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Latin Idea Ventures Backs Mexican Startup Linio

7 November 2013

(Dealbook) The Mexican venture capital firm Latin Idea Ventures said this week that it had made its first investment in an e-commerce company, Linio, a Mexico City start-up that, like in the United States, sells a wide array of products.

The investment, announced on Tuesday, was a sign that Latin Idea, founded in 2000, is growing and poised to make significantly larger investments as Mexico’s nascent start-up scene gains momentum.

The announcement also gives some credibility to Linio’s creator, the European firm Rocket Internet, which has been much criticized for creating copycat Internet companies, mostly of successful American ventures, around the world.

Latin Idea Ventures said it was the largest investor in a $50 million round of financing in Linio, which is looking to capitalize on Amazon’s struggles to gain traction in Latin America. The one-year-old Linio expects to use the capital to expand its current operations not just in Mexico, but also Peru, Colombia and Venezuela.

Other investors in the new round, which closed last week, were JP Morgan Asset Management, Summit Partners, Investment AB Kinnevik, the Tengelmann Group and Rocket Internet of Berlin. All had also invested in prior rounds.

Latin Idea, a late-stage venture capital and growth equity firm, provided about half of the new money, according to the firm’s managing partner, Alexander Rossi. Linio has raised about $100 million to date, he said.

Part of Rocket’s strategy is to create clone e-commerce companies throughout the world, armed with large amounts of capital so they can outspend local competitors.
Because of that, Rocket has often been criticized by Latin American venture capital firms, particularly in Brazil. Latin Idea is thought to be the first respected venture capital or private equity firm in the region with which Rocket has partnered.

Latin Idea has been at the forefront of developing a venture capital and entrepreneurial ecosystem in Mexico, according to Susana Garcia-Robles, principal investment officer at the Inter-American Development Bank’s Multilateral Investment Fund, which has long worked to spur development in Latin America.

The firm’s 2006 fund, Mexico Venture Capital Fund II, “was a pioneer venture capital fund” in the country, said Ms. Garcia-Robles, who provided its anchor investment.

Its current much larger fund, the $130 million Latin Idea Mexican Venture Capital Fund III, which started late last year, shows progress. Limited partners in it include the American investors PineBridge Investments and the W.K. Kellogg Foundation, Mr. Rossi said.

The size of that fund, significant for Mexico, has enabled the firm to shift its strategy, Mr. Rossi said. “Before, we would put our capital in to grow the businesses, but then we would have to look for other partners to help. Now, we’re able to do it more assertively on our own,” he said, including leading financing rounds with international investors.

It also counts as investors Mexican pension funds and Nafinsa, a Mexican government-owned development bank.

Still, Mexico’s economy has cooled this year, and total venture capital and private equity dollars invested in the country fell in the first half of this year compared with the same period last year, according to the Latin American Private Equity and Venture Capital Association.

Yet both number of deals and amount of fund-raising dollars have increased, a trend also seen in Brazil, Latin America’s largest economy, reflecting that both countries have growing entrepreneurship movements that are likely to outlast current economic woes.