The Bullish Case for Latin America, According to Marcelo Claure and Shu Nyatta

The co-founders of Bicycle Capital shared their insights on the region’s investment potential during a recent episode of the 20VC with Harry Stebbings podcast

The Bullish Case for Latin America, According to Marcelo Claure and Shu Nyatta
August 23, 2023 | 03:00 AM

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Following their launch of Bicycle Capital, a Latin America-focused growth equity firm aiming to raise $500 million for its inaugural fund, cofounders Marcelo Claure and Shu Nyatta are on the prowl for fresh investment opportunities across a region of some 650 million people, one which boasts some of the world’s fastest growing technology companies.

Having amassed $440 million in commitments by the time their new firm was unveiled in June, the Softbank alums shed light on the potential for VC deployment in Latin America during an interview on the 20VC with Harry Stebbings podcast.

“If you add the GDP of Latin America, we happen to be two times India, with ... one third of the people ... There’s a lot to be done in Latin America,” Claure said.

Latin America: A Hidden Gem?

The 52-year old Bolivian considered that “people often underestimate Latin America”, but that the region now success stories. “You look at Nubank, great example. To me, the world’s best digital bank. Look at MercadoLibre, nothing to envy to an Amazon or to an Alibaba, etc”.

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Nyatta chimed in to highlight the diversity of companies emerging in the region, particularly noting the presence of software development firms such as Argentina’s Globant, which “serves clients globally, not the thing people associate with Latin America.”

“Different kinds of companies get created in the region,” he emphasized, challenging conventional notions about Latin America’s entrepreneurial landscape.

Resilience and Growth in the Face of Disruption

Claure also shared his view on Latin America’s particular ability to adapt to digital disruption. He revealed that during his time as an investor in Uber, Latin American cities consistently ranked among the top five markets, showcasing the region’s readiness for innovative technology.

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The investor believes that Latin America’s eagerness to embrace digital services is evident through the widespread and rapid adoption of platforms like Netflix and WhatsApp.

Unlike many other regions, where there is an abundance of capital chasing limited opportunities, Latin America offers an environment where opportunities abound, Claure added, stating, “I think Latin America is the only place which is great because there are more opportunities than capital available. Everywhere else, there’s more capital than opportunities available, which drives crazy valuations.”

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The Next Decade: Macro Strength

Looking ahead, Claure painted an optimistic picture for Latin America over the next decade, pointing to two significant trends: nearshoring and commodities. “I feel very good about the future of the economy of the two most important markets in Latin America, which are Mexico and Brazil,” Claure asserted. Nearshoring, or diversifying supply chains, and the region’s rich commodity reserves, particularly in lithium, position Latin America for economic stability, he continued.

Nyatta added a macroeconomic perspective, stating, “Brazil and Mexico, the largest markets, have very well-run central banks that have performed incredibly over the last two years.” He further emphasized the strength of these countries’ currencies due to early central bank interventions, reinforcing their attractiveness to investors.

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Challenges and Opportunities Across the Region

The cofounders acknowledged that while Latin America offers immense potential, it also presents diverse challenges and opportunities. Claure, for his part, discussed Argentina’s exportable asset, its skilled workforce, and the potential it holds in the tech sector. However, he recognized the country’s historically weak currency and macroeconomic instability.

Nyatta mentioned that while some Latin American markets present challenges, they remain optimistic about long-term prospects. He said, “Some will always be challenging. Argentina has perpetually been a challenging market... Colombia is having a challenge now, but we’re long-term bullish on Colombia.” Understanding each country’s unique dynamics is crucial when navigating the region’s investment landscape.

Solving Real Problems: Latin America’s Tech Revolution

Claure and Nyatta highlighted that Latin America’s tech landscape is distinct from that of the United States. The region faces pressing issues in education, healthcare, and transportation, which makes it ripe for tech-driven solutions.

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Claure remarked, “You have to understand what are the problems that you can solve... I think we have a deep understanding of that, and this is why we can partner with these companies and help them grow their businesses.” The cofounders believe that Latin American entrepreneurs possess a unique understanding of their region’s challenges and are leveraging technology to provide innovative solutions.

Sophistication in Financial Markets

Nyatta pointed out the sophistication of Latin America’s financial markets, particularly in Brazil. He highlighted the ability to securitize cash flows and easily raise debt capital as evidence of Brazil’s financial market maturity. Nyatta noted that this sophistication is often underestimated by outsiders but contributes to the resilience and adaptability of Latin American businesses.

He further emphasized Latin America’s prominence in the fintech sector, stating, “Latin America has something like 25% of the world’s fintechs.” Brazil, in particular, boasts a highly developed financial market capable of handling complex financial instruments.

Latin America’s Role in Global Innovation

Claure and Nyatta’s insights shed light on Latin America’s transformative journey in the tech and investment landscape. The region’s vast markets, diverse entrepreneurship, and resilience in the face of challenges are attracting investors’ attention.

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As Latin America continues to embrace technology and innovation, it stands poised to become a global hub for startups and investment opportunities. By understanding the unique dynamics of each country and addressing pressing societal issues, the investors say, entrepreneurs in Latin America are shaping a brighter future for the region and contributing to the global innovation ecosystem.

In that sense, for Claure and Nyatta, the next decade could witness Latin America’s rise as a major player in the global tech and investment arena, redefining the way the world views and engages with this dynamic and vibrant region.