General Atlantic’s Escobari: ‘We Are Not Yet at the Darkest Moment of the Night’

Co-chairman of growth equity giant believes the US is heading for a recession, and says entrepreneurs should prepare for the worst

Martin Escobari, co-president of General Atlantic, says crises also serve as opportunities
August 16, 2022 | 12:14 PM

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Bloomberg Línea — For Martin Escobari, co-president of General Atlantic, startup founders must be alert to take advantage of the opportunities that arise after surviving “the darkest moment of the night”. But, he warned, “we are not yet in the darkest moment of the night, but it will come”.

Speaking at an event promoted by Endeavor for Scale-Ups on Tuesday in São Paulo, the Bolivian who lived in Brazil for 20 years before relocating to New York, believes the US is headed for a recession, and that the worst of the crisis is yet to come.

He sees the upcoming presidential elections in Brazil, the conflict with China, and the imminent US recession as three dark clouds on the horizon.

“I don’t know if they will all make it rain,” he said, however.

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‘Prepare for the worst’

One of the first to talk about adjustment in Brazil at the beginning of the year, the investor is advising entrepreneurs to prepare for the worst. “I love a good crisis,” he said, pointing out that in such situations “the cards are rearranged” and the best can stand out.

“When I look at my career as an investor, my seven big hits in history were during crises,” he recalled.

The first crisis was the bursting of the dotcom bubble in 2000. A co-founder of Brazilian e-commerce company Submarino, Escobari had raised $200 million at the time, which he referred to as “the equivalent of raising $2 billion today”. “If you had cash on hand, you couldn’t do IPOs. So you had to go out and spend cash,” he recalled.


On the eve of its IPO, Submarino was worth $1.5 billion, according to Escobari. But with the dotcom crisis, investors fled the initial public offering, which would end up valuing Submarino at $25 million. “And we had $20 million in cash”, he said. In the end, Submarino negotiated a proposal to be acquired by B2W, the holding company of Lojas Americanas, for $25 million.

“But the [potential] buyer didn’t want it. He said the dead company was worth more than when it was alive,” Escobari said.

Submarino underwent a transformation into a B2B business, turned a profit in Brazil, and within two years the market turned. The company ended up completing an IPO at $250 million and, in less than three years, was sold to B2W for $2 billion.

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‘Good and bad days’

“But if it wasn’t for that, we wouldn’t have generated profitability. We are getting older, and what we remember are not the sunny days,” he said. “The only certainty is that we will have good and bad days. It is always a cycle. A leader has to say things won’t stay good forever. And winter doesn’t stay forever, summer comes,” said the seasoned investor.


But in the moment of crisis, the main function is to survive to reach the “summer”, according to Escobari. And for that, he says entrepreneurs need to make tough decisions, such as layoffs, with courage, transparency, and meritocracy.

“Everyone accepts it if they understand the reason and that it was not something arbitrary. The organization embraces and respects the leader who is making the tough decisions. And in the darkest moment of the night, an unbelievable opportunity always comes along.”

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Asked by Bloomberg Línea about the window for IPOs, Escobari said the market will no longer see companies that are unprofitable going public as they did last year.


“There was a fever, and 90% of those companies that went public were not making a profit. The focus has to be less on the window and more on profit. The window will sort itself out,” he said.

General Atlantic is one of the largest traditional investment companies in the world, specializing in growth equity, a model that combines venture capital and private equity. It has around 200 companies in its portfolio and $80 billion in assets under management, according to its website.

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