Cut The Check: Evolution of Mexico's Ecosystem | The Role of VC's | The Silver Economy in LATAM | Expansion Across the Global South | Hernan Fernandez, Managing Partner Angel Ventures

In this conversation, Hernan discusses the evolution of angel investing in Mexico, the growth of the startup ecosystem, and the transition from an angel network to fund management. He shares insights on investment strategies, the importance of relationships in Latin America, and the challenges of scaling businesses across different countries. Hernan also highlights current trends in fintech and the silver economy, while reflecting on the lessons learned throughout his journey in venture capital.

CHAPTERS

00:00 Intro: Hernan Fernandez, Managing Partner of Angel Ventures
00:59 The Evolution of Angel Ventures
01:44 Initial Reception and Challenges in Mexico
02:46 Feedback to a Angel Syndicate in Mexico in 2009
04:06 Value of MIT Network in Early Days
05:35 The Evolution of Mexico's Startup Ecosystem
08:42 "It's a 20 Million Fund Onwards or You're Not On"
09:38 Fund 1 Economics
10:28 Fund 1 Takeaways
12:17 Angel Ventures' Thesis
13:48 Latam's TAMs & Tailwinds
15:10 It's Not a One Size Fits All in Latam
17:04 Why Everything Flows into Mexico 
18:37 Challenges of Expanding to the US
19:56 The Similarities Across The "Global South" Markets
20:45 When LATAM Startups Should Expand to the US?
22:07 Angel Ventures Target Ownership & Macro Challenges
23:32 Ensuring The Business Model is "VC Backable"
25:55 Emerging Trends in FinTech and Beyond
27:07 The Silver Economy: Consumers over 50 years old
27:49 Corporate Partnerships, Agtech, & Heathtech
29:07 How Do You Think of Moats & The Art of VC 
31:15 Building a Supportive Ecosystem
32:39 What's the Role of VC?
33:51 Final Thoughts
38:29 Outro

Cut The Check w/ Mack Meyer is a podcast about venture capital, startups, and entrepreneurship in Latin America and beyond.

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Transcript

Mack (00:36)
Thanks, Hernan for joining us.

Hernan (00:37)
Hey, Mack how are you? Thank you for the invite and great to be here.

Mack (00:41)
You know, I always say when I came down to Mexico, I don't know, almost two years ago, I was pretty impressed by some of the almost, I would call them OG investors. I think you fall into that category. Honored to have you on today and wanted to get your background and insights. Cause I think you've seen quite a few things over the years.

Hernan (00:59)
Yeah, fantastic. mean, the, landscape has definitely changed. And, um, yeah, I will say that we, we started as the first angel investor network in Mexico, hence the name angel ventures, which can sound pretty generic, but, this was back in 2008. So we, we did the, the angel investment. A club for a few years then in 2013, we launched our first fund. Second fund was 2018, 19, and now we're doing our third fund. So.

So yeah, certainly dog years, but yeah, so many changes like we have seen through the years.

Mack (01:31)
When you guys started this kind of angel, would you kind of call it a syndicate at first? And what was the initial idea for you? Did you know that eventually you wanted to have a true fund or at first you didn't know?

Hernan (01:44)
Yeah, that's a really good question. will say we didn't know, to be honest. So when I was at MIT, that's where I met other co-founders and Camilo, my current partner, et cetera. And we started to do two different models, right? And so we went to the US and we looked into what Band of Angels was doing over in Silicon Valley or Common Angels in Boston.

you know, Keiretsu and a few more. And I will say like the more sophisticated ones did have carry sorry, Cycler funds back in the day. We started out with the network and see where that will take us. And from there, you know, we were lucky enough to, to spin out the funds, but, know, back in 2008, when we started this, we had no idea that this will, yield or transform into a fund.

Mack (02:28)
Yeah. when you started this initial concept, obviously you had this experience and then you went to school in the US for your MBA. But what was the reception like in Mexico from, I don't know, friends, family, corporates? I guess you say other people in family offices, were they like, this is crazy nonsense?

Hernan (02:46)
Yeah, I will say that that was kind of like the general reception, but some people were like, that's crazy. I'm out. That's like crazy. I'm cool. It's crazy. I'll try. But usually it was met with a, you know, three different areas, right? And this, you know, when talking about like individuals, know, like friends, extended friends or whatsoever, everybody had someone that was looking for money and they had like pretty cool idea. So they wanted to introduce

Mack (02:53)
You

Hernan (03:12)
him or her to me. Everybody had someone that probably was better off and that was doing a lot of BS investing or they already had 15 kind of like subway sandwich franchise. They were looking into what else to invest. And the most interesting ones, the third question they always ask is how can they help? And that was actually a key trigger because that allowed us to actually have a fantastic, great extended network because

The answer was always, you know, just like keep on, you know, kind of like preaching and let people know that we're here, that we want to get early to the best founders or whoever's trying to build. yeah, it kind of like felt like the Wizard of Oz in the sense that, you know, many, many people were coming with high expectations and they're probably doing very interesting things that we had no clue how to evaluate or how to even give them like an honest feedback. Right. So.

Mack (03:54)
Yeah.

Hernan (04:06)
That's where the MIT network did come in handy because, you know, we're looking into a deal on robotics or, you know, early, I don't know, like data science. We can send back to the network or go through the expanded network and find someone that can give us like an honest opinion or feedback on what this founder was building. Right. So, you know, baby steps with this for a few years, we, we did 13 deals through the kind of like syndicate model. And from there we were able to.

to start getting some credibility traction and raise the first fund for 20 million.

Mack (04:34)
Mm-hmm.

Of those 13, you, does any of those stick out like you remember and still have a relationship with one of those founders?

Hernan (04:43)
Yeah, would say like, actually, I do know most of those founders, to be honest, you know, and probably relationship wise, you know, it's some of them are doctors and, know, they're still like a doctors in certain issues. you know, the good part is like they were very decent and I never got a doctor bill from them in my life, you know, even though that the company.

Mack (04:55)
Yeah.

Hernan (05:06)
The company did not succeed. The other one was a company that's still around, it's very successful, was acquired by a food conglomerate here, which was Aides Campa, which is today the first and largest organic producing company in Mexico. So a couple of them actually migrated to the fund model or to, sorry, to become a fund investment.

Mack (05:22)
Yeah.

Hernan (05:28)
We have a couple of e-commerce companies, some in healthcare sector. So it was very broad and very diverse.

Mack (05:35)
Yeah. It's funny you mentioned you haven't seen a bill. There is some perks. But when you think back to like the, you know, I mentioned the question about the ecosystem, and it's very impressive you've seen, I don't know, almost 15, 20 years of this. What do you think has been the biggest change now? And I'm sure there's a lot of things and people ask you these questions all the time. What's been the biggest change in the last 15, 20 years?

Hernan (05:40)
yeah, for sure.

Mack (05:59)
in this startup ecosystem? Where do you think there's still room for improvement?

Hernan (06:03)
I would say that certainly Mexico City has grown and Mexico as a whole has become much more of hub for entrepreneurs. And I mean, there's like very different factors. I think like safety, Mexico City became much more safe. Obviously the pandemic, the fact that Mexico had remained with open borders brought a lot of people like digital nomads.

So we'll say like the quality of entrepreneurs and teams is just amazing. And kind of like Mexico became the capital for the Spanish speaking world, right? So you will see entrepreneurs or teams building out from Spain, Colombia, Chile, Venezuela, Peru, and even, know, there's a lot of like Americans Canadians or French building companies here in Mexico.

Mack (06:47)
Mm-hmm.

Hernan (06:48)
So I

think that's, that's been a very interesting change. And again, you don't only see it from the VC perspective. You can, you can also go to any cafe in Polanco or Roma and probably half of the people that are there would not even speak Spanish as, a first language. Right. So I think that the fact that, you know, Mexico has been growing and becoming a more, much more relevant player has also brought a lot of attention and expats that that obviously nurtures the ecosystem.

Mack (07:03)
Mm-hmm.

Hernan (07:14)
Besides that, for sure, there were a few initiatives, some of them fueled by the government, others were corporate, that have started putting some capital into the ecosystem, into early stage founders. And obviously, the first unicorns to be created, Kavak or Clip, So a lot of changes in these past 10 years.

But yeah, it's hard to pinpoint an exact moment when this happened. But some of the earlier funds that we were around, were struggling to find good teams then boom, at some point, there was just so much pipeline.

Mack (07:38)
Yeah.

Yeah

And I guess the question now for you is if you had to think back, would you have thought it be this quick?

Hernan (07:55)
yeah, it's, it's a good question. I don't know, to be honest. It's like, we started this in 2008 as, a group of friends that wanted to do something for access to capital being more democratic. And then we met a lady that has been up to today instrumentally in our whatever we can call success or survival from the Inter-American Development Bank. And she said, are you like what you're doing?

but you should really think about this and how to structure a fund because that's the only way that we have seen survival, right? And that's actually what spurred like the fund conversations. And in the beginning, we wanted to do like a $5 million fund and we were actually in Washington and she said, I'm gonna pretend that I didn't hear that and I'll go quickly and I'm gonna come back. And if you're still pitching like a $5 million fund, I don't want to hear anything about it, right?

Mack (08:35)
Yeah.

Hahaha

Hernan (08:43)
It's 20 million onwards or you're not on. So I was there with my partner. I was like, okay, just like, you know, find replace "5" "20", you know? And then she was like, okay, now we're into something. This is something we could work out. The IDB was our anchor investor for funds one and two. In fund one, was, 20 % of the participation. So With that, we actually launched it and find a group of 53 individuals that put on like

Mack (08:50)
Yeah, yeah, fine.

Yeah.

Mm-hmm.

Wow.

Hernan (09:11)
kind of like half of the fund, right? So The dynamics are very different. It was like smaller checks where we're trying to migrate our own angel network syndicate or whatever into the fund. And there were some people that said, you know, guys, we trust you. We like you. We have been coming to these breakfasts and hearing about like these products. So I think we're ready to give you a $200,000 check and see what you can do out of this, right? So It felt fantastic. And I will say that fund one has given

Mack (09:16)
Yeah.

Mm-hmm.

Yeah.

Nice.

Yeah.

Hernan (09:38)
all the money back in full and we still have some major positions in two unicorns there so it's going to be a very successful fund and when we gave that money back, man, it felt amazing.

Mack (09:44)
Wow. Yeah.

When he felt,

the weight on the shoulders for like a decade just fell off.

Hernan (09:52)
Oh,

oh yeah, no, it was just amazing. I don't think I have, I had as many congratulatory calls, not even in my wedding, right? was like, so people was like, oh, you made it. I never thought I'd see that money back. It's like, yeah, exactly. I like you. I want exactly, I want to do this for you in Mexico. Feels so good It was amazing to be honest.

Mack (10:04)
Ugh.

Yeah, yeah, that was because I liked you. I wrote that off a decade ago.

And was that advice, was that the key to making this work and still today? If is that five million, the fees don't work out, the fund maybe isn't taken serious. What are your thoughts on that? If you did the five, would it have worked?

Hernan (10:28)
Yeah, I don't know, man. It's a good question. What I've seen. So let me put it this way. Some of my colleagues launched very small funds, but I'm telling I'm saying, you know, like three, four million even. And exactly. So, So literally like very, very small funds. And today they are probably launching their fund four right.

Mack (10:39)
the other.

Mm-hmm,

yeah.

Hernan (10:51)
So

in our case, our first one was 20 million. So probably it was on the, on the higher side of anyone's like first made in fund, right? And we're now raising fund three.

Mack (10:59)
Mm-hmm.

Hernan (11:01)
Obviously the answer is that, our fund one was amazing and it was like a super well performing fund. And we learned so much from the angel days and actually we brought a lot of lessons learned from managing the angel investor network into our fund manager perspective. if we get to that conversation, then, then it's great. Right. But, on paper, can be seen that, we are

Mack (11:04)
Yeah.

Yeah.

Hernan (11:21)
a less experienced fund manager because we're actually doing our fund three versus some other colleagues that are having fund four. I think it's semantics, but in the end, in AUM and everything, it's very comparable.

Mack (11:24)
Yeah.

What I was going to say is since you were able to return some of that initial capital, it's almost proved that it's a lot harder to do it at 20 million than five. So I think the bet maybe worked out.

Hernan (11:43)
Yeah, no, no, I think that's a very fair point. And we bypass because a lot of these earlier funds obviously do not have institutional capital for Fund One. Our funds have always been mostly about institutional money. Fund One was 55 % institutional investors. Fund Two was actually 85 % institutional investors.

Mack (11:44)
Yeah.

Mm-hmm.

Mm hmm. Wow. And then fund three will be along those lines as well. Something like that. Yeah.

Hernan (12:09)
It's going to be a mix, yeah,

but I do think that it will be at least 50 % institutional.

Mack (12:17)
Go straight into your thesis, right? You guys, from what I understand, invest really at inception or pre seed to like a series A. And I think that's common for a lot of funds here. How does that make it in some ways easier and harder for you guys to evaluate opportunities based off valuation, ownership, and so forth for your unit economics?

Hernan (12:39)
Yeah, we gravitate towards seed that that's where we thrive. We might do that on occasion on pre seed. And I think now more than ever for Fund three, we only do pre seed for people that we know and that they're serial entrepreneurs. I guess something that's changed is that now you can be looking into the founders that have done one, two, three companies before this, and you can somewhat evaluate success or.

talk to their teams or co-founders or engineers and get a better perspective on their management skills. When we were doing this back in 2013, this was impossible. There was no way. So yeah, we're opportunistic and we like to back amazing founders. There's another thing that we're also looking for, which is we feel that innovation in emerging markets travels very differently.

There's certain regions that are all about like deep tech. So certainly Israel, Silicon Valley, know, like route 128, places in Europe, even China, of course, are doing a bunch of like very deep tech stuff, right? And Mexico, don't think is that. don't think like Latam is actually that. I don't think Southeast Asia is that. I don't think Middle East, Northern Africa is that, right? So I think the companies that we're trying to back have

Mack (13:29)
Mm-hmm.

Mm-hmm.

Hernan (13:49)
amazing, huge markets. The TAM is pretty much up there and they're changing livelihood of people for the better. It's not that we're Mother Teresa and we want to just like save the world. Of course we want to save the world, but we also want to give money back to our investors. example, that's why fintech, I think it's very relevant. I don't think that there's actually fintech companies in LATAM that will...

strike out as something very unique, right? It's like they're investors in Clip right? So it can be easily compared to Square in the US in the beginning. So right now they now have like a very different offering. And yeah, companies here like Bitso you can think, it's a Coinbase for Latam right? So it's not that you're doing like an industry defining company, but the fact is that you are doing that in a country where

Mack (14:21)
Mm-hmm.

yeah.

Yeah.

Mm-hmm.

Hernan (14:36)
It's starving for new products and services. It's growing fast. There's an emerging growing middle class that is looking for better goods and services. So there's a ton of business to be made here. Actually what we're doing is we're looking into places like Indonesia, India has some sort of deep tech, also these huge market economics.

Mack (14:46)
Yeah.

Hernan (15:00)
and trying to find business cases that travel well. And whenever we find that someone is building one of these cases that we have mapped, we are super excited for that vertical.

Mack (15:08)
Yeah.

It's interesting you mentioned that about, you you might see not a copycat, but something building along the same lines as a Coinbase like you mentioned. I wanted to ask you this, and I think you'll have a perspective on this. A lot of the times, I think it's very easy to think Mexico, Colombia, Argentina, Brazil, I'm building something for Latam. Can you speak to the nuances maybe of

Okay, I'm building something in Mexico. It's not as easy to scale and go to Brazil or Colombia, Argentina or vice versa. Because I think the common mistake people think is they can just build one for all of them.

Hernan (15:44)
Yeah, no, no, certainly there are challenges, right? And that's, that's, that's, think that perception that I hear across different teams, right? For example, for investors we're doing Latin America and we're, going to do a fund in Brazil. It's like, okay, fine. But bear in mind that if you do do Brazil, which is a huge market by itself, and, and probably is the most advanced in Latin America, you're only doing Brazil, right? Because it's very inward looking. It's a very different culture.

Different language right? it's a completely different perception. Mexico on the other hand, even though like it's a smaller economy than Brazil, is still huge on its own, right? It does attract a lot of talent from, you know, Spanish speaking at the time, Argentina, Colombia, Peru, even Spain. So it's a different story. What we usually tell to investors is like, if you want to do Latin America, it's like you have to do something in Brazil.

and something in Spanish speaking at that time. And that's where, you know, Mexico comes into play. right? It's a huge continent, you know, from going to go from Mexico city to Buenos Aires is like an 11 hour flight.

Mack (16:37)
Yeah.

Hernan (16:45)
The distances are long, So what we usually say is that I think that Brazil is certainly like its own beast. And for Spanish speaking at them, I think that there's five countries that stand out, Argentina, Mexico, Colombia, Chile and Peru, right? Obviously, Argentina is complicated given the macro situation.

Mack (16:51)
Yeah.

Hernan (17:05)
Chile is a very small market, but very efficient in many ways. they have, for example, a fantastic biotech cluster. Colombia is an interesting market because they're amazing entrepreneurs and they try things super fast. And Peru's probably kind of like still finding its way or whatever, but we have seen some interesting companies coming from there. The thing here is like Mexico feels comfortable in a way in the sense that

Mack (17:21)
Yeah.

Hernan (17:29)
everything flows into Mexico. you're building in Colombia, you're probably going to do something in Colombia and then the expansion phase involves Mexico 100%, right? Same for Chile, same for Peru, same for Ecuador. So if you are sitting and you're waiting for companies to show it at Seed or Series A Mexico should be the place. And in that case, guess that probably what you should be doing is

Mack (17:32)
Yeah.

a great place.

Hernan (17:53)
try to build relationships early with some of these teams in other places Latam even from a pre-seed or seed perspective and try to come into some of these early. But again, that being said, I think that doing what we do in Mexico feels good in the sense that everything comes to here. Like even companies like Cornershop made in Chile, but Breakout Market was Mexico.

Mack (18:02)
Yeah.

Yeah.

Yeah.

Hernan (18:17)
Rappi made in Colombia, but break out market was Mexico. So we will continue to see this trend.

Mack (18:20)
Yeah.

I wanted to ask and add, it's also with now this emphasis of founders here wanting to build globally. If they want to head to the US there's probably a high chance that they're going to want to do some type of soft landing or expansion in Mexico to make it easier to get to the US.

Hernan (18:37)
I'm not sure if I completely agree with that. mean, the US is a completely different animal, right? I actually tell my founders, some of them, I mean, if you're probably doing consumer goods, for example, we look at Birdman at some point, and we unfortunately passed, but I think the guys are killing it and great for them. And actually, We had some concerns on

Mack (18:38)
No?

Mm-hmm.

Yeah.

Hernan (18:57)
the competition and barriers to entry, but they have done amazingly well and it's a lesson learned for us, to be honest. So there's some things that are well, but we have seen so many concepts, so many ideas that will try to come into US and they just like, they don't raise the dollars and they don't have the marketing budget to compete period. So, I mean, there's some areas of opportunity in the Hispanic markets.

Mack (19:09)
Yeah.

Yeah.

Mm-hmm.

Hernan (19:21)
coming through Texas or wherever, or tapping into the nostalgia market, I think that makes complete sense. But for example, if you're building software or SaaS solutions or a mobility play or even a fintech, if you look at the market, you're probably going to find that there is a better opportunity in Turkey or in Thailand or Indonesia. Because again, they're more similar to Latin America. So I would rather have those founders or those companies think that way.

Mack (19:25)
Mm-hmm.

Mmm.

Hernan (19:45)
than say we want to go to a very saturated market in the US with $2 million under our belt where, you know, that's probably not enough even to go beyond McAllen, Texas. Doesn't make any sense.

Mack (19:56)
Yeah, and not to mention the burn rates there No, I think you make a great point on that. I was coming from the angle of this emphasis on building globally.

Hernan (20:00)
Yeah, exactly.

about the global South.

I mean, five markets that are comparable to Mexico. What is Mexico? Mexico is 135 million people. It's a nearly $2 trillion economy. It's big on services, tourism, manufacturing. And it's a 10 % upper class and 25%, 30 % upper middle class.

Mack (20:19)
Mm-hmm.

Hernan (20:28)
Where are you going to find those dynamics? And according to the goods and services that Mexicans are buying, I tell you, they're going to be more similar in Turkey or in Pakistan or in Indonesia. Obviously, I'm down playing Latin America. But to go beyond Latin America,

Mack (20:39)
you.

Hernan (20:46)
I don't think many companies are actually focused on the US unless they have or they either go through the nostalgia market and try to find like a foothold in Mexican places or, you know, that there's like some synergies or you're doing something, for example, like what Nuvocargo or Finkargo that are doing like trade. Exactly. That's obviously something that where the US makes sense. But if you're doing,

Mack (20:53)
Mm-hmm.

Yeah, cross border.

Hernan (21:10)
I don't know, like a CRM SaaS. What you see is that you are building a solution for cash on delivery or cash on demand and need to have some mix. And you're based on Whatsapp. It's like, dude, you're not going to US. You're not going to Western Europe. Your markets are probably going to be North Africa, Middle East, Southeast Asia, Indonesia.

If you actually dig into the details, you're going to be like, you're going to find much more relevance. Think about like Rappi. For Rappi, you have right for models like Gojek, you have like similar here, right? So actually I tried to challenge ideas that the US is the clear market for expansion.

Mack (21:41)
Mm-hmm.

Yeah.

As you guys look, in the last 15 years in Mexico, exits are always challenging. It's becoming something that everybody speaks about. How does that kind of effect your evaluation of startups ownership early? And what's your overall take on this?

Hernan (22:08)
I don't know, It varies, but we try to aim for 5 to 10 % ownership on the get go and we write anywhere from 500 to 2.5, $3 million initial checks, And then lessons learned in the hard ways, like we definitely need to have a lot of money to actually back our winners and to have a lot of...

Mack (22:13)
Mm-hmm.

Hernan (22:28)
of discipline to actually have money to vouch those companies as they grow. So, but again, I think that the fact that there's less tourist capital in Latin America, because 2021 was completely crazy. And many of these companies were raising $20 million pre-money rounds on a pre-seed, right?

Mack (22:49)
Without

product market fit, no customers.

Hernan (22:52)
Yeah, maybe, you know, like a good founder that

can tell like a fantastic story coming from consulting or banking. And, I mean, very few of them actually succeeded. Many of them, there was like so much hurt and pain in ecosystem. I think that 2025 and feels, feels great in the sense that, we're, back to basics. We're seeing, valuations, cool down a lot, which is fantastic. We're seeing, founders

really thinking long and hard about product market fit and questions and doable unit economics. It's like we were looking into companies that were burning through $100, $120,000 selling $2,000 a month. That was not sustainable.

I will say that we did not entertain many of them, but we also, have a fair share of, you know, also vouching for some of these models. And the other thing that, we have become more critical is if X or Y business model is really something that should be VC backable, right? An investor of mine actually had a very interesting challenge and a very interesting point, right? The guy is into retail and he was, he was,

Mack (23:48)
Yeah.

Hernan (23:56)
very critical of one of our investments. This company that was obviously into retail is like this investor, what he was saying is that when he invests, he expects to get his money back of that investment 18 months on average, right? So if the location of what's where it was superstar, probably that was gonna be like 15 months.

If he was like a lager, was going to probably take him like 24 months. If it was like really, really a dog, it was probably going to take him like 30 months to get his money back. So you have all of these like VC concepts that were claiming to do it fast and more efficient. How many times when you honestly like look under the hood? Yeah. What tech do you have? E-commerce. Okay. Great. Right. like.

not much tech there to claim. But the reality is like, they were raising VC money to actually launch eight stores at once, right? What was their claim is that, yeah, we need to have overhead and, share costs. But it turns out that many of these concepts actually failed, right? And I go back to this LP and it's like, yeah, you're right. It's like, the question is like, how do you manage to...

Mack (24:38)
Yeah.

Hernan (24:58)
to do that on a single kind of like location basis and then go further, which VC times is actually much more accelerated. But the conclusion that we're coming to is that there were a lot of deals out there under this logic that got funded that should have never been funded. everybody has a fair share of those two.

Mack (25:06)
Yeah.

Mmm.

Yeah.

Hernan (25:21)
raising the bar significantly, we're sticking to our guns on what should be funded. And, and yeah, we're, saying significantly more no's and we have always been super picky. Don't get me wrong. this time around, and capital is more scarce.

Mack (25:32)
You

Yeah.

It's like one of those things where the business model might make sense early, but then when you start thinking can this investment return the fund? It probably won't, but it sounds good on paper. We're going to expand to eight stores, but then you realize to get to 100 million in revenue, it might take 30 years. Yeah, and a lot more money.

Hernan (25:52)
Yeah, 200 stores.

Exactly, exactly.

Mack (25:56)
Yeah,

Where are you most excited now in Mexico? And you could speak broader, Latam, and what industries and verticals in the next 10 years?

Hernan (26:04)
Yeah, I think that fintech will continue to be very relevant. If you take a look into the 23 unicorns in Latin America, over half of them are fintech. So I think that that will continue to grow. So we're actively looking into stuff that has to do with fintech. Obviously, a lot of space is having claim and a lot of things are crowded now. So you have to be creative.

But we like, for example, everything that has to do with embedded finance. So pretty much what we tell every single one of our founders, regardless of what they are building, is to have one slide that thinks about how can this be a fintech? And that's interesting to see some really smart people, thinking about at some point how that they can use a platform to start

pushing through credit cards or credit products. But that's an early discussion that I really like to have. Other areas where I'm interested is anything that has to do with the silver economy, which is something quite unique and quite new to Latin America, because we have always thought about Latin America having a demographic bonus because of the young people, But it turns out that

Mack (27:06)
Mm-hmm.

Hernan (27:07)
It's also going to be one of the regions that will age the fastest. And in 2050, a third of the population will be over 50 years. So If you take into consideration some of these aspects, there's going to be a shift of consumer you will see in Japan or Europe. The median age in Japan today is like 48 years, I believe.

Mack (27:15)
Wow.

Hernan (27:28)
you make it to Tokyo, you're going to see a lot of TV ads where they have middle-aged men and women in the middle of their campaigns. So at some point, that's also going to happen in Latin America. I think many of the problems or solutions that we're seeing in different markets should start to be applied to Latin America today. I think That's an interesting area to be preemptive.

Mack (27:36)
Yeah.

Mm-hmm.

Hernan (27:50)
We have a great partnership with Nestle and we're doing a lot of very exciting stuff with food. And we see food very broadly, right? So it's since from farm to fork. So that involves like delivery, a ag tech solution, stuff like that. I'm confident that we're seeing a lot of very interesting stuff there. You know, health tech, I think is also finally maturing.

Mack (28:04)
Mm-hmm.

Hernan (28:11)
We have, for example, an investment in Midoconline from Fund 2 which is an amazing company and the largest telemedicine platform today in Mexico. And just branching out to a bunch of services. And it's been fascinating to see it grow. And yeah, besides that, anything that has to do with Mexico's strengths, supply chain financing will continue to see stuff like

between moving trades, goods, services, between Mexico and the US. I think that will continue to be very relevant.

Mack (28:37)
Yeah.

For you, and you've been at this a long time, when you mentioned the embedded finance and you mentioned founders coming with fintech solutions, and you just mentioned nearshoring now the stage is set on Mexico. Where do you dig in and find some type of moat? Is this founder very good at executing? How do you really find these nuances? Because like you said, if you just think of remittances through WhatsApp now,

You probably could fill a whole market map of just every company doing something along those lines. Who's going to win this market?

Hernan (29:07)
Yeah, that's I think that's the that's the art of this industry, right? It's like it's hard to figure out who is going to be like the real winner, right? And I mean, we invested in Clip and Kueski from fund 1. If I had known those were going to be like key winners, I would have sold my house. I will ask my grandma to sell her house and and back these companies. So it's what we need to to be confident is that

Mack (29:11)
Yeah.

Yeah.

Hernan (29:31)
the founder that we are assessing, with the market that we are entertaining, and with the data that we have, we're backing winners, right? We're never investing into a company saying, well, maybe it's going to be interesting if we actually get to be like number two in this market. No. So it's a series of things. And this becomes more difficult if you're leading investments, right? Because I don't know, you get, if you...

getting to a founder that you know that Sequoia and Andreessen are backing and you're graced with being able to place like an early check and probably that company had, yeah, exactly. Exactly. Then probably, well, you know, that's going to be a winner, right? The thing is like how to develop like deep conviction into being like a leading investor into that category defining company in Latin America. I would say like founders

Mack (29:58)
Yeah.

Yeah, 100,000. That's great.

Hernan (30:18)
still the most relevant that we can think of. And, uh, and again, I think a lot of these like tourist founders or who's probably expertise only comes from consulting or I banking. mean, don't get me wrong. I was an ex consultant, nothing against it, but, I think like we're trying to, to dig deeper into the psyche on why you're building that product. And probably it's the thing that has bugged you since you were 10 and there's like some amazing stories from founders, know, they just like.

Mack (30:29)
Mm-hmm.

Mm-hmm.

Hernan (30:44)
falling in love with a problem and trying to eradicate it with deep sector expertise. We're trying to find these founders for sure. We're trying to be supportive. use our corporate network, which has been enhanced over the years to find pilots or solutions very early on for some of these companies to out the best from the best.

Mack (30:46)
Yeah.

Yeah.

Hernan (31:02)
I don't think the playbook has changed, right? I think we just need to learn from our mistakes and a little from the successes and use the best people that we have around us to actually make the best educated guesses on who to back.

Mack (31:05)
change you.

You mentioned the local network with these larger corporations and you've been here a while. How important do you think that is to founders and their success long term? I don't think a lot of people touch on that often, but these relationships to do these pilots and partnerships.

Hernan (31:30)
I think it's very important actually. In Latin America, I think that's a lesson that many founders learned the hard way. These relationships take a lot of time to build and the sales cycle is probably the longest, right? Because in the US it's mostly about like products and merit. It's like you have a good product, they probably make a decision to whether like incorporate your solution.

In Latam you have to meet with this guy. And then this guy's probably busy. And then you're going to have a first meeting. The guy likes the product. And he says, my boss needs to see this. So probably that's another two weeks for the boss to see it. And then the boss sees it. And then he says, the team needs to see it. Probably if you actually, I love to tell this story, but if you're actually making a good in roads in Mexico at some point, one key stakeholder is going to take you out for lunch. Mexicans are very social in that end.

Mack (32:00)
Yeah.

Hernan (32:17)
If you are treated over for lunch, dinner, breakfast, it's looking good for you. These relationships take long to build. The fact that we have been building these relationships and many of these corporates trust us, and we can now tell them, you need to look at this because according to what we discussed in our last meeting, this is solving for XYZ that you were looking for.

Mack (32:38)
Yeah.

Hernan (32:39)
If you think about a VC, particularly a generalist VC, and where it is going to help, you have to think long and hard. It's not like we're AI purists, I don't think that's going to be us, and I have really not many VCs.

Mack (32:51)
Yeah.

Mm-hmm.

Hernan (32:55)
So for us, it's about like execution and finding the right business model and opening as many doors as we can to talent, to funding, to clients, to corporates. A lot of people ask, okay, what is your mantra as a VC? I remember that character from the Entourage TV show, Ari Gold. I think that's...

Mack (33:15)
Yeah. Yeah, Ari

Hernan (33:17)
I think that's how, a good VC should be You are an agent of sorts to your entrepreneurs, right? And you have to make sure that they have everything in their hands to execute according to their vision, challenge them every now and then, uh, and just be like a great ambassador and a problem solver that works with them. And not just a pain asking for a bunch of like reports and whatever, or

Mack (33:30)
Yeah.

Yeah, yeah.

Hernan (33:41)
or shooting them like at WhatsApp is like, have you thought about this? Because probably you guys like, yeah, yes, a lot, right? But yeah, we try to be those guys for our companies.

Mack (33:45)
I out of nowhere, yeah, yeah, everything, ugh.

Final two thoughts here. I would probably classify you as one of the OGs of this ecosystem. What are you most proud of to date?

Hernan (34:00)
I love the culture that we have built in Angel Ventures. We have a lot of young people that have been with us 10 years and they have grown with the project. Now the project actually has grown with them and we need to continue to grow for them and with them. I really like the network that we have built of LPs, investors and we try to be very social about it.

So I feel very proud about that. I feel proud about how many founders that we have back talked about us. I dream of that day where Sequoia is known for backing Google or X or Y company, like Accel for backing Facebook. I dream of the day where I don't have to introduce Angel Ventures I can just say.

Oh, well, it's an early check in Clip, Kueski Aprende, Colektia, Digitt and a few more. I dream of that day where some of these companies are so big, so massive, so successful that it's like, those are my calling cards, other than me saying the pitch, oh, we started back in 2008 as the first angel investor network in Mexico. We have grown out of three funds, blah, blah. He's like, no. He's like, know Clip? Yes.

Mack (34:59)
Yeah.

Yeah, yeah, yeah.

Hernan (35:09)
Where the first check there, you know, Kueski Yes, where the first check there. You know, I dream of that day.

Mack (35:10)
Yeah, great. But that pitch

has gotten better though from 10 years ago. But most people now that come here probably have heard of you and know you. And if they haven't, maybe they should.

Hernan (35:19)
Yeah.

That I mean, true, but you cannot take it for granted, right? So yeah, you need to continue to build in a very nascent ecosystem and it's up until there's an IPO or money in the bank for everyone on a massive way, you still have a lot of work to do.

Mack (35:24)
Yeah. Yeah.

Mm-hmm.

Yeah. Yeah.

Last question here, just, and sometimes this is challenging, so you could take a second to think about it. What's been the biggest disappointment or learning experience since inception of Angel Ventures? How has it shaped your approach moving forward?

Hernan (35:51)
I don't know, that's an interesting question.

I would say, in Latin America, there's this very entrenched perspective on funding that you go to talk to many of the big names, the big family names. And usually they will say something like, well, we have a lot of Mexico or Latin America risk because X or Y company is doing business in Mexico. It gets 90 or 95 % of the revenues in Mexico.

So whenever we actually have some money, which has already gone through the process and it's kind of like free cash flows, we want to invest it in the US or in Europe or elsewhere. Right. I don't think that's, actually the case in many other places. Like, you know, like the US or, or India or many other countries is like, they believe in their country more. Right. So I, I mean, and don't get me wrong. Most of my LPs are Mexican and most of my LPs are.

Mack (36:25)
Mm-hmm.

Yeah.

Yeah.

Hernan (36:44)
guys that dream and believe that there can be like a better Mexico or a very Latin America, right? And we're working super hard for them. But the vast majority of them, you know, kind of like falling into this category of like, well, now that this money can go anywhere, it's like, why should it return to Mexico? And we have 20 nationalities of LPs, you know, ranging from Korea to India, obviously US, Canada, and many more.

Mack (36:48)
Yeah.

Yeah.

Hernan (37:09)
And yeah, so the pitch that we tell them is like how awesome Mexico and Latin America are in terms of opportunity, right? And when they get this, it's sometimes frustrating And we have had a few disappointments there on stuff and even an institutional level, we always say that there's not a single ecosystem that has taken out.

Mack (37:13)
Yeah.

Hernan (37:26)
if the long-term savings or the pension funds do not invest into these assets class. And it's been a struggle to get our pension system to really look closely into the ecosystem and back us with conviction.

Mack (37:30)
100%.

Yeah.

Yeah, and do you think that could, it's not happening, but could it happen? Is the conversation still the same from 15 years ago and maybe it never changes?

Hernan (37:47)
I think the government continues to be open to this and they are understanding more and more the narrative. I think that we need to make a few successes that Clip are just like so resounding and that these arguments can be more clear and more broad for them to take notice.

When that happens, obviously there's going to be more more push and hopefully there's a few of them that react and actually say, okay, we need to understand how to do this and how to back it.

Mack (38:09)
Okay, fine. Yeah.

Hernan (38:13)
Everybody else in the world, they will have like cycles up and down. So there will probably be, over and under their targets, but they're always a program here. There's no such thing.

Mack (38:22)
Awesome, Hernan That's all we have on my end. But thanks for everything. Yes, nice to meet you. Yes, of course. Bye.

Hernan (38:22)
Yeah.

Fantastic. Thank you, Mack for your time.

Likewise, cheers. Bye.