Consuelo Valverde, founder and managing partner of San Francisco, California-based SV Latam Capital (SVLC) is not your average VC investor. She brings a diverse wealth of technical, scientific, government and entrepreneurial experience to the table.
At age 21 she founded her first company — a PC manufacturing company and IT training center in Mexico, where she was born. Other notable achievements followed. Valverde founded a software-development company, science museum, an innovation center, a science magazine, a TV and podcast science series, and a business-coaching company in San Francisco before she founded SVLC.
“The common denominator driving everything I’ve done during my career has been a desire to improve society and the planet. Instead of focusing on the technologies, we target difficult problems on a broad scale,” said Valverde. “Whether you are a serial founder, a tech entrepreneur, or a scientist, SVLC is here to help you build a breakthrough company from the moment of its inception.”
SVLC’s new USD $22 million Fund II, unveiled this morning, is earmarked for tech and science startups that are good for people and the planet, and helmed by daring, driven entrepreneurs who are committed to solving massive challenges such as mitigating climate change, reducing world hunger, discovering new treatments for chronic and age-related diseases, boosting financial inclusion, and strengthening SMBs (small to medium-sized businesses) in emerging markets.
New LPs for SVLC’s Fund II include Crystal Sacca, a New York Times’ best-selling author, an early investor in Uber and Blue Bottle Coffee through Lowercase Capital, and the co-founder of Lowercarbon Capital, and her husband, Chris Sacca, a legendary VC, company advisor and entrepreneur who invested in seed and early-stage companies such as Instagram, Twitter, and Uber. Other LPs include PayPal, IPG (Investment Placement Group), The Julian Grace Foundation, and a world-renowned bank.
“While so many funds are fighting over the same scraps, visionaries like Consuelo are finding incredible deals that so many others miss. Diverse VCs mean fresh lenses and deal flow, which translates to outsized returns,” said Chris Sacca.
SLVC is one of 19 venture capital funds out of a pool of nearly 200 Black- and Latinx-led firms to receive funding from PayPal as part of the company’s commitment to invest $535 million to support Black-owned businesses, strengthen underrepresented minority communities, and fight for racial equity and economic equality.
Here are excerpts from my recent conversation with Valverde:
Lauren Simonds: Tell me about your early days as an entrepreneur. Why were you originally attracted to science and technology?
Consuelo Valverde: I grew up in Mexico going to the family ranch every weekend. My dad, who emigrated from Cuba, worked on genetic engineering; transplanting cow embryos and exporting cattle to the U.S. and other countries. That experience exposed me to life sciences at an early age.
I went to college at the University of Miami and graduated with a degree in electrical engineering. I was just turning 21 when I moved back to Mexico and went looking for a job. I grabbed the national newspapers to look at the job postings for electrical engineers, and they all said: ‘Gender: male. Age: 25 years and older.’
I thought, ‘Wow, this isn’t fair. It shouldn’t be legal.’ Although I had interviews, some at global companies, I never got a job. I never made it past that first interview.
It was very frustrating. People told me to go into software. They said I couldn’t get a job as a hardware engineer because it was a ‘guy thing.’ I remember thinking, ‘Why do I have to go into software? I want to be a hardware engineer.’ It was one of the first difficulties I experienced based on my gender. I created my own job because that’s what I had to do.
That’s how I started my first tech company: a PC manufacturing company and IT training center in my home state of Morelos. It remains one of my best experiences ever. It marked me even though I didn’t fully understand the path that I had chosen at that moment.
LS: You’ve had extensive experience with science and technology. Why do you think science matters more than ever today?
CV: Science has become part of the debate in politics, in health — everywhere — especially with the pandemic. It’s not only the U.S. It’s happening in other countries including Latin American countries such as Brazil and Mexico.
Making decisions based on knowledge, rather than assumptions, is very important, and scientific experimentation can show whether your hypothesis is true or not. You need to experiment, test, and learn continuously.
Employing a scientific method is essential for anyone to understand various situations and the world in which we live. It all starts from curiosity, but then you must ask the right questions in a process that provides accurate information to help you make better decisions.
LS: You are the second Latina investor to found an early-stage VC firm in Silicon Valley. Your friend Miriam Rivera, at Ulu Ventures, is the first. Why did you decide to plant roots in Silicon Valley?
CV: I had a master’s degree in computer science, lots of interest in biology, bioinformatics, and computational biology; the sequencing of the human genome influenced me enormously. But I wanted to get into venture capital. So, in the early 2000s, I went to London for a master’s in science entrepreneurship focused on turning science into a business.
I was very familiar with the science infrastructure of Mexico, and passionate about being part of that nascent ecosystem and forming biotech companies, based specifically, in the life sciences areas. My plan was to work in London for a year or so, and then launch a life sciences-focused venture capital firm in Mexico. But serendipity and a chance reconnection changed everything.
I went to San Francisco for the launch of the TechBa Accelerator, an initiative by the Mexican government to support startups in the U.S. There, I met a friend from high school, who had previously been in venture capital, and was launching a startup.
I told him about my plans, and he was very interested in exploring them with me. We continued the conversation over a couple of months, and then he invited me to move to San Francisco, join his startup for a year, and then pursue the VC firm together. So, I moved to San Francisco in May 2006.
The startup took longer than we expected, and the recession in 2008 delayed the venture-firm launch plans. I founded a business-coaching company in Silicon Valley working with fast-growing startups in the San Francisco Bay Area, and saw a big, missed opportunity. Most of these firms were outsourcing their development to software engineers in India and Eastern Europe. I never found one with a team in Mexico.
A bit of background: In the late 1990s, I worked for the Mexican government at both the city and state levels. My home state, Morelos, has the largest concentration of research centers and scientists in Mexico, and I worked with the federal government and its science agency, the Ministry of Economy.
That missed opportunity brought me back to venture capital. I knew the infrastructure, the software engineers and all the policies in place to develop the software industry in Mexico. Yet, I was very surprised there was no connection between Silicon Valley and Mexico, especially at the startup level.
I was drawn to bridge that gap. It was a natural fit, and my combined experiences — as an entrepreneur and with creating and implementing public policies — helped me a lot.
LS: Your current portfolio includes agtechs, biotechs, fintechs, greentechs and healthtechs. Why did you land on this mix?
CV: Our diverse portfolio connects with my diverse background. The common denominator in everything I’ve done is my desire to make the world a better place. Instead of seeing the part of the problem that affects me, I want to solve the whole problem. That’s why I went into government. I never saw myself in that role, but instead, I took an entrepreneurial approach to create a place for science, technology, and innovation at the state level.
When I founded SVLC, I wanted to invest in startups leveraging science and technology. In 2012, Mexico’s venture ecosystem was just starting. The federal government launched an initiative, through the development bank of Mexico, to invest in new early-stage VC firms. I applied to the government’s RFP because getting that bank as an anchor-investor would provide validation that other investors could trust.
I wanted a portfolio of innovative startups across a broad range of issues and a strong, scientific base. Instead of focusing on the technologies, I targeted difficult problems. We focused on three pillars — environment, society, and health — and we chose specific themes for each pillar.
Society focuses on financial inclusion, strengthening small business, and the future of work. Health targets chronic disease and access to diagnostics. And, for the environment, we focus on climate change.
LS: Clip, a Mexican fintech, is poised to become one of the country’s first unicorns (with a $1B+ valuation). Its co-founder, Vilash Poovala, has since co-founded Oyster Financial to solve another fintech challenge for Mexican SMBs. Tell us more about those two companies and the broader fintech sector, which has received the most investor funding for the last six years.
CV: Fintech is so active because you have a lot of underserved markets, and large, unbanked populations that are ripe for disruption by smart, fast-scaling tech companies.
Clip and Oyster have been great investments. Clip solved an early, widespread challenge with a terminal that lets businesses easily accept all types of electronic payment methods. Oyster is focused on an even bigger problem in Mexico: a lack of basic financial services such as debit cards and credit cards that, alas, a vast majority of SMBs in Mexico don’t have easy access to. And, if they are lucky to be the one in five small business owners who can access the basics, it will likely take many months for them to obtain accounts from traditional banks that do not serve SMBs in Mexico well.
Right now, we’re looking at other opportunities, and I think we’ll add a couple more fintech startups to our portfolio.
LS: You just launched your Fund II. Please tell us more about it. Was it a difficult process fundraising with limited partners (LPs) during the pandemic?
CV: Fundraising has been one of the most difficult things I’ve ever done, and I’ve done many difficult things. You need perseverance and endurance to go through the process. You could have three or four years to build a typical startup company. But, with a venture capital fund, you have two years, at most, to raise the capital. It takes time to build relationships with LPs, and it has literally taken me years to form some of those relationships.
The pandemic made everything harder for everyone. We were preparing another close, which meant investors coming in from Brazil, when San Francisco issued a mandatory shelter-in-place order, and then, the pandemic began to hit Latin America as well.
Investors are used to meeting VC partners, developing relationships, and hearing pitches in person. Moving due diligence to Zoom was challenging for many investors, but they are more comfortable with it now.
You couldn’t get a face-to-face appointment, except on Zoom, and investors were overwhelmed with emails. Attracting LP investment in breakout fund managers, the ones with first or second venture funds, became even trickier. It was challenging to get people’s attention. We had to sell our story, convey our track record, and distinguish ourselves from all the other VC firms.
I raised USD $22 million for our Fund II. It’s tiny compared to the billion-dollar venture funds, but it’s a perfect size to invest in great, early-stage companies and provide very good returns to our LPs.
SVLC Fund II’s first Brazilian investment is a startup called Mercê do Bairro, which is a startup that sits at the intersection of e-commerce and fintech. They service ‘mom-and-pop shops’ and corner stores in Brazil, and they’re building the largest virtual retail chain in Latin America by democratizing access to retail technology.
They are an incredible team of Brazilian serial entrepreneurs. The co-founder, Guilherme Bonifacio, was on the founding team of iFood. Diego Libanio, who sold his previous company, Zé Delivery, to Anheuser-Busch InBev, is the CEO. They’re a stellar team, and we’re very lucky to have them as one of SVLC’s first Fund II investments.
LS: Both SVLC and Ulu Ventures use a scientific methodology to analyze potential portfolio companies instead of using only “gut” instinct to choose your investments. Please tell us more about why you take that approach.
CV: We apply decision analysis to venture investing. This method, developed at Stanford University, integrates different fields: decision theory, game theory, psychology, and other social sciences.
Investing requires intuition, but how do you know you have good intuition? Decision analysis is a framework for testing VCs’ intuition. The process lets you attach a number to your judgments, assess the potential outcomes of different scenarios, and helps you recognize and remove biases.
An opportunity could be a massive unicorn, or you could lose all your money. The chances of losing all the money are much higher than of it becoming a massive unicorn. The decision-analysis process helps determine the probabilities of all those uncertain outcomes.
There are a lot of unknowns in the venture world, and we’re probably going to be wrong when we assign numbers to the different unknowns. But the goal is to be within an ‘adequate range of wrong,’ so we’re still using good-quality information and still making the right decisions.
Most VCs look to make at least a 10X in an investment, depending on what investment-stage sector they’re focused on, but they tend to look for a single investment to return the entire fund. Applying the decision-analysis framework, we look instead for a probability-weighted multiple.
In that unicorn scenario, let’s say a 200X return is possible, but the probability of it happening is about 1%. The probability-weighted multiple is 2X, but we can add probabilities for different scenarios. It’s structured, rigorous, and much more reliable than using gut intuition on its own.
It helps entrepreneurs see different scenarios throughout the life of a company. They see which drivers have the most impact on the success of the business, which is very important. The framework helps them understand which variables can deliver more customers, more revenue, higher valuation, and less risk.
LS: What is it like being a woman working in predominantly male industries like venture capital, science and technology?
CV: It does make things harder. However last year, in the U.S., there was more interest in diverse fund managers and people of color, underrepresented minorities, and women.
Some people want to place you in a particular box. Being a woman and a Latina who invests in science and technology, I don’t fit easily into any box. It is what it is, I cannot change all that. But what makes me different makes me able to look at opportunities and connect with different people who don’t fit in boxes.