 geeks. So can we first talk about who it is? What is 42 geeks? And also the interesting story behind the name.

Yeah, well, so I guess in a way it's a reboot of something we used to call Geeks on a plane, which I started way, way back, I think 2009 or 10 with Christine Liu and some other folks. And then after I started 500, 500 startups, we did it pretty regularly for about six, seven years. We did two or three trips a year to different parts of the world. But the general idea is kind of, I call it nerd tourism. So we take a bunch of entrepreneurs and a bunch of investors, we go to different parts of the world and we try and learn about the startup ecosystem, adventure investing ecosystem. We usually meet with other startups and entrepreneurs and other investors and VCs and occasionally governments and probably a few corporate entities thrown in there. And we do some cultural events. We always end up doing a lot of eating and probably a good bit of drinking as well.

Sure.

So it's certainly a lot of fun. There are some business that's thrown in there, certainly a lot of bit of pleasure as well. But it's, you know, it's mostly about people who are interested in exploring what the tech ecosystem looks like outside the US and other parts of the world. And like I said, we started doing that probably 12, 13 years ago. We took some time off, but Chuck called me up, was like, hey, we should really restart this again. And we changed the name just because the other entity was so partially, I guess, 500 related. But so about a year ago we kind of rebooted that and we've done three trips so far, about to do our fourth. We've been went to Southeast Asia last Year. So we actually came here to Singapore and visited Vietnam and Thailand and ended up in Bali. And then we did a trip to the Middle east earlier this year in February, we went to Israel, Palestine, UAE and Saudi. And then just a few months back, we went to Latin America and we saw Uruguay, Brazil and Sao Paulo. And then our next trip coming up, we're going to be doing Taiwan, Korea and Japan in October. So hope to do about three trips a year and visit different, both developed and developing tech economies around the world. And the people who come with us usually have a great time. A lot of it is just them meeting each other. So I sort of call it like summer camp for nerds on the road. But, you know, we take about, usually about seven to 10 days, visit two or three countries and there's anywhere from 30 to 50 people. If you're asking about the name 42, that comes from Hitchhiker's Guide to the Galaxy, for those who are not familiar with that, I won't explain it, you should just read it. But, you know, 42 is the answer to, you know, the life universe and everything. Or also, what's six times seven?

We'll make sure to put that in the show notes for, for everybody.

You bet.

And so on. On these trips, can you talk a little more about, you know, are you visiting companies all day or, you know, what, what is, what is the typical itinerary look like?

So usually we try and anchor around a couple of events. So sometimes there's, you know, other conferences going on that we're joining. Sometimes we're visiting like an accelerator setup or a larger platform company that's, you know, key to the region, I think, you know, like I said, there's some government involvement. So we got, when we were in Saudi, we got to meet with the Minister of Investment, which was pretty crazy. I mean, we actually thought we were going to meet with the deputy minister, but the minister himself ended up showing up. And you know, I don't think most of people on our trip knew who he was, but he was the guy who was previously chairman of Saudi Aramco and was, yeah, running basically the person setting global oil prices for two decades was the person who was sitting there talking to us, which was incredible. Astonishing.

Yeah, this is maybe trillion dollar business too, right?

I think that was a bit of an outlier. I don't expect we always get that kind of VIP to sit down with us, but that was amazing. A lot, a lot of times we're visiting companies in the region that have got to some level of success. And we're, you know, maybe 100 or a couple hundred people that are already past maybe series B or C and hopefully doing 50, 100 million in revenue or more. And then we often meet with a bunch of startups who are looking to grow and get investment. And sometimes people in our group are writing checks. That isn't the exclusive purpose of the trip. So it's meeting with large and small startups. It's meeting with investors, either other angels, other VCs, sometimes other corporates. And then also understanding what role government has to play in helping develop policy and investment frameworks. And also we'll do cultural events that are normal things that tourists do. Just that we're a little nerdier than the average tourist. Yeah, food is a big part of every trip. So we really, really love to eat. Awesome. So we have a slogan which is kind of stealing from Mark Andreessen, Andreessen Horowitz. You know, software eats the world, but geeks eat everything. Is the sound bite there.

I like that.

So we always try and explore the food as well as the technology of the places we're visiting. And we visit three or four, usually three or four cities along the way. A couple days each city. Yeah.

Well, this podcast really hits into Latin America. And before we get into your 42Geeks trip that you recently did, what was your experience with Latin America before all this? Maybe your first trip ever and.

Yeah.

Some of your other, other, other experiences.

Well, I'm trying to remember when the very first time that I went, I think, I think in 2008 or nine, I went with the State Department, the US State Department, on a trip to Columbia that was sponsored by some folks who were. It was a little bit of tech entrepreneurship, innovation, but also a little bit of happening out of the U.S. government. And I think at the time Colombia was kind of starting to maybe settle down or stabilize with a lot of the things that happened with there was a internal war, I don't know, wouldn't necessarily call it civil war, but there was FARC guerrillas and a lot of security related issues and that had just started to maybe calm down a little bit. So that that trip was sponsored by folks in the US Government who were bringing tech entrepreneurs to the region to see about how technology could help improve, you know, things going on in the country. And we visited both startups and governments and also some, some nonprofits who are doing education stuff. That was my first real experience in, you know, seeing Latin America, aside from some other stuff I had done when I was in College and, you know, it was pretty interesting to see, you know, both sides of stuff. We were in Bogota and I think Medellin, and. Yeah, and then we also had a trip into the middle of the jungle, which was kind of pretty intense. I mean, we visited some small villages there that I think were. I think the government was doing some kind of PC. I can't remember the name of that program, but they were giving PCs to kids in schools down there. But we were literally on a military cargo plane with a general, and we landed in this place where there were tanks around. We were surrounded by people who were in camo and it was right in the middle of. Oh, my God. That was like. Really?

That's pretty intense.

Wild first experience. Yeah. Subsequent to that, After I started 500 Startups in 2010, I had some friends who were investing in Mexico and David Weekley, who was the founder of another company called PBWiki, I think, and then two local Mexican tech nerds, one who was a developer, one who was a designer, and they'd been running kind of a startup house type of event, kind of hacker house event. And so David was getting a small VC fund started down there with those guys and I think his wife or partner at the time also, and we were small investors. I think they were aiming to put together like a two or three million dollar fund to invest in tech startups. And a lot of these guys were very involved in the startup, a developer community in Mexico City and also I think Guadalajara and Monterrey also. Right. So the fund ended up being a lot smaller than that. And we ended up being probably half of that fund. And then about a year after that, we kind of just decided, hey, we should just join forces. And so those guys ended up becoming the Latin America team for 500 startups. Oh, okay, okay. And Cesar and Santiago. Santiago now is still running 500 Mexico or 500 LATAM, I think, and they've done really great. I think they're raising their third or fourth fund. I think they've invested in 300. At least two or 300 companies down there and really all over the region. So that was kind of the beginning of a more regular involvement there. There was another woman, Beji Yang, who is also managing partner at 500 Startups, who was a Brazilian native, and she had joined us, and we were also doing some investments down in Brazil. I think this was kind of in the 201112 time frame, both of those things started happening. So we had a pretty significant exposure to Latin America through those two countries and then through the rest of the region as well. It was really, really clear to me that there is a big market opportunity. You know, just in those two countries alone, you're talking 300 million people. The rest of the region is probably another 2 or 300 million people.

Yeah.

At the time there was very little US investments in tech companies in, you know, Latin America. I mean, there was starting to be some attention from USVCs in Brazil in a few places and Mexico selectively, but it was still pretty undercapitalized both domestically and certainly from US perspective. So even though we had a small budget for the market, we were pretty active investors. Even the first year or two. I think the Mexican VC and later 500 Mexico team was doing 50 to 100 investments per year, mostly at pre seed and seed. Veggie was doing probably 10, 15 investments per year in Brazil and then we did other investments in regions. So we were one of the very few US based investors who was active in the Latin American startup scene, which didn't take much, really. If you were even there writing any number of checks, you were among the people who were doing it. Right. But I think for us, because we had people on the ground who were both from Brazil and Mexico, we had a little bit more visibility into what was going on. And there are probably five to ten, maybe even less active VCs in both countries. I think probably less than that really these days there's a lot more, but still, I would say Latin America is still relatively undercapitalized compared to the opportunity. And I'm sort of glossing over 10 years of growth where SoftBank had a major presence and then not so much of a major presence. And so there's been an acceleration of activity in Latin America that started happening in 2017, 18, 19 and then kind of a pullback after that, which has been a little unfortunate, but still huge opportunities. A bunch of companies that have gone public. Mercado Libre, which is sort of like ebay for Latin America, is a $70 billion market cap company. Delocal, which was an IPO out of Uruguay and Payments that's had some pretty strong success and a few others on the way, I think. Newbank and some others. Right, yeah, ups and downs, but still, you know, fintech and E Commerce have been sort of the two big pillars of the Latin America startup scene over the last 10 years. Yeah, so that's a whole bunch of stuff and I probably skipped a lot there. Dive into any of that if you want.

Yeah, dive into some of that. Well, I wanted to first ask just about the checks in proportion. So for example, it's so much more expensive in California, you know, hiring.

Yeah, completely.

Percentage of that. Yeah, a big percentage of that, you know, goes for, for talent. Right. Of any, any software company.

Well, a big portion of that goes for like rent and everything else too. Yeah. So it's, it's not cheap to hire people or to you know, pay the rent and. Well, I guess.

Yeah, people and real estate are a lot cheaper in Latin America. So the, the check sizes are obviously smaller.

Well, they're smaller but they go a lot, a lot further. Yeah, we were doing probably, I think I would, I'd say in the US we were probably doing hundred thousand dollar average size checks, maybe a little smaller, larger. In Mexico we were probably doing more like 25 to 35 thousand dollar average checks. But you might actually get more out of a 25k check in Mexico than 100k check in the US yeah.

When you think about like milestones that these startups are trying to achieve, do you think that got you more bang for the buck?

Like more. Well, certainly, I mean I think in the US you might look at a pre seed round at 250k to even up to a million. In Mexico or Brazil maybe. Brazil is probably a little bit more expensive, but still I would say. And a lot of people were doing 50 to 100k sort of checks but there wasn't as much of an established market. So a lot of times it was just either individual angels or a very small number of funds that were deploying capital. This was 10 years ago. Now I think it's changed, but it's still relatively inexpensive. I think Mexico City is now becoming a lot more expensive. So it kind of depends on where in Mexico City you are operating startup. You can certainly spend a lot of money if you want to live in the shishi sections of town. But you know, some parts of town that are more, less expensive in Brazil, you know, kind of same thing. There are certainly very expensive parts of Rio and Sao Paulo if you want to be there. There's very inexpensive parts of those towns as well. So there's kind of the highs and lows of all that.

Yeah, yeah. And Dave, if you don't, if you wouldn't mind, let's, let's dive into just your personal experiences on this, this last trip to Latin America.

Sure.

Maybe start with Sao Paulo. That was your first stop, right?

Yeah. And it was, it was the first time I'd been back down to Brazil for a while. I used to go to Brazil kind of frequently at least maybe once a year, sometimes more, more than that, but I hadn't been down for probably six, seven years. Yeah. You know, Sao Paulo is obviously one of the largest cities on the planet. I think probably 30 million, 25, 30 million people in the overall, you know, extended metro area. So huge, huge economy. And, you know, it's, it's a very vibrant city. Amazing people, tremendous food.

Any, any particular cuisine food that you, that you remember?

Well, we were in, you know, Argentina, Uruguay and Brazil, so I had a lot of meat for about 10 days straight. I had more, more beef than I could possibly even think about eating. But, you know, you also get a lot of fresh fruits and vegetables. Sure. I mean, you're sort of in the jungle. Even though you're in a major urban city, you're effectively in the jungle. And so you get a lot of tropical sort of cuisine and food, which is great. I like meat too, so that was awesome. And a fair amount of seafood as well, since you're on the coast. So that was terrific. Again, you can choose to pay whatever you want and you can spend a lot of money or not a lot of money on dinner and food there. But. Yeah, and I, I think, you know, maybe not that everything's, you know, rainbows and unicorns. There's, there's probably some security and crime issues you need to be aware of, and that's certainly true in Argentina as well. Sure. But, you know, still, it's, it's an amazing and growing economy. And I think the, the people are incredibly social. And that's, that's not, you know, just a qualitative statement. That's actually a measurable.

Yeah.

Quantitative statement when you're talking about social media. And so just, you know, there's, there's a lot of sharing of experience that is both the interpersonal side and then also in the social media world, I think there's some measures of Latin America and specifically, you know, South America, social media being the most active users on the planet, maybe competing with the folks in Indonesia and Southeast Asia and maybe in Middle east as well.

Yeah.

So it's, it's a lot of everything, I guess I would say, you know, for me, it was the first time I'd seen it again since not having been down there for probably seven years. And yeah, a lot of things have not changed, but then a whole bunch of other stuff has taken off, particularly in Brazil. There's a payment system called Pix, which I don't know if people are aware of, but just kind of started less than two Years ago, I think maybe a year, year and a half ago. And half the people in the country are using it. Like I'm not exaggerating, the adoption is crazy.

Penetration is insane.

Wow. I think it was north of 40% in like about a year. And so that was super crazy. Like we didn't even know about that going down. And then we were talking to people. What are you, what are you talking about?

And do you think there's any lessons to be gleaned from their go to market strategy or anything that I don't.

Know exactly the whole story there. So I'm probably not the best person to tell this tale. It was a somewhat government sponsored effort and there was significant involvement with the banks. So I think that had a lot to do with it being widely available. I don't think there's a lot of costs associated with it. So it's maybe somewhat subsidized but it has resulted in a huge amount of payment activity. There's maybe a similar effect to some extent that's happened in India with the way they've done their. I can't remember the name of the national identity system there. And then strangely I think, I'm trying to remember but I think Turkey maybe 10 years ago had worked with a bunch of local banks to help get E Commerce payments off the ground there. But it's just really a pretty amazing change when you see that much behavioral adoption in such a short period of time. You don't normally think about Brazil as being this huge technology advanced outlier, but in that area they, they seem to have had quite a bit of success. So that, that's not throughout the rest of Latin America, that's just in Brazil right now. But I know other people are trying to figure out how to copy that success story.

Yeah, yeah. And I was going to ask you just your, your personal thoughts on, you know, business aside, maybe just Brazil versus Uruguay versus Argentina. You know, how might you. Yeah, how might you describe them?

Yeah, so a very interesting thing was when I'd been down to Argentina, I'd been to Buenos Aires, I think twice before and certainly we'd done a lot of deals with people in Argentina. Argentina is a bit of a basket case economically speaking. But there's a huge amount of talent down there, a lot of software developers and designers and there used to be this story about Latin American, South American companies where they're incorporated in Chile. They were started by Argentine developers, but really the market was Brazil and that's maybe still true. There's certainly a lot of Argentinians who develop for the Brazilian market. But the other interesting thing was that was the first time I'd been to Uruguay, Montevideo. A bunch of people that I had known who were investors in Argentina had moved to Uruguay and particularly the VCs and they were still doing investments or running businesses in Argentina. But a lot of people had set.

Up shop Switzerland of Latin America. Like the banking.

Yeah. Or the Singapore or the Dubai, if you want to use those analogies. So I guess for whatever reason the government of Uruguay is run by, how do I put this delicately? Sane people who are reliable and you know, I probably shouldn't be talking about Argentina, but I don't think I'm the first person to say that Argentina. I think we've had some challenges.

Yeah, we had plenty of Argentines on the show who would say the same thing.

Yeah, yeah. In fact, I was just watching a YouTube video on Argentine inflation this morning. And you know, while we were down there, it became a topic because I think inflation's running at 110, 120% in Argentina. Yeah, but this is not news. I mean it's been like out of control inflation for 20, 30 years. The country's defaulted on its currency or whatever, on bonds more than 10 times.

Yeah, I'm sure you, I'm sure you went to some restaurants where the prices were written in chalk.

Well, yeah, like there's places where they talk about raising the prices during the afternoon to keep up with the change. That's not an exaggeration, that's just like crazy.

That's true.

So it was interesting to see that Uruguay had picked up this opportunity to sort of be a little bit more manageable economic situation situated kind of between Brazil and Argentina, which are these two huge populations and economies. Uruguay I think is maybe only 8, 10 million people, I'm not quite sure. But relatively stable and well run government and a lot of forward thinking economic policies, again similar to like how you see Singapore in the UAE in their regions. So that was kind of interesting. And the place where we also visited in Uruguay, I think was about an hour or two drive from Montevideo is called Punta del Este and a lot of people hang out there. I guess it's a really good popular destination during the summer, which is in the winter time for the U.S. but we visited a startup house there that was inhabited by startup developers nine months of the year and then they rent it out to tourists for three months a year and pay for the rest of the year out of that, which is great story, I guess, except for the Three months where you're living elsewhere. So that was interesting to just see those folks had, you know, how they were sort of managing some of the challenges in the economic environment. Yeah, we had, we had, we had dinner with some folks, I won't name drop, but some very VIP folks in both Sao Paulo and Uruguay who were quite involved with a couple of VC firms and with Mercado Libre. So we got a little bit of the inside story of both of that. It was, it was really interesting looking at both the opportunity and the challenges in those environments. And I think that's an ongoing issue for anybody investing down there is tremendous opportunity, but some tremendous economic challenges and volatility and political issues to be aware of.

Yeah, I'd like to hit on that a little bit more and get your perspective. For me personally, I found, you know, I lived in Argentina for a little over a year and you know, building a company and the perseverance and the grit, you know, because there's so many external challenges people are facing.

I don't understand how people manage that. I mean, trying to think about starting or running a business when you're like 100% inflation. I just have no idea where you begin with that.

Yeah, like we couldn't purchase laptops on credit. You know, everything was in cash and it was, Yeah, I mean just, you know, inflation, the government mismanagement and for them it's, it's just a Tuesday.

Right.

For like any one of those things.

Would like drive us crazy.

Yeah. So, you know, as we were, we were talking about just some of the challenges, the external challenges that these people have, they've not caused any of it, they're just experiencing it. What that makes you think about as an investor when you're, you have to deal with the external as well because that's part of the equation. But maybe that does that make founders more interesting because they've had to develop.

Well, I wouldn't try and paint it with too much of a rose colored brush or whatever. I don't know, mixing my metaphors here. I think you have to be aware that number one, it's a young and growing economy overall. I mean, I'm mixing the entirety of Latin America, but still, generally speaking, pretty young. But there's a lot of economic and political issues to be aware of. And that's changed rapidly and frequently over the last five to 10 years. And we're still seeing it where, you know, you have government switching parties, you have, you know, certainly a challenging relationship with the US on some fronts. Sometimes good, sometimes not. So good. You have, you know, administrations like in Brazil that change hands and you know, put the previous administration behind bars or so it's just, you know, and a lot of populist related issues. So I'm sorry, I'm forgetting the Mexican leader's name or abbreviation is amlo, I guess or the.

We'll have to confirm that in the show notes.

Yeah, yeah, well that's the initials I guess is what I'm saying. But he's a little bit more of a socialist populist. And then you have other sort of far extremes on that and maybe Venezuela, Bolivia and others. But even in sort of moderate countries there's, you know, pretty significant populist sort of stories. And you know. Right. Argentine Peronis and now maybe hershers. Right. It's weird. You know, it's. And you know, in Brazil, Bolsonaro, who is sort of like a Trump like figure. Yeah, yeah. So it's. There's a lot going on, I would say for most investors that scares them off. Wanting to do business there and just risk alone, it's difficult for me. I guess I would say anytime there's volatility going on, that actually makes me interested, like where are the opportunities? And I will not tell you who mentioned this quote to me sometime because I thought it was. It made me jerk my head back when I heard it. But somebody who was an investor in Latin America said to me one time, where all the beheadings are going on, that's where the action is. Whoa. That's maybe not my investment thesis, but the way that was stated was yeah, whenever there's extreme volatility, there's usually extreme opportunity as well, if you know how to take advantage of it. I wouldn't say that that's going to be my lens for where to do investing. But there is something to be said for sort of looking at, okay in a challenging economic environment like Argentina, like somebody's probably trying to solve problems. And I think if you look at the overall. So the thing that was really clear and this was true 10 years ago is now today. But it's like more than half of startups and venture investing in Latin America is fintech. It's like half fintech or 2/3 fintech and 1/3 e commerce and then very little everything else. I guess now probably education, healthcare and a few others are starting to grow. But fintech is clearly a big part of what people are doing. That's payments, that's lending. Surprisingly, it's not mortgage finance and housing, which is something that has puzzled Me, the amount of homeownership, level of homeownership across Latin America is relatively tiny. And even more developed economies like Mexico and Brazil, it's not very far along. I think maybe Chile is probably further along than most, which is puzzling when you look at homeownership rates in the US or North America and even Europe further along. So I mean some of that is obviously because you have volatile currency, because you've developing economies, maybe property rights and credit scores are not easily available everywhere. But in places like Mexico and Brazil where people are, average GDP is probably 10,000 US equivalent or even more. Certainly for some, some part of the population, it's more. You would think there would be a substantial mortgage finance opportunity for at least the upper 20% of the population. And it's not, it's not there. And I don't know whether it's a lack of government sponsored entities that are like the lack of Fannie Mae and Ginnie Mae equivalents in those countries maybe is the reason, but it just feels like that's a huge opportunity to go after. Yeah, lending is a huge opportunity to go after and is being addressed by a lot of folks, small business finance and personal finance and then you know, even really basic stuff, you know. So like we went down and we saw a company in Brazil called motu which is, I guess they're sort of like leasing motorcycles to delivery people in Brazil. I think they're also involved in managing the logistics for doordash equivalent businesses down there. That company's growing huge, really taking off. I think they just raised a new round, I believe from QED and Bicycle. Bicycle is the new VC fund that was started by Marcel Claret, who was previously Softbank Latam. And two months later we decided to jump in and put some money into that through a combination of primary and secondary. And if you asked me four months ago, hey, you're going to be investing in a motorcycle company in Brazil, like what are you talking about? But company's growing like crazy and it's not really a motorcycle leasing company, it's more like a small business lending company to sole proprietors in Sao Paulo. And they can't, they can't make the motorcycles fast enough to keep up with, oh my gosh, the opportunity there. So like if you have a motorcycle to do delivery, you can double your salary in Sao Paulo. And a lot of people, you know, can't afford to buy motorcycles. So they'll pay for it on a leasing basis and for them it's really like, you know, a functional business. Loan to get off the ground and start, you know, building your career and your business and, and I think there's a ton of opportunities like that where if you're willing to do a little bit of high risk stuff, you know, you can certainly get paid well for your investment. And I think there are certain places that don't seem like a tech investment, like, you know, renting motorcycles. Is that a tech, is that a tech company? But turns out, well, yeah, it actually is. And you know, if people stop making payments, they can turn off the, you know, the bikes remotely, which is kind of cool. Yeah, they're not just selling the bikes, they're also providing logistics support. And so we visited the place where they're, you know, one part of the house was these guys, you know, working on and fixing the motorcycles and building the motorcycles. Like I felt like it was in the chop, you know, shop or motorcycle shop. And then the other side of the house looked like a call center and they had this like floor of people like you know, on headsets and, you know, lining up people for delivery. And I was like, wow, this is pretty cool combination of sort of like, you know, high tech and low tech in an emerging economy. But clearly the company I think is growing 60, 70% per year and wow.

That'S tough to beat.

Approaching 100 million in revenue. I'm not quite sure. Wow. So really interesting opportunity and I think again, you're seeing that all over. Latin America is under capitalized opportunities. Yeah. And even now I think that was true 10 years ago. It's still true. There's not a lot of people jumping into venture capital investing in these markets because some of the same issues we were just talking about, it's nowhere near what you see in the US or Europe and not even what you might see in Southeast Asia or India, which are other developing economies which do have a good bit of capital going at them.

Yeah. On that point, I wanted to ask you about valuation multiples and liquidity. How does that look?

Much more reasonable on valuations, much less on liquidity. My partners and I were talking about this like, okay, how much are we going to start putting into Latin America? And we actually just hired a couple folks part time to work on some projects down there for us. So we're leaning in a little bit, but I mean it's not the majority of what we do, but we're starting to allocate maybe 5 to 10% of our capital there. Prices are very reasonable. So that's one attractive component is.

I.

Think not to quote too Many things. But in some opportunities we're looking at multiples that are only four to six times revenue, which is unheard of here in the us. You're going to pay two or three times that for fast growing opportunities in the us so that's super interesting that you can get in on the ground floor and some stuff that isn't crazy expensive. On the flip side, liquidity is a little bit more limited. You're not going to see much of an acquisition M and A market here, excuse me, in Latin America. And although there's been some recent IPOs and a lot more in the wings, the ones that I mentioned before, I mean, Mercado Libre way back and Deloco and Nubank and others more recently, still kind of few and far between. So I don't think you should jump into the Latin American market expecting that you have a short path to an IPO or a very high probability path to an ipo. So there's some very different factors in these markets that limit the exit opportunities. But again, I think if you're willing to take some risks, there's incredible growth opportunities. Hopefully the liquidity story gets better over the next decade. I think you are seeing more non Latin American investors going into the market because of some of the situations with China. You're seeing huge opportunities for growth in places like Mexico. I think China itself is a big investor trade partner for a lot of South American countries for both for agriculture and potentially for oil as well. So I do feel like if you're playing the long game, Latin America is a huge growth opportunity that I think has been overlooked by a lot of the rest of the world, maybe the exception of Spain and Portugal. Have some long term connections to the markets down here, down there.

Yeah, I was going to ask you with the liquidity too, maybe how that lines up with your day job with pvc because there's a lack of liquidity. Does that make it more interesting?

Made a really interesting acquisition. Yeah. So we, you know, for folks who are not aware what we do, we're a secondary market investor. We buy positions in companies which, which we call direct secondary. We're buying out other shareholders in companies or sometimes, you know, founders and employees. And then at the fund level, which is a little bit more what we do, we buy positions from other limited partners or investors in funds and sometimes from the general partners or the VCs who run those funds. Because funds usually have a 10 year horizon which is really in most cases more like 12 to 15 years. And that's a very long time for most investors to wait for return of capital, even for individual companies, IPOs are taking closer to 10 years now. So there's a lot of investors in companies and funds who are not necessarily willing to wait 10 to 15 years for their returns and might be looking for liquidity and more of a five to seven year horizon. And so we will take in, we'll step in and take some of those opportunities off the table and buy some folks out. Again, I would say given market conditions and given the situation, those are pretty reasonable, reasonably priced from our perspective. Or for those folks, might, might be that they're taking a haircut on some of the, on paper value to get to cash. But in the current market, people are really looking for any kind of liquidity and cash. And a lot of folks who jumped into tech investments in those markets might have been waiting for a long time. So that's presented some really quite compelling opportunities for us to consider going into those markets. And again, this wasn't necessarily on my radar a year ago, even though we had done a lot in the past in Latin America. But after we looked at it, we're like, wow, there's some really great companies that are going to have still another three to five years before they get to a liquidity event. There's some investors in those companies who are looking for cash today. And that gives us a really interesting, not too crazy long window. If we're willing to be a little bit patient for another three to five years, we can see some, some great opportunities, assuming we're managing the risks of getting to liquidity, which are still there for anybody jumping in. And all the things we just had discussed before about currency risk and political issues. But I think because we're diversifying across multiple companies, multiple geographies, and we have a fund approach that's easier for us to do than someone who's just an investor in a single company or fund or geography. So we can manage that risk a little bit easier because we have a more global perspective and a little bit more diversified perspective.

Yeah, yeah. Dave, I got a couple fun questions here as we start to wind down.

Sure.

In your three country trip to Latin America, I know you ate a lot of red meat.

Was there. I had to get back on the gym after that.

Yeah, me too.

All I wanted to do was eat.

Vegetables after my time there.

I did. I needed a vacation for meat. When I came back from down South.

I was like, anybody got any spinach?

I could go for that. Although there was a lot of fresh fruit there too.

But I Was curious if there's any one particular meal that stood out in your time there.

There were several. And I'm trying to remember. There was one restaurant in Sao Paulo, which we'd been to before, that had this huge tree growing in the center of the restaurant. It's pretty famous, I think. And the meals, they were just fabulous. And then I guess, you know. Well, it's hard to pick one meal because they were all amazing. I think we had dinner in one place in Montevideo or Punta del Este. I think it was Puna del Este in Uruguay. That was just incredible. And someone else again, who I will not name drop, was kind enough to pick up the tab. So it was even more amazing. Thank you, Renan. But yeah, it was just, you know, I think for a lot of folks who've had South American cuisine before, it's a lot of comfort food. So you do kind of taste amazing. But you do have to sort of watch your carbs and blood pressure a little bit.

If you're Paleo, you can do okay just meat and fruit. But those empanadas are pretty good too.

Yeah. I think probably the most memorable experience for me was I'm not a Spanish speaker, but I managed to download and order door delivery. Oh, nice. And paid another currency. And it took me a while to figure out what I was doing. I had to sort of translate while I was looking at the order. But I managed to have someone deliver to my hotel room, which was pretty cool. Yeah. There's so much opportunity to go after down there. I think, really, again, it's overlooked by US investors, even other people who are interested in emerging markets. I think it's been overlooked historically. And yet some major cities in Mexico are shorter to get to than people going from San Francisco to New York. So it's really right under your nose. There are more people now visiting Mexico City. I think all the time. A lot of people are realizing huge growth and vibrant city and multicultural, multi ethnic city. And so I would really encourage people to sort of like, you know, check it out. Getting down to South America is a little bit longer trip. We didn't even talk about, you know, maybe the Caribbean and Central America, which is also pretty accessible. You know, there's certainly some, you know, security risks and concerns to be aware of, but there's also just some great culture and some great people and depending on the time of year, some incredible weather. I have some friends who are building kind of an eco startup community in Costa Rica and some other friends who are working on that in Honduras. And I Do think there's interesting sort of digital nomad communities spread across different parts of Central and South America to check out as well.

Yeah. Last question for you, Dave. As you picked up a little bit of Spanish, you made your delivery order. Was there any. Do you have any favorite Spanish words or phrases that you picked up?

Dude, I absolutely am horrible at. I mean, I learned to pronounce Spanish in high school because I was a singer and so we had to learn all the Latin languages and everything. But so I know a little bit from, you know, actually more just understanding of other languages. So Hola is my only really. Hola. Ingracias is like about all I can really manage and handle, which is horrible because it's not that hard a language to pick up. But I guess I have more opportunity to get exposed to the culture there. Good. Maybe Google Translate and some future Babelfish will help me get there faster. Awesome chat. ChatGPT for Spanish. Whatever. Good.

Well, Dave, this is a blast. You've been so generous with your time. I know you're a busy guy. This is Saturday morning for you as well. So thank you again. Really pleasure to have you on the show.

You bet. Yeah, a lot of fun. Good. Encourage folks who haven't visited to check out and go see it yourself.

Yeah, absolutely. Like you said, the opportunity there is huge.

And if any of your listeners are interested, we're Planning to do 42 geeks trips to other parts of the world next year. So again, the one coming from in Asia we're already maxed out on, but I think next year we're going to be looking at possibly North Africa, probably Morocco.

Oh, interesting.

I think we're going to come back to Southeast Asia and check out Indonesia and the Philippines and then I think still thinking about it, but probably Central America. So we might visit folks. I think we'll probably check out Honduras and Costa Rica and maybe a few other places we'll see. So 42Geeks.com, if you're interested in nerd tourism and hanging out with startups, investors and eating a lot of great food, love it.

That makes a great trip. And that's 42Geeks.com is the website, right?

You bet. Yeah, you bet. Just amount that you can fit on a bus. I love it.

Well, Dave, thanks again. Let me thank our sponsor real quick. That's Plug Technologies. Great way to find software developers all over Latin America for U.S. companies. We'll see you next time in the Nearshore Cafe. Thanks again, everybody.

Thanks for joining us at the Nearshore Cafe podcast. Tune in next week for a new episode featuring another special guest with exciting stories.