German VC Picus Capital Opens Shop in São Paulo Looking For Early-Stage Startups

The Pre-Seed investor wants to be with LatAm founders from day one to IPO

Julian Roeoes and Santiago Danino, partners at Picus Capital.
April 04, 2022 | 04:02 PM

The German venture capital firm Picus Capital started investing in Latin America 18 months ago, when it opened its office in the Americas, in New York. In talks with Bloomberg Línea, Julian Roeoes, Head of Americas at Picus Capital, said that the company is now spreading its wings in Latin America, with a new HQ and hires in São Paulo.

As a Pre-Seed investor, Roeoes says that the closer the investor wants to be in the early stages it’s important to be on the ground to find founders. So Santiago Danino will be the new partner of Picus Capital in Latin America, looking to work with those founders, and planning a new office in Mexico as the next step.

“The pace of innovation and the strength of founders coming in the region has been nothing short of incredible. There’s a staggering number of unserved communities, and there’s still asymmetry between companies and access to capital. So the combination of those market dynamics is a reason behind our doubling down in LatAm,” said Danino.

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The firm is looking to hire local talent and Danino says he is enthusiastic about opportunities in the rest of LatAm. “We are seeing exciting opportunities in Argentina, Peru, Bolivia, and Central America. At the end of the day, we are not encumbered by geography, and instead, we follow great ideas and best in class teams.”

So far, Picus has backed 20 LatAm companies, including Mexican Clara, Chile’s Xepelin, and Brazilian Kamino. “I think there’s more capital coming because there is more talent, there is a very fast pace of talent development and second-time founders from some successful companies in Latin America like Nubank and dLocal,” said Roeoes.

According to him, there is a lot of repatriation of talent going back into Latin America. People that used to work for tech funds in the United States or went abroad for an MBA are now coming back to Latin America and growing tech communities in Colombia and Uruguay, according to the investor.

Check below the main excerpts of the Picus Capital interview:

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Bloomberg Línea: Why do you think foreign VC firms like Picus are coming to LatAm now?

Julian Roeoes - Global capital is super interesting because a lot of international founders are coming back. Also, there is a lot of innovation that we have seen for example in India five years ago, and is now being out in Brazil. There’s a lot of fintech innovation happening in the US, in Europe, that has now been shown in Mexico, alongside digital banks, and infrastructure solutions on the banking side. So there are tremendous benefits that these funds can bring, and now the same evolution is happening in Latin America, so combining great talent with smart capital that has learning and can help founders to accelerate innovation is a great opportunity where foreign capital can add even more value because we have seen a lot of learnings.

Santiago Danino - We can bring the best of both worlds. We will have a local presence with local connectivity and local talent but we will be able to support that with the resources to scale and the learnings of a global organization.

Bloomberg Línea: What are the main challenges and difficulties of investing in Latin America compared to other markets?

Julian Roeoes - We are different from other funds. We have our privately funded setup, we invest for 15 years and more, so we don’t have to look at specific fund lifecycles. [It doesn’t matter] movements like elections coming up and economic cycles, we can focus on the long-term innovation potential that we believe. Right now is a good time in Latin America, because some of these innovation cycles are happening. There is a risk consideration that we monitor the market very active when it comes to political risk, elections, inflation, some markets like Argentina have different inflation profiles. But there is also opportunity coming back to technology, innovation, web3, cross-border payments enabling saving and investing.

Bloomberg Línea: Even though, as an early-stage fund, the risk is greater, isn’t it?

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Julian Roeoes - The risk of early-stage is something that we see globally. We have been a Pre-Seed investor for the last six years, we have 150 portfolio companies by now. I think there is a risk in the early days.

We want to help that founder to succeed. We know that there will be failures and pivots along the way, but a lot of times there are the right partners and the right supports. Founders can succeed. We feel like if we find a founder with vision to build innovation, maybe it will not be his/her initial idea, but maybe it’s a different idea, we have this open-minded approach to help founders.

Naturally, there will be failures in our portfolio. Fortunately, in LatAm, we have not seen any company yet that failed. But I think we are very realistic about it and we want to work with founders.

So for us if a company is not succeeding, we will stay close to the founders, we will help them in challenging times, and maybe the next company will be successful. For us, it is important to stay close to founders and help them to achieve the best outcome.

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Bloomberg Línea: Why are we seeing so large Pre-Seed and Seed tickets nowadays?

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Julian Roeoes - There’s a lot of capital deployed, more capital needs to be allocated to several new businesses that are starting. When it comes to Series B or C stages, and the US public markets are under pressure, there may be questions if I invest in a Series B or C round what’s the exit possibility for the IPO. But committed capital wants to be deployed. And so there are more funds shifting capital to the early stages.

If you have a high conviction to start a company with a founding team that has a stronger idea, people have more capital to deploy and it is competitive.

Santiago Danino - You see a lot of headlines of LatAm companies successful on a global scale like NotCo and Nubank, which dramatically increases interest in the region, it sort of crowds out later stages and forces people to enter it early. We’re excited about the next chapter in VC in Latin America, despite all the activity going on in the early stages because our tracker is such that founders that we work with really speak to the value-added and that is something that we think is tremendously helpful and valuable. With being more competitive in Pre-Seed, Seed, we think that there is still opportunity.

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Bloomberg LíneaWhat are the sectors Picus Capital wants to invest in?

Santiago Danino - If you look at 2021 alone, upwards of 60% of the VC capital that went to Latin America was directed to e-commerce and fintech. Given ongoing shifts in consumer behavior towards digital finance and retail, we think opportunities in those spaces will continue to present themselves. We are also big fans of other ideas that support HRTech, procurement, and logistics, we like proptech and we have seen powerful business models from other geographies succeed when launching in LatAm. With all that said, we are industry agnostic by the end of the day, and simply follow excellent founders that want to build categories.

Julian Roeoes - We like B2B marketplaces and procurement enablers. We have a global pull of capital that invests which gives us a great benefit of being super flexible. So for us, if we see great founders, in great opportunities that we believe in, then we can genuinely make investments in the right term in the right stage.

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Since we opened up 18 months ago, we roughly invested one company per month, with our 20 portfolio companies. This is a pace we are very committed to continuing and we appreciate it as eventually Seed rounds get larger, and we will continue to invest in subsequent rounds of our portfolio companies. If we see five great companies we are going to invest in five, if we see one, we are going to invest in one.

Santiago Danino - The next step is to frame opportunities outside Mexico and Brazil, and continue our efforts in the region. Following that, who knows, another office, but we are committed in the long term. We typically invest with a 10 to 15-year horizon in mind and that’s exactly how we view Latin America. Despite market volatility, we are here for the long term.

Julian Roeoes - We want to be the best early-stage long-term partner in LatAm. That’s why we are super selective because if we invest in a founder, we are going to be a partner for the founder. We want this reputation to continuously build in LatAm.

That’s why we like the early stages. There is a lot of innovation potential and you’re there from day one and you will probably be there on the day of IPO.