Interview, Fireside Chat
Julio Vasconcellos: Scaling to $100M and 1,200 Employees and then Cratering | 20VC #928
- Atlantico aims to become the dominant venture firm in Latin America, anticipating the region's tech penetration will rise from 1.5% to match India and China levels within the next decade, generating trillions in value and a 10x increase in value creation.
- The fund expects to operate with thinner reserves of 25% compared to the typical 50% for follow-on capital, a strategy designed to allow more bets and concentrate capital to achieve the highest multiples on capital.
- A reduction in capital from crossover funds is projected to increase mortality rates and loss ratios in Latin American companies over the next couple of years, representing a necessary reversion to long-term averages after the pandemic-driven boom.
- The investment strategy prioritizes non-consensus positions and concentrated portfolios of approximately 20 companies to capture massive returns from "one hit" category-defining winners, which may yield 100x returns and outweigh the sum of other investments.
- Companies that expanded across multiple geographies and products without product market fit are expected to fail or die now, reinforcing the view that focusing on one geography, product, and customer is critical to avoid a "recipe for disaster."
- Founder advice centers on cutting costs to remove inefficiencies ("cutting through the fat"), building smaller motivated teams to improve output, and shifting from a 10% craftsmanship approach to a 60-40 balance to secure product-market fit.
- Future LP management plans involve optimizing the base for individuals who provide "interesting debates" rather than straightforward reporting, with a specific desire to secure investment from the Yale Endowment.
- Market analysis identifies Latin America's adjacent market opportunities as "green fields" with outcomes potentially larger than US comparables, driven by persistent digital adoption that did not revert to historical averages post-pandemic.
- Successful scaling requires securing dedicated growth capital from global funds like General Atlantic and Riverwood, as well as sovereigns like GHC and Temasek, to fund breakout companies through to public markets.
- Investors expect to engage in honest conversations to potentially change executive teams if confidence reaches zero, while also valuing the empathy of investors like Mickey Malka to help founders break out of ruts.
- Fundraising for new managers is predicted to be a prolonged process requiring many "no's" to find product-market fit for the fund itself, with no shortcuts available to raising capital.
- Strategic lessons from past experiences include regret over missing Snapchat due to skepticism of its core feature, the importance of avoiding "greed" that chips away at long-term returns, and the necessity of optimizing processes via software rather than adding headcount during rapid growth.