Five big ideas from my Conversation with Dave Nangle, Founder and CEO of VEF, an emerging markets-focused, growth-stage fintech investment firm

In the bonanza days of 2021, cash-rich venture capital firms deployed a staggering $16 billion in Latin America, minting a crop of unicorns with skyrocketing valuations and unrealistic growth expectations. Fast forward to 2023, and funding in the region dropped to $4 billion, with Latin American startups experiencing their worst year of investments since 2018. This roller-coaster environment has been a blessing in disguise for LatAm tech companies, as they managed to pivot from growth at all costs to efficiency faster than startups in other regions. This resilience, coupled with positive macro trends, a favorable regulatory environment, and a well-developed local tech ecosystem, represents a lucrative opportunity for a more careful, strategic, and dedicated approach to capital deployment in the region from the global investment community.

What should this approach be, and how to succeed in investing in Brazil, Latin America, and emerging markets more broadly, was a major theme in my recent conversation with Dave Nangle, founder and managing partner at VEF. VEF is a publicly-traded investment firm that focuses exclusively on growth-stage fintech companies in emerging markets, with a particular emphasis on Brazil and India.

Here are the five big ideas from that conversation👇🏻

1️⃣ Emerging markets like Brazil and India have a higher potential to deliver venture capital returns than developed markets like the US and Europe

They offer higher ROI potential due to larger, younger populations, less saturated markets, and the ability to leapfrog technology, all while benefiting from the lack of competition and higher margins. Emerging markets with low financial inclusion but high mobile penetration are ripe for fintech innovations

2️⃣ To be a successful emerging markets investor, embrace long-term thinking and apply the same rigorous approach you use in your core markets

The hit-and-run approach seen in 2021, when markets were high and interest rates were low, led to inflated valuations, unrealistic growth expectations, and financial losses. Stay adaptable to market fluctuations, learn about the unique challenges of each region, understand the political and regulatory environment, build partnerships with credible local investors, and maintain price discipline

3️⃣ Founders should opt for good investors who add value over those offering high valuations but less strategic support or experience operating in the market

Another important piece of advice to founders is to be honest and transparent with investors about challenges and setbacks to build trust and foster better collaboration

4️⃣ A less sexy but more sustainable exit strategy for tech investors is M&A, not IPOs

M&A offers more certainty and immediate returns, avoiding the volatility and prolonged timelines associated with IPOs. In emerging markets specifically, sometimes you have to sell when you can, not when you want. Be prepared to seize opportunities as they arise

5️⃣ A permanent capital structure is worth considering when investing in emerging markets

This allows for sustained investment without the pressure of fixed investment periods, which is especially important given that emerging markets require time to mature and deliver returns

Dave Nangle's book recommendation is Man’s Search for Meaning by Viktor Frankl

You can watch the full interview with Dave on Youtube 👀👇🏻

Or listen / watch the episode on Spotify 🎧

Before you go:

We’re excited to introduce a new section to our newsletter, where we’ll spotlight curious updates and news about our previous guests from The J Curve Podcast 👇🏻

Making agile core technology article in American Banker featuring Daniela Binatti, co-founder and CTO at Pismo, who joined us on a pod in June.

CRMBonus raises $10M in a Series B extension round shortly after announcing a $75m Series B led by Mary Meeker’s Bond Capital. Alexandre Zolko, the company's founder and CEO, joined us on the pod in May.

This week’s reads:

Cash-Rich Venture Capital Firms Eye New Investments in Latin American Startups - a super curious Bloomberg article published earlier this year that argues that Latam-focused VCs are sitting on at least $3.7b of dry powder waiting to be deployed 👀📈💵

The Art and Science of getting to the very top of Crowded Creator Markets - Old but good reddit read on how to get to the top of the creator market using a very scientific approach 

Thanks for reading,

Olga