LABS once asked the partner of VC firm Redpoint eventures why were unicorns important for Brazil and Latin America. Rodrigo Baer‘s answer was related to something that seems to be the current paradigm for investors that set eyes in the region: Latin American unicorns are solving huge problems.
And not only the unicorns. Working as a digital real estate platform and broker, Mexican startup TrueHome focuses on making the process of buying and selling a home less bureaucratic and more transparent to users. Earlier this month, the startup has raised $8.8 million from San Francisco-based Class 5 Global in a Series A round.
“Mexico has one of the highest home ownership rates in the world. With very little organized data, however, the process of buying or selling a home in the country is full of friction,” co-founder and managing partner Zach Finkelstein stated at the occasion. “Buyers are forced to deal with fake and duplicated listings and unreliable brokers. TrueHome is solving these problems by using technology to make buying and selling homes a seamless and transparent process.”
From the Latin American startup ecosystem, to the coronavirus effects on the region’s venture capital investments, Zach Finkelstein told LABS a bit about why he believes that are several opportunities in these countries – whether in real estate, logistics, or other sectors. Check the interview below:
LABS—In an interview with Crunchbase, you said that Class 5 Global was “amazed by the quality of the entrepreneurs emerging in the ecosystem.” and that it hoped “to partner with many more.” Can you elaborate on that?
Finkelstein—We’re seeing incredible people, who could have any job that they want, choosing to found startups instead. This is a great sign for the ecosystem. We believe that most of the tech opportunity in Mexico is yet to come. Class 5 plans to make a lot more investments in the country. TrueHome is just the beginning.
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LABS—About the fund’s recent bet on the Mexican TrueHome, you also said that the startup was “meeting a critical need”? Does this is something essential when considering startups to support?
Finkelstein—It’s important for us that a startup is addressing a large problem. Usually at least a $1B market and sometimes a lot more. TrueHome is addressing the real estate market which is a great example of this.
LABS—How does the Latin American VC ecosystem differ from the other emergent markets Class 5 Global focuses on?
Finkelstein—What we love about Latin America is the huge concentration of middle class consumers. But, at the same time tech is still in its early days. There are lots of opportunities to improve people’s lives using technology and they have the disposable income to pay for it.
LABS—Among Latin American markets, do any of them draw particular attention? Why?
Finkelstein—Mexico and Brazil are great because they are large markets. But, there are plenty of great entrepreneurs based in smaller countries, such as Colombia and Argentina.
LABS—You and Joel Ayala (Class 5 Global co-founder) have previously led an investment in CargoX. Why did this company attract your attention?
Finkelstein—Brazil is the third largest trucking market in the world and it’s highly fragmented. A large, offline, and fragmented market tends to be a great opportunity for tech startups. More importantly, Federico Vega, the founder is a deeply driven and talented individual.
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LABS—Due to the coronavirus outbreak, is there any forecast regarding how this will affect the VC ecosystem, and possible drops in investments in Latin American startups? In which sectors?
Finkelstein—VCs, just like everyone else, are adjusting to the crisis and absorbing new information everyday. This can slow some investors down. But, as an industry, we are paid to make long-term bets. Class 5, for example, is currently looking seriously at several opportunities in Latin America. Overall, VC will continue but may slow down for a time.
LABS—Do you believe that this crisis could generate new business models among startups, both in a global sense or in the markets where the fund operates?
Finkelstein—The interesting thing about crises is that they often make consumers and businesses rethink a lot of what they’re doing. This can be a catalyst for innovation. Take the Global Financial Crisis as an example. Uber, Airbnb, Twilio and lots of other amazing companies were founded right in the middle of it.
