IDCEE 2013: Current Startup Environment in Brazil - Patrick Arippol (Principal @ DGF Investimentos)

Documento Interno e CONFIDENCIAL – Versão #2

Current Startup Current Startup Environment in BrazilEnvironment in Brazil

DGF Inova / DGF Inova / DGF Investimentos DGF Investimentos

IDCEE ConferenceIDCEE ConferenceOctober, 11th, 2013October, 11th, 2013

Patrick [email protected]: +55 11 3521 3700www.dgf.com.br

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Introducing DGF Investimentos – Practice Areas

DGF BIOENERGY 1

Status: InvestingSize: R$ 300MVintage: 2009

DGF GROWTH 2Status: RaisingSize: R$ 300MVintage: 2013

DGF GROWTH 1Status: Invested

Size: R$ 100MVintage: 2007

Mid

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-ups DGF Early Stage

1Status: ExitingSize: R$ 22MVintage: 2002

DGF Early Stage 2

Status: LaunchingSize: R$ 50MVintage: 2012

GROWTH CAPITAL

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Leading Brazilian Firm: Founded in 2001 by the former president of ABVCAP (Sidney Chameh), DGF is

one a leading pure play growth Private Equity firm in Brazil, with 4 funds and AuM of U$ 300M

Seasoned Investment Team: The senior team has worked together for more than 10 years, having

invested in 27 high growth companies with >15 exits

Value Added and Network: DGF invests in growth opportunities in small to mid sized companies,

partnering with outstanding entrepreneurs and adding core capabilities and value

Proven Track Record: Team has achieved very positive and consistent results (IRR and MICP)

Leading Brazilian Firm: Founded in 2001 by the former president of ABVCAP (Sidney Chameh), DGF is

one a leading pure play growth Private Equity firm in Brazil, with 4 funds and AuM of U$ 300M

Seasoned Investment Team: The senior team has worked together for more than 10 years, having

invested in 27 high growth companies with >15 exits

Value Added and Network: DGF invests in growth opportunities in small to mid sized companies,

partnering with outstanding entrepreneurs and adding core capabilities and value

Proven Track Record: Team has achieved very positive and consistent results (IRR and MICP)

Introducing DGF Investimentos – Highlights

Import / Export Software

Tax Software Developer

CRM Software Developer

IT Infra-Structure Outsourcing

Exits Portfolio

Software for mobile ticket sales

B.I. Solution for Healthcare

On-demand printed products

Corp. Expanse Mngt. Software

Telecom R&D Outsourcing

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CRITERIA & DIRECT SOURCING

Criteria (“sweet spot”):

STAGE – Revenues of U$1-3M with proven business cycle and profitability potential

BUSINESS MODEL – Consistent and with attractive dynamics (recurring revenue, etc)

GROWTH – Potential >U$50M revenues in 5yr

TEAM – Stellar entrepreneur and team

INNOVATION – Innovative company

TICKET – Invest U$1-5M per company

EXIT – Clear exit opportunities

Sample Investment Theses:

Enterprise mobile software platforms

High-growth Cloud & Saas plays (long-tail)

SaaS solutions to drive on-line customer acquisition for small and medium companies

Highly scalable web platforms in healthcare

Business Intelligence applications

Value-added distribution of virtual goods (retail)

Introducing DGF Inova: Criteria &

Pipeline

SNAPSHOT

Pipeline Status since launchU$25M fund launched in January 2012

913 companies analyzed

2 investments completed

Direct-sourced projects (from 30% to 70%)

Segment Representation among top prospects:

E-Commerce infrastructure: 18,5%

Cloud/SaaS: 15,4%

Web 2.0 / Internet Advertising: 13,8%

Health-Web: 12,3%

Mobile: 10,8%

Financial Technologies: 7,7%

IT-enabled Services: 6,1%

Online Media: 6,1%

Education: 4,6%

Other: 4,6%

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The DGF Inova Fund has one institutional investor, plus 36 personal

investors. The group includes many of the “who’s who” of startups in

Brazil (2/3), as well as super-angel value-add investors from the USA

and EU:

Serial entrepreneur in financial technologies, and one of top angel investors in

Brazil

Founder and CEO of leading tax software in Latin America

Founder/CEO of leading import/export software in Brazil

Co-founder of Mercadolibre

Founder of Brazil's leading student loan company

California-based CEO and investor in 30+ ventures

Founder of Submarino.com and serial entrepreneur / investor

3 Angels in NY and Madrid with >100 investments in Brazil, Russia, India,

Turkey, and USA

Founder/CEO of Brazil's leading digital photo startup

Introducing DGF Inova – Value-Added LP Base

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Myths Worth Dispelling:

VC investing in Brazil is similar to VC in Silicon Valley

(Risk of “One Size Fits All” Approach)

The moment for good VC Investments in Brazil has passed

(Risk of “Following the Herd”)

Topics: Current Venture Capital Market in Brazil – “One VC’s ViewPoint”

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Dispelling Myth#1: VC investing in Brazil is similar to VC in Silicon

Valley

YES – Bring Insights from a Mature into a Maturing Market

Sector-specific support for global technology companies

Increase direct sourcing and specialization

Best practice / governance at global levels

NO – Use the Same Investment Approaches

Only “proven models” are worth investments: great local and BRIC-

specific business models

“Spray and pray”: portfolio company monitoring is more

demanding

Pay US-valuations: exit markets command different valuations

Assume follow-on investors will “be there” for good companies:

don’t be so sure – better be ready for follow-ons

Good companies will find exits: Again don’t be so sure. Best to find

companies with multiple paths to exit, and help them reach

significant scale

One VC’s ViewPoint – Risk of “One Size Fits All”

Approach

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Dispelling Myth #2: The moment for good VC Investments in

Brazil has passed

Local VC eco-system has matured: specialized law firms, etc

Critical mass has been reached for companies to “hit it out of the

park” –consumption (e.g. mobile phone users), entrepreneur quality,

cloud software take-up, etc

Slowdown of “hype” is already creating interesting investment

opportunities (leaders emerging from overcrowded startup segments;

more “prudent” investments)

One VC’s ViewPoint – Risk of “Following the

Herd”