Fynsa
In March 2022, Fynsa AGF will launch the new “Venture Debt Latam” fund, which aims to raise US$50,000,000 with the goal of investing in assets located in various Latin American countries, starting with Mexico, Colombia, Peru, and Chile; the fund expects to generate an annual return of 8% in U.S. dollars.
Lately, there’s been a lot of talk about topics such as venture capital, startups, fintechs, unicorns, and venture debt—among other terms you hear every day in conversations and in the globalized world we live in—but what exactly is venture debt?
When startups—emerging companies with significant growth potential—seek financing, they do so in two ways: the first is through equity or direct investment, whereby they raise funds from angel investors, Series A rounds, or other mechanisms in exchange for a stake in the company. The second method is through debt, which could be provided by traditional banks; however, due to the risk associated with the collateral involved and the stage these companies are in, banks are unable to meet the total demand for loans to startups, creating a business opportunity that we will call Venture Debt.
In other words, venture debt involves providing access to financing for these early-stage companies with growth potential. This financing is provided through the acquisition of assets originated by these companies, which enables them to have the resources to continue providing financing to individuals and/or small and medium-sized enterprises.
At FYNSA, we are pioneers in this strategy; in early 2021, we launched the Venture Debt fund in partnership with the fintech company MIGRANTE. To date, the fund has assets totaling more than $25 million, spread across more than 12,000 loans, enabling it to provide financing to immigrants who are outside the financial system (and lack access to credit), giving them opportunities to continue their personal development in Chile.
In recent years, there has been a boom in the venture capital industry in Latin America, where more than 14.8 trillion dollars were invested in venture-backed companies in 2021 alone—a 30-fold increase compared to the amount invested in 2017.
In terms of success stories, these have also grown in line with the increase in investment, demonstrating that providing these “ideas” with greater sources of funding gives them more tools and opportunities to develop them and achieve success. In this region alone, there are more than 40 unicorns, 18 of which were founded in 2021.
This new FYNSA Venture Debt Latam Fund presents an attractive and timely investment opportunity. By capitalizing on the current momentum in the venture capital industry, the boom in new startups, and FYNSA’s experience as pioneers in venture debt funds, investors can access an alternative that offers good risk-adjusted returns, allows for portfolio diversification, and provides opportunities to promising, innovative companies within the current economic ecosystem.
#PioneersInVentureDebt
