It's a New World of Venture Capital in LatAm

MIAMI (03/03/2000) - Risk capital has begun to flow into Latin America in the past year thanks to a vibrant entrepreneurial atmosphere in the region's Internet market, but the cash flow has also brought challenges, a speaker said yesterday at the Latin Venture 2000 event here.

"This is a great moment in the history of Latin America," said Susan Segal, Latin America Group Head at Chase Capital Partners (CCP). "There is extraordinary optimism. The Internet revolution is in Latin America to stay.

But there are also real challenges going forward."

Two years ago, there was virtually no early-stage risk capital available for startups focused on Latin America. But then, opportunities in the Internet market spurred entrepreneurs into action, and there are now many promising ventures in this field in Latin America, she said.

"There has been an explosion in Latin America in the creation of new (Internet) enterprises and in venture capital. It is incredible," said Segal, who has been involved with the Latin American market for more than 20 years.

CCP, which focuses on equity and mezzanine capital financing, has invested in several Internet companies focused on the region, such as portal pioneer StarMedia Network Inc., online travel agency Viajo.com Inc., MercadoLibre SA, Patagon.com International Ltd. and Sports Ya! Inc. Segal expects this venture capital enthusiasm for Internet companies in Latin America to spread to other industries as well.

But Segal also sees red flags in Latin America's current VC horizon. She is concerned that many startups are rushing through the financing process, which typically involves five stages -- seed, angel, first round, second round and mezzanine round -- in order to launch an initial public offering. This rush puts more pressure on these companies to perform at a certain level before they are ready, especially if they launch an IPO, she said.

It's also critical for these startups to have visionary and solid top management, good execution of their services, and a strategy that includes the generation of revenue and profits through e-commerce activities and ad sales, she said.

"Valuations are outpacing actual performance," she said.

Latin Venture 2000 ends today. More information about the event can be found at http://www.latinventure.com/.

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