The J Curve Insider: We don’t do competitive term sheets

U.S. venture is sitting on trillions in AUM—and still delivering subpar returns. In contrast, emerging markets are compounding: better founders, stronger teams, and real breakout winners.

But very few public investors are willing to play the EM game.

Dave Nangle is one of them. As CEO of VEF, Dave has spent the last decade backing fintech companies across Brazil, India, and other overlooked markets—staying disciplined when capital floods in, and doubling down when it dries up.

We get into why legacy U.S. venture is structurally misaligned with performance, how LPs continue to fund underperforming megafunds, and what it will take to redirect capital toward markets that are actually compounding.

Dave also breaks down how he builds conviction in volatile environments, why VEF only concentrates when they’ve earned the right to, and what most founders—and investors—still misunderstand about exits, risk, and price discipline in EM.

Let’s get into it.

THE CYCLE IS BROKEN — BUT THE ECOSYSTEM IS COMPOUNDING

Olga Maslikhova: Dave, let’s start with the big picture. What are the most significant structural shifts you’ve seen in venture over the past decade?
Dave Nangle: The two biggest ones: First, the evolution of local ecosystems in EM. Ten years ago, when we showed up in São Paulo or Mumbai, there was very little—no real VC stack, no second-time founders, no angel networks. That’s changed. Today, you’ve got proper capital formation, experienced teams spinning out of scale-ups, and early investors putting their money back into the system.

Second, we’re seeing a version of what’s been true in developed markets for a while: the compounding effect of success. Founders like David Vélez or Sergio Furio are reinvesting, mentoring, and helping create the next wave.

OM: Meanwhile, U.S. venture returns have been underwhelming. Carta data suggests median fund returns hover around 1.5x. Even Lightspeed’s leaked numbers were shocking.
DN: That’s a symptom of the cycle. Too much capital chasing too few assets. The last few vintages—especially 2020 to 2022—will go down as poor-performing funds. And it’s not just the new shops. It’s legacy firms raising too much, too fast, without the discipline or scarcity that used to define venture.

THE LP MISALIGNMENT

OM: What’s your view on the fact that more LP capital keeps flowing into those same legacy firms—despite the lack of returns?
DN: It’s a game of incentives. If LPs are still allocating capital, the Sequoias and Lightspeeds of the world are going to keep taking it. It’s a logical business model: AUM gathering over performance. The blame’s not on the GPs. It’s on the LPs for not enforcing discipline.

OM: So what would force LPs to reevaluate?
DN: Performance. That’s it. Real DPI, not just paper markups. Once enough LPs go through a cycle without distributions, they’ll start asking tougher questions.

EMERGING MARKETS NEED PATIENT CAPITAL

OM: Why don’t we see more LPs reallocating capital to emerging markets—especially when U.S. venture is underperforming?
DN: Because EM plays by different rules. You need flexible, long-duration capital. And most LPs still treat it with a developed market mindset—obsessing over geopolitics, macro, and FX, instead of focusing on what really matters: the micro. The companies. The teams. The TAM.

OM: So what’s the opportunity they’re missing?
DN: The opportunity is in backing scale winners that rise above the noise. Think Nubank. MercadoLibre. Kaspi. These aren’t just local champions—they’re generational businesses that transcend country risk. But to see that, LPs have to stop treating EM like a macro bet and start thinking like company builders.

THE DIFFERENCE BETWEEN A GREAT COMPANY AND A GREAT INVESTMENT

OM: You made a distinction I really liked: a great company isn’t always a great investment. Can you unpack that?
DN: It comes down to two things: timing and price. I’ve seen companies that compounded beautifully for 10, 15 years—but if you invested at the wrong point in the cycle, you made no money. Or worse, you lost it. That’s especially true in EM, where currency swings and political shocks can eat your returns alive.

You can love the founder, love the product, love the mission. But if you enter at peak hype or pay too much, it’s a bad investment. You’ve got to stay disciplined. Price always matters.

WHY GROWTH CAPITAL STILL GETS STUCK IN EMERGING MARKETS

OM: You’ve said before that scale-stage capital is still hard to come by in most emerging markets. What’s the real bottleneck?
DN: A lot of EMs just aren’t built to support large exits. Brazil and India have the ingredients—depth, liquidity, proven IPOs, local M&A. But look at Mexico: not a single meaningful tech exit. That’s a huge drag on the whole funding stack.

You want more growth capital? Countries need to get serious about enabling exits—whether it’s better capital markets, better rule of law, or just letting acquirers do deals without friction.

VEF’S STRATEGY: CONCENTRATED CONVICTION

OM: VEF is known for building concentrated positions. How do you actually think about portfolio construction?
DN: We start out diversified—but with the clear goal of concentrating over time. Think 10 positions across different markets and verticals. But once we identify a breakout—something with scale, traction, and a durable moat—we double down. The idea is to earn the right to concentrate.

OM: And what does that actually look like in practice?
DN: We’ve had up to 70% of our portfolio in a single name. That’s by design. If we find the winner—and we’re sitting at the table, counting cards—we want to bet harder. Especially when the rest of the market is pulling back.

HOW TO SPOT A BREAKOUT

OM: What signals tell you it’s time to double down?
DN: A few key ones. First, when a company dominates a vertical in a single country and starts compounding—strong growth, solid unit economics, even approaching profitability. Then, if they show they can expand into a second product or market and win again, that’s a big trigger.

OM: And what are the red flags?
DN: Weak unit economics hiding behind GMV growth. Founders chasing hype instead of fundamentals. And assholes. Life’s too short for bad partners.

WHERE AI IS ACTUALLY WORKING

OM: You’ve said you’re skeptical of AI as an investment theme—but bullish on how it’s actually being used inside portfolio companies. What are you seeing?
DN: It’s not sexy—but it’s incredibly effective. At Creditas, Konfío, and TransferGo, we’re seeing real impact. Headcount is down. Costs are down. Customer service metrics are up.

AI’s helping automate underwriting. Collections. Customer support. And all of it hits the bottom line. So no—we’re not chasing AI-native startups. But we are watching closely how the best operators are using it to drive margin.

WE DON’T DO COMPETITIVE TERM SHEETS

OM: You mentioned that you don’t participate in competitive rounds.
DN: Ever. We don’t do bidding wars. If someone says, “Send your term sheet by Friday,” we’re out. That’s not how we operate. Our approach is relationship-driven, not transactional. We build conviction, we agree on terms, and we move forward. If it turns into an auction, we walk away.

OM: What else is non-negotiable for you?
DN: Legal. I’ve learned the hard way—no matter how much I like a company or a founder, if our counsel says the deal terms don’t work, it’s a no. That’s a hard line for us. You have to respect the process.

EXITS: M&A, SECONDARIES, DIVIDENDS—JUST GET THE RETURN

OM: Most VCs are still praying for the IPO window to open. How are you thinking about exits?
DN: IPOs are just one piece of the puzzle. M&A, secondaries—those are real exits too. In the last three months, we’ve done all three: an IPO, a sale, and a secondary. The important thing is turning assets into dollars. That’s what LPs care about.

OM: Any learnings from the Gringo exit?
DN: Great outcome for the ecosystem. Do I wish the price was higher? Of course. But getting cash in the door, proving liquidity exists in EM tech—it’s powerful.

ON OPERATING IN EM: DIFFERENT GAME, DIFFERENT SKILLSET

OM: Can emerging market founders follow the Silicon Valley playbook?
DN: They can learn from it—but it’s not the same game. The environment in Silicon Valley is completely different. The capital, the stability, the rule of law—it’s another planet compared to what founders deal with in most emerging markets.

OM: So what does it take to succeed in EM?
DN: Resilience, for one. An ability to operate through constant volatility. And a much deeper respect for capital. In EM, the music shuts off harder and longer. You need to treat every dollar like it might be your last—because sometimes, it is.

OM: I’ve noticed that many of the top founders in Latin America come from finance or consulting backgrounds—McKinsey, Bain, that kind of thing.
DN: Same here. A few years ago, we realized that half our portfolio founders were ex-McKinsey, BCG, or Bain. We used to brag about it—and honestly, it made sense. These are structured, strategic adults. They bring discipline, clear plans, and strong communication. They’re not just mavericks swinging for the fences—they come in with a playbook.

RISK: EMBRACE IT, PRICE IT, THEN DECIDE

OM: Emerging markets can seem chaotic from the outside—so many countries, each with its own risk profile. But you’ve said the real investable universe is actually quite small. How do you think about narrowing it down?
DN: Most of EM isn’t investable. You start by ruling out the obvious non-starters—places like Belarus, Iran, Venezuela. Then you’ve got China and Russia: huge markets on paper, but off-limits for structural reasons. That leaves a focused set we go deep on: Brazil and India are our core. Mexico, Indonesia, Pakistan, Egypt—those are more opportunistic.

OM: And how do you think about the risk that comes with those markets—currencies, politics, legal systems?
DN: We embrace it—but we price it. If the Brazilian real is going to devalue 10% a year, we model it. If the legal system’s shaky, we structure for it. The key is not to distort your valuation or throw discipline out the window just because the market is hot. In EM, risk is the cost of the upside. You have to plan for volatility—it’s part of the job.

RAPID FIRE

OM: One underrated founder trait?
DN: Charisma. It buys you time, attention, and capital.

OM: Favorite VC book?
DN: Zero to One. Still the best.

OM: A founder you’d back again in a second?
DN: Oleg Tinkov. Even if he went to the moon.

OM: Most overrated tech trend?
DN: AI investing. Using AI? Great. Investing in it? Overhyped.

OM: One piece of advice for new EM VCs?
DN: Fasten your seatbelt. It’s bumpy. But the upside is unmatched.

THE TAKEAWAYS

→ Great companies ≠ great investments. Timing and price still matter. In EM, the best business can be a bad trade if you get the entry wrong.

→ Growth capital follows exits. No liquidity, no scale-stage capital. Brazil and India work because they close the loop. Most EMs don’t.

→ The edge is in the down cycle. When others panic—on macro, FX, or regulation—insiders with conviction consolidate.

→ Not all capital is created equal. EM doesn’t need 10-year funds. It needs flexible, long-duration partners who understand the timing game.

 P.S. If this issue was valuable to you please share it with a founder who needs to hear it. Let’s build LATAM’s next tech leaders—together.

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