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VC | Silicon Alley Flies South for the Winter

Item:

Do not make the mistake I always do, referring to the Northern California innovation fault line as «Vale do Silicone».

«Silicone» is for breast implants.

According to Brazil’s premier business daily, there is more and more foreign capital chasing Brazilian tech startups. I  translate in haste:

The same dollars that contributed to the success stories of the Silicon Valley, such as Google e o Facebook, is starting to irrigate the fields of Brazilian startups. Californian funds began backing Brazilian firms in 2008, but this type of investment has grown more common starting last year.

Seven investors stand out in this scenario: Redpoint Ventures, BV Capital, Flybridge Capital Partners, Accel Partners, Tiger Global Management [*], Venture Capital Group and 500Startups.

In all, the funds have taken stakes in 20 startups, most, or rather, almost all of them Internet companies. It is not possible to know how much these funds have invested to date, because most of this information remains confidential. In general, the funds invest in what is known in the U.S. as Series A investments of between US$1 million and US$10 million.

The most attractive areas for these startups are e-commerce, online marketplaces, outsourced financial and customer services, e-learning, social networks and mobile software development.

Shoes4You, for example, a buyers club for shoes and accessories, has received backing from Accel Partners  — an investor in Facebook and Groupon — as well as from Redpoint Ventures — Netflix — and Flybridge Capital Partners. Olivier Grinda, CEO of Shoes4You, finds the experience different from the process other startups undergo. “The Silicon Valley investor looks at the business from a long-term point of view, between 10 and 20 years.  Care is taken to align perspectives of startup and investor, though without the demand for immediate revenues and cash flows.

Flybridge partner Jon Karlen has traveled to Brazil three times already this year in search of e-learning, social network and mobile software opportunities The fund has $560 million in assets, $100 million of which it plans to spend in Brazil in coming years. To date, it has invested in four Brazilian companies.

With US$ 3 bilion in assets, Redpoint Venture is bullish on Brazil, where it currently has stakes in seven companies. .”We have set aside 10% of our portfolio for Brazilian deals, but expect to exceed that proportion in just a few year,” say founding partner Jeff Brody. Interest is so high that Redpoint partnered with  BV Capital — another U.S. fund, with US$ 300 million — to create eVentures Redpoint.

The partnership was announced just a week or so ago.

The rise of billion-dollar companies in the Brazilian e-commerce market, such as Netshoes, has attracted European and Latin American groups looking to diversify …

From the joint venture’s inaugural press release:

Headquartered in Sao Paulo, Brazil, Redpoint eVentures will be led by founding partners Yann de Vries and Anderson Thees. Through Redpoint eVentures, Redpoint and eVentures’ combined global expertise in Consumer Internet, e-commerce, mobile, media and cloud services will be made available to local entrepreneurs. The firm will support promising start-ups by sharing international best practices as well as providing access to financing, talent and strategic partnerships.

The development of Redpoint eVentures was three years in the making, following dozens of flights back and forth from Silicon Valley to Brazil as well as three promising local investments (Viajanet, Grupo Xango and Shoes4you). Co-founder of Redpoint, Jeff Brody, is convinced that having an established local presence is critical to long-term success, explaining,

“We’ve learned in China that to be truly effective finding opportunities and supporting entrepreneurs, one needs to be established on the ground, rather than flying back and forth every couple of weeks – focus and access are critical to success. Now that we have assembled a great local team in Sao Paulo, we are ready to continue our efforts to scale across the region.”