How a VC Firm is Driving Innovation in Latin America’s Startup Ecosystem

Ontro – 00:00:01: 

Welcome to Startup Success: The Podcast for startup founders and investors. Here, you’ll find stories of success from others in the trenches as they work to scale some of the fastest growing startups in the world, stories that will help you in your own journey. Startup Success starts now.

Kate Adams – 00:00:18:

Welcome to Startup Success. Today we have Maria Gutierrez Peñaloza in studio who is the Co-founder and Managing Partner of Nido Ventures. Welcome Maria.

Maria Gutierrez Peñaloza – 00:00:32: 

Thank you, Kate. Thank you for having me today. Super excited to talk with you today.

Kate Adams – 00:00:36:

Yes, I am excited as well, I really am looking forward to getting into Nido ventures and what you’re doing there. So before we start, if you could just give us an overview of your background and what led you to Nido. That would be great.

Maria Gutierrez Peñaloza – 00:00:52:

Awesome, yeah. So I, originally from Mexico City. I was born and raised there and then came to the US for college where I studied engineering. It’s where I met my Co-founder. We both decided to go the big tech route. Worked at different companies in the Bay Area. And then we always had a little inkling that we wanted to do something with Latin America or Latinos in the US. We just didn’t know exactly what we wanted to do. Initially, we thought it’d be a traditional company. So we started thinking a lot about ideas, thesis that we had, what spaces did we want to work in. And that’s where we decided to apply to MBA to have two years off to think about the next step and truly be able to get the most out of that. And we both ended up going to GSB together. And we were at the time working at two different startups in Mexico City because we wanted to try something completely different. And we absolutely loved being back at home. We loved working with Latinos again. But also we saw this big gap in opportunity in the ecosystem in LATAM to actually build more companies, have more investors come in, and just really do to the ecosystem what had been done in Silicon Valley over the past 60 years. Particularly from a very early stage standpoint, very few angel investors and with really small checks. So not enough to really fill those pre-Seed angel rounds. And then the second thing was we just didn’t see enough technical investors throughout Latin America. So most people that have built funds in LATAM, some incredible funds I may say, but they come from private equity, investment-making backgrounds. And it’s a very different way of looking at companies that are doing technology than we would coming from tech backgrounds and how we saw the ecosystem and the world. And so that’s when the idea of becoming angels began, which is how this whole Nido adventure started. We got together with three other friends. We were five total. And we were just investing in things that we thought we could add value to. Those came in all shapes and sizes. But eventually we realized there were companies in the technology space that needed that extra push or help on the technological standpoint. And that was like the main thing that they were working on, using tech to scale and become larger. And through that, we started doing more investments, working on it more and more time. And that’s when Caro and I decided that we wanted to do this full time. We were loving our jobs. We loved working together. We thought that we could do something really different, that we had a true edge. And we were also in the middle of the MBA, so with a lot of access to professors, capital, different types of relationships, things that we could do and just leverage to build this out. And that was summer of last year when we started fundraising. And we’ve since done a first close and have started investing. So that’s the history of the Nido.

Kate Adams – 00:03:53:

Amazing story. I love how you two planned this all together, saw a need, went after it, built your experience around it. It’s a very motivating story. Can you dig into a little bit more about your investment philosophy now?

Maria Gutierrez Peñaloza – 00:04:11: 

Yeah, of course. So I think we continue on with the line of wanting to invest in things that we can add value to. And that now has a name. The way that we define it today is B2B companies that are within three pillars. So the first one is fintech infrastructure. And that can be all the way from building blocks for rails to tools for the CFO, et cetera. The second piece is B2B marketplaces and vertical SaaS. They’re mostly combined in Latin America. They’re like a single group. And the reason why we like these so much is we think there’s a lot of legacy industries in Latin America that are ready for a lot of technology to come around and just transform the way that things are done today. And we have a lot of connections to these legacy industries. So I’ve just seen that investing in these B2B marketplaces we’re the perfect investor for it, but also we really like the trajectory that they can go to. And the third one that we look at, and it’s kind of all encompassing, but it’s this idea of cross-border startups. And what this means is, Caro and I are cross-border people. We grew up in LATAM, but also spent our formative years in the US. So we understand both sides of the border. And we started looking at these companies that are focusing on supply chain, nearshoring, reshoring, all of these different types of buzzwords that have come out recently that are on everyone’s minds. But for us, it’s been something that I’ve been looking at since I was working in big tech in supply chain many years ago. And so we’ve seen a lot of things coming up. Now with the intersection of AI, everything’s just going a lot more quickly and things can actually start coming from Latin America to the globe. So we’re very excited about that cross-border component as well. And eventually the idea is to make a really synergistic portfolio. So we want companies, that they can all help each other and they can leverage each other to be much better.

Kate Adams – 00:06:09: 

Excellent focus. Can you talk to us more about what you’re seeing around these cross-border companies in Latin America? Because that’s just a niche that we haven’t explored much on this show, and I know we’d love to hear more about it.

Maria Gutierrez Peñaloza – 00:06:23: 

Yeah, of course. I think it’s one of the topics that I like talking about the most, so happy to go into that. I think with cross-border, we started out with this thesis mostly around nearshoring, so how tensions with China and different sorts of things have led to the US to look at Latin America as their trade partner, much more strongly than they did before. The most obvious and first choice is Mexico, but we think that there’s a lot of possibilities throughout Latin America to engage in nearsharing, not only in Mexico. But we started seeing a lot of trends outside of the VC world and outside of the tech world, more so like, on real estate and more manufacturing that were just leading to a lot more external investments coming into Mexico to build, manufacture, and send stuff to the US. But there was a clear lack of technology that would allow this to become  bigger in scale, except for the few companies that are really big, like the BMWs, Teslas, the ones that already have all of this infrastructure in place. But what we wanted to see is how, can we look at these smaller manufacturers to get on these platforms and then also be able to sell to the smaller brands in the US that want to buy their manufacturing from somewhere else. And we saw that kind of like a big win-win. So that’s where the premise of cross-border startups came. But now we’ve since seen a lot of very different things within it, starting from payments. How do you make payments across the border more seamless, especially for the B2B world? It’s relatively new. Wire transfers are like the classic way of doing it, but it’s obviously much more expensive and very cost prohibitive for the smaller companies. So we’ve invested in a company in that space. Then you have the platforms that are helping nearshoring exist. So we’ve invested in a company, for example, that is combining or connecting textile manufacturers in Latin America to DTC brands in the US. It’s called Modet. It’s a great company that is focusing just in that space. And then we have a couple of others that are looking at particularly helping out the manufacturers. So they’re on the ground in LATAM, helping manufacturers become more efficient and better, more prepared to sell to the big guys. And then the last thing that we’ve been looking at a lot is tools. And this is where the AI comes in very strongly, but tools that help companies that are already engaging in cross-border trade to reduce the amount of mistakes they make, to have better logistics, to enable more of a marketplace type so that they can connect with other manufacturers in the same space and help each other out become better. And so our latest investment is a company called Auba that is doing that, using AI to help prevent mistakes in cross-border trade. So parts are usually stuck in the border for months sometimes because of a single tiny mistake on a paper that could happen to anyone. So how do you avoid a lot of that – that’s where they are starting, but I think they have a very big world that they can still go to, but those are the three buckets that we are looking at today.

Kate Adams – 00:09:34:

Fascinating. I mean, so much opportunity in all three areas, right? It must really excite you.

Maria Gutierrez Peñaloza – 00:09:41: 

I love my job. Yeah.

Kate Adams – 00:09:44: 

I bet. And what about, I mean, we talked about this when we first met a few months ago, female founders. Are you seeing that or no?

Maria Gutierrez Peñaloza – 00:09:53: 

I mean, they’re out there. They’re rare. They’re out there. And the goal for us, and initially actually when we started Nido, our idea was maybe we just invest in female founders. Why don’t we look at that? But then we realized that that would cut our deal flow, maybe even by like 90%. It is crazy the amount of companies that have no females in them in period let alone founders. And what we are thinking now is the best way that we can have an impact to make teams more diverse is invest in those teams that maybe wouldn’t have thought of hiring a woman or wouldn’t have thought that that was something that was important for their business. And so those companies, that are two or three guys that got together because they’re friends and our idea is to push them to build more diverse teams. And it’s not only about women, but it’s also about ways of thinking, right? Like that’s what we think that will actually make teams that are excelling is people that have diverse thought leaders in them. And one of ways of achieving diversity is through gender, but that’s just one of many. And we’re very proud to say that half of our portfolio has at least one woman on the founding team, which is, I think, a lot better odds than most other funds that are in LATAM. So we’re very excited about that. But our idea is showing them that diverse teams can really truly build things that are better.

Kate Adams – 00:11:14:

I love that because more and more research is coming out that better decision-making and collaboration happens with diverse teams. So to go at it in that regard instead of just limiting around female founders, but looking at the bigger perspective makes so much sense. How are the conditions of the market right now impacting what you’re doing? I mean, it’s such an odd time. 

Maria Gutierrez Peñaloza – 00:11:42:  

I think for us in particular, there hasn’t been a better time to invest because the way that we see it is we’re truly investing in a downturn market where valuations are a lot better and the people that are starting companies today are founders that truly want to build a company because the opportunity cost of being a founder today versus two years ago is completely different. The salaries aren’t cushy, you’re not getting thrown money just because you exist, meaning the decision of being a founder today we see as being one of the filters that helps us filter out some of the deal flow, which is great. But I think that the market is definitely really stuck. So investors are complicated, starting from the LP level, a lot of them are overexposed to venture or are not willing to go in now because they see it as a risky asset, so they’re not going to start exploring it today. Those that hopped on the train in 2021 are definitely overexposed to it. Obviously, emerging markets are harder to invest in when the market is like this because people don’t have experience with it, etc. So that piece is definitely hard. And then we’re also seeing it with companies that aren’t able to raise subsequent rounds, especially those that raise that really high valuations or they’re not able to sell their product at the price that they wanted to sell because people don’t have the budgets today that they did two years ago. So in that sense, I think that actually building a company right now is a hard time to do it. But it’s also where there’s a myriad of opportunities to fix things in Latin America and truly not have 10 companies that are doing the same thing at the same time. That’s how we look at it today. But I think if you are not an eternal optimist, you can’t be in venture capital. It’s just not the right job for you. So I think I have a very optimistic way of looking at the market conditions right now and how we can help our companies truly succeed. But they’re all still doing really well. So that’s exciting for us.

Kate Adams – 00:13:46: 

That’s good. That’s good. And I like that. And so are you partnering with them more? Is it a little more hands on during this time? I mean, how are you working with your investments?

Maria Gutierrez Peñaloza – 00:13:57: 

Yeah, so we’ve liked being hands-on investors since day one. I think that comes from having worked at startups before, worked in companies before, like the experience we bring to investing is actually operating. So we’re excited to be hands-on and go in with the companies and help out with things that are happening there. But it really depends on the company and what they need. We know that in the pre-Seeds, they don’t have boards. A lot of really big decisions are coming along, so we want to act as like semi-boards to them where they can truly comment, thoughtful ideas around, et cetera. And what we do is we schedule check-ins with them. Some are every two weeks, some are once a month. It really depends on the company, but the idea is to just be a resource for them in any way, shape, or form. So we have some that just need someone to talk to every once in a while about what’s going on in their lives. Others are much more focused on how can we build better products, like talk to me about tech. Others are thinking about their go-to-market strategy. So we’ve truly become very versatile in that. And what we’ve done to complement this is we have three venture partners on the team that come from very different backgrounds. They’re all on the ground in Mexico city, but one works in the fintech realm on the product side. Another one’s a CEO, Co-founder of a mobility startup. And the third one has a more financial, traditional background. And so they help out a lot also with the companies, and they’re an extra resource for them to just go in and talk about whatever it is that is on their mind, that it could be pertinent to those three backgrounds. But yeah, I think it’s very much up to the companies. We love being involved, and it’s, I think, the best part of being in this for us.

Kate Adams – 00:15:46: 

Right. And sounds like with having those resources on the ground, you all are a true partner to these founders and these founding teams. And I’m guessing that kind of keeps you close to the momentum of what’s happening in the market, too. 

Maria Gutierrez Peñaloza – 00:16:01:

Yeah, that really helps because Caro and I made the decision to be US based at the beginning of Nido. And the reason is, you know, there’s a lot of capital that we can bring from here. There are a lot of extra investors that we can introduce to Latin America, human capital as well, that we want to start liaising with LATAM. And so our idea is like if we’re here, it makes us different also from the funds that are in LATAM, and entrepreneurs really like the fact that we’re US based. But we definitely want to have people that are on the ground and looking at that every day. The rest of our team is on the ground, analysts, data scientists and the three venture partners. And that really helps out. And Caro and I travel a ton. So we’re basically pretty hybrid. But the idea is to also have a foot here in the US for the cross-border companies, for investors, for everything. It makes sense for us to also be here.

Kate Adams – 00:16:54:

That makes a lot of sense. And I bet you love to travel. I mean, I bet going out and meeting with these people one-on-one, that’s got to be so exciting.

Maria Gutierrez Peñaloza – 00:17:02: 

Yeah. And I mean, Mexico city is also partly home for me. So to me, it’s always great to go. And most of the companies that we invest in are either in Mexico or Colombia. We look at all of Spanish-speaking LATAM , but those are the biggest markets for startups today. So to me, it’s a treat to go back home.

Kate Adams – 00:17:20:

I love this conversation because what you’re doing is, I mean, it’s truly changing the world. It’s so, so exciting. We always wrap up the show by asking our guests advice for founders that are out there right now. It’s such a challenging journey. There’s a lot of highs, but there are some definite lows. Anything you can leave our audience of founders.

Maria Gutierrez Peñaloza – 00:17:45: 

I’ll say if you’re not a founder yet, definitely, like make sure that this is something you really want to do with your life. Because as you said, the lows are really low and you are going to feel alone and it’s hard as a founder. And, especially this market is complicated. The opportunity cost of becoming, founder is high. I personally love it. I feel like a founder myself doing a first time fund, but I definitely can understand how hard it can be. So I think it’s a life decision. I definitely think about it really strongly. Those that are already founders, I think there’s two things. One is really think about the type of leader that you want to be. I think that that’s not talked about enough in this industry. We talk about more tactical things, how things are supposed to be done, technical support, etc. But we don’t focus on the types of leaders that we’re becoming and how we’re growing in this industry. And we talk a lot about this within Nido the values, the mission, the things that we have internally. This is a very touchy feely answer, but we think it’s so important in thinking about how you’re going to scale your company people wise to think about the type of leader that you want to be. And the second one is more like this, hang in there perspective. There are so many opportunities to build incredible things all over the world. And there’s a reason why these founders are doing them today. And it’s going to be tough, but the highs are super worth it. And I think that the hang in their mentality, the market goes up and down. And so we’re going to get another high soon. And that’ll be really exciting as well. 

Kate Adams – 00:19:19:

I like the positivity and I also like what you spoke about, the leadership. I think you’re right. There’s so much focus on the product or the market and not enough on the leader you want to be and the type of decisions you want to make and how you want to guide your team. I think that’s a really good point. So for those listening that want to learn more about Nido ventures, where did they go?

Maria Gutierrez Peñaloza – 00:19:44:

Our website is super easy, www.nido.ventures. And we’ve recently started this whole initiative within Nido to create more content generally. Our theses are being published, opinion pieces, we’re working on a really interesting article about the history of VC in Latin America. And like the idea with all of this is to have people that are outside LATAM understand LATAM better and the people that are within Latin America understand the VC technology entrepreneurship world a lot better. And we are coming out with different things every week about it. So definitely like, follow it, subscribe, like, and I think there’s some interesting information that will continue to come out of that for any type of audience that has any interest in LATAM.

Kate Adams – 00:20:29:

I love it. Absolutely. What a great resource. Thank you so much, Maria. I really enjoyed this conversation. It’s so different from so many that I’ve had recently. It was really refreshing and I love the work that you’re doing. So thank you for making the time for the show.

Maria Gutierrez Peñaloza – 00:20:46:

Thank you for having me, Kate. This was great. Every time I talk about what I’m doing, I get more excited about my job. So thank you for giving me the space.

Kate Adams – 00:20:54: 

Oh, I love it. I love the passion. Thank you.

Outro – 00:20:58:

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