When the Going Gets Tough, We See Who’s a Real Investor, Endeavor Co-Founder Says

In an interview with Bloomberg Línea, Endeavor’s co-founder Linda Rottenberg says that now the trend of ‘everybody being an investor’ is over

Linda Rottenberg, co-founder and executive director of Endeavor Global
December 07, 2022 | 11:45 AM

Bloomberg Línea — Linda Rottenberg co-founded the global entrepreneurship incubator Endeavor in 1997, which selects and scales up fast-growing businesses in emerging markets. She oversees Endeavor Catalyst LP Funds, that currently has over $250 million in assets under management, and which is co-invested in Endeavor entrepreneurs raising from Series A to E rounds of equity capital.

Rottenberg started Endeavor in Chile, Argentina and then moved on to Brazil, Uruguay, Mexico, Colombia, Peru and Ecuador, and the network is present in 41 markets worldwide. When Endeavor started, there was almost no venture capital in Latin America, and which was followed by a decade during which it was possible to receive seed and Series A rounds, and venture firms such as Kaszek, Monashees and Valor emerged.

A lot of companies started to receive Series B and C and became unicorns.

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“Once companies reach the billion-dollar goal it never goes back,” Rottenberg told Bloomberg Línea in an interview. “Even if one company or several companies have difficult times or are going to be in down rounds, that psychological barrier you can never take away,” she added.

“My prospects for Latin America going forward are tremendously high. The world is now seeing Latin America’s market size and they see the talent. This is not going away.”

What is going away, in Rottenberg’s view, is the trend of “everybody and their mother becoming a venture investor”.

“I got nervous in 2021. I don’t like times when everyone thinks they are a venture investor because they always leave when things get tough. Now you will see who the real entrepreneurs and investors are.”

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Rottenberg says that the region will see more and more local entrepreneurs becoming early-stage investors in Latin America because they are people who know the market and are comfortable with volatility.

When asked about down rounds in the region, Rottenberg said that entrepreneurs took too-high valuations when they were expected to have grown at all costs. Now, they are being told to seek profitability.

“I’m generally bullish. I see corrections, but they don’t overcorrect,” said Rottenberg, adding that the region will never go back to the days of no venture capital being invested.

“If you say you are an entrepreneur first, be an entrepreneur first. If you switch games, people will remember. That’s all I want to say to funders. Be careful thinking you are smart in a few deals and then losing out in the long term,” she said.

“If you have to do a down round, it doesn’t mean the end of the company. If you can make sure that employees are gifted new options, it can be an opportunity to reset equity and invest in employees. I hope that funders create new stock plans with the new round to protect the talent.”

Rottenberg thinks there will be some M&A (activity in Latin America, and some people that leave companies will start their own.

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“Credit is an option, venture debt is an option if you can get that, and sometimes companies raised money last year that they did not necessarily need. I think people are waiting to see what is happening with Ukraine, what is happening with inflation. Once there is a little bit more certainty, I predict by Q1 and Q2 2023 we are going to start to see more money going into the system.”

‘If it were easy, everyone would do it’

“It’s just going to be a hard year or so, but entrepreneurship is hard. If it was easy, everyone would do it. This is where we are going to see the real CEOs and the real business model.”

Endeavor’s co-founder says the only founders that she doesn’t have quite so much sympathy for are the ones who take money without carrying out diligence.

On Endeavor’s board are Latin American unicorn founders such as Sergio Furio of Creditas, Cesar Carvalho of Gympass, Robson Privado of MadeiraMadeira, and David Vélez, Nubank’s CEO, who invests in Catalyst, Endeavor’s late-stage fund.

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“Don’t despair. Hard times are always hard times. Chaos is the friend of the entrepreneur. This is a great time to be an entrepreneur and there has never been a better time for Latin America,” Rottenberg said.

“I didn’t like 2021, I was nervous. It was too fast, too much. And for all the negatives of 2022, the two positives were more companies from Latin American looking globally in new markets and finally the rise of female C-suite co-founders.”