Dear IGNIA friends,
As we approach the end of another year, we at IGNIA want to take a moment to extend our warmest wishes for a happy and festive holiday season. We also want to use this opportunity to reflect on what has been a memorable year and thank you - as ever - for your continued support.
I. IGNIA VC Fund I - Where We’ve Been
Proving our Investment Thesis
Our current fund — IGNIA VC Fund I — has produced exceptional returns for investors, positioning IGNIA among the top quartile of vintage 2016 VC funds globally1. This portfolio is comprised of world-class companies such as Rapyd, Fondeadora, Covalto, UnDosTres, Konfío, Lentesplus, and Tiendanube, among others. With 7 exits to date and 20 active portfolio companies, there is a significant amount of upside that remains to be captured.
One key highlight consisted of a secondary transaction completed in July, underscoring an increasingly relevant and strategic exit avenue for IGNIA and Latin America. This transaction enabled us to continue realizing distributions for our investors and improving our best-in-class fund DPI.
As a testament to the fund’s performance, IGNIA has raised US$67 MM in SPVs, including a US$25 MM fund extension to accompany our top-performing companies as they continue to scale.
II. IGNIA VC Fund II - Where We’re Going
New Beginnings
Moreover, we have so far raised US$50 MM of our US$150 MM IGNIA VC Fund II — our latest fund focused on supporting early-stage tech startups looking to scale in Latin America. This new fund will invest primarily in Seed and Series A rounds among high-growth sectors such as Fintech, E-commerce, SaaS, Web3, Proptech, and more. We expect a final close in early 2023.
We’ve been eager to resume bringing new entrepreneurs into the IGNIA family by investing in them and their startups as we continue doing what we love: backing world-class entrepreneurs solving genuine pain points for the emerging middle class. With IGNIA VC II, we have invested in five new companies. We are excited to see the evolution and success of these businesses and look forward to further advancing the development of the LatAm startup ecosystem.
III. XV Year Anniversary
In mid-November, IGNIA celebrated its 15th anniversary by hosting a cocktail with investors, friends, and colleagues from Mexico and abroad. The event marked an important milestone, more than anything because it pays tribute to the collective effort that has made the advancement of the LatAm tech ecosystem possible. It does, indeed, take a village, and IGNIA’s longevity is the result of the long-standing support we’ve received from our investors, network of founders we consider colleagues and friends, and fellow VC funds who share our mission.
This gathering featured our partners, Álvaro Rodríguez, Fabrice Serfati, Otto Graff, and Christine Kenna, and together with the investment team, hosted entrepreneurs, investors, alumni, industry leaders, and friends that have been crucial to the development of the entrepreneurial ecosystem in Mexico and across LatAm.
As Mexico’s first VC firm, IGNIA has had a front-row seat to the paradigm shifts that have swept throughout Latin America. Like most momentous changes, LatAm’s transformation has happened gradually, then suddenly. After many years of laying the foundation and literally building out the infrastructure needed to sustain technology companies, LatAm is now poised to experience (long overdue) explosive growth.
IV. Outlook & Perspective
The LatAm tech ecosystem has come of age in the past couple of years. Elements of frothiness crept into the region during the pandemic by way of bloated deals and exorbitant valuations — as did everywhere else — but as we come back to earth we welcome this correction as a renaissance of fundamentals, discipline, and responsible investing. For the sake of LatAm’s long-term prospects, such a shift is well-timed and will ultimately benefit the ecosystem for the better.
Make no mistake, we are already witnessing and continue to expect a difficult environment for both founders and investors in the short term, particularly throughout 2023, as companies shift their focus from a “growth at all costs” mindset to charting a clear path to profitability. Funding risk is a very real phenomenon, and those who predicated their success, not least their survival, on raising capital every few months are bound for a harrowing, if not existential, reality check.
Further, many companies have been compelled to make difficult decisions in an effort to cut costs and extend runway. This great reset may well translate into a great purging, leaving many companies in its wake, but those who emerge on the other side will do so with a much sturdier foundation upon which to continue building. In that vein, we find ourselves returning to the late F1 driver Ayrton Senna’s oft-quoted phrase, “You cannot overtake 15 cars in sunny weather … but you can when it’s raining.” Moreover, it’s worth recalling the slew of generational companies that were shaped during the Great Financial Crisis and ultimately created billions in value, including Slack, Instagram, Uber, and WhatsApp, to name a few.
As this correction fully runs its course, we believe the next few years will be transformational in terms of value creation, innovation, and overall consolidation for VC in LatAm. 2022 is already on track to be LatAm’s second-best year ever — only bettered by 2021. Although it will be difficult to match 2021’s all-time highs, it is worth noting that 2022 has already surpassed 2020’s annual total for both deal count (104 vs 73) and deal value (US$1.02 B vs US$527 MM) as of 3Q22.
To this, we must also consider that VC funds across LatAm and the US have raised record amounts of capital, with US$5.7 B and US$298 B, respectively, of dry powder set to be deployed over the next few years.
Secular trends and tailwinds will continue to drive the development of LatAm, as those illustrated by our friends at Latitud through this excellently-researched report:
As founders now have a growing selection of alternatives when it comes to partnership and access to capital, it is critical to create an edge both in selecting investments and why founders should choose us over others. Over time, reputations and track records do much of the heavy lifting, but they alone are not enough. We’ve been committed to honing a unique, principled point of view to investing, underpinned by a related experienced set and network. Our Anti-Portfolio is as good as any, but we believe this approach stands to make us uniquely valuable partners to a set of founders and companies. We’ve leaned into this strategy from the onset and remain committed to doubling down over the next 15 years and beyond.
As we look ahead to the future, we are confident that the region's strong foundation and untapped potential make it an increasingly attractive destination for investment. We are excited to continue supporting and partnering with the talented founders and teams who are driving innovation and positive change in Latin America.
We would like to thank all of our partners, investors, and supporters for their continued trust and partnership.
Wishing you all joy, peace, and prosperity in the coming year.
Sincerely,
The IGNIA Team
According to Cambridge Associates Benchmarks