LAVCA INTERVIEWS MARK HEESEN, NVCA EXECUTIVE DIRECTOR

“The high tech economy is based solely on ideas. We’re no longer dealing with factories and trying to get a product out the door. Most of what we do is intellectual property today. So we have to keep these quality people, and keep them happy and motivated. That’s what the venture capital community in the U.S. has helped to do over the last 30 years.”

NVCA’s ED speaks with the Latin American Venture Capital Association (LAVCA) about the need for Latin America to self-advertise, the proximity factor, the entrepreneurial spirit, and building a venture capital hub one block at a time.

October 29, 2004 — Mark Heesen has served as Executive Director of the U.S. National Venture Capital Association (NVCA) since 1991. In that time he has seen venture capital activity worldwide rise to record heights of innovation and profitability, seen new sectors emerge, new markets develop, and Dot.com startups grow into industry giants. He has seen the bubble burst and no doubt heard endless accounts of investors who got burned. But Heesen is an optimist on the subject and would probably say he couldn’t ask for an industry that kept him in better company. Venture capital, says Heesen, is for people “who believe that everything is possible.”

According to Heesen, NVCA members certainly believe Latin America is possible. LAVCA spoke recently with Heesen on the reasons behind NVCA’s strong support for LAVCA’s activities in the region. A member of LAVCA’s Board of Advisors, NVCA has contributed to LAVCA’s development from inception and serves as a sponsor of LAVCA’s December 7th strategic planning session for members in Washington, D.C.

Emerging markets are increasingly being incorporated into the long-term strategies of major U.S. investors, says Heesen. And among the many aspects that draw their attention to Latin America is one simple regional advantage over hot emerging markets in Asia—it’s closer.

Says Heesen, U.S. investors “are very interested in engaging with other regions, but Latin America offers a proximity that Asia can’t. It’s easier to monitor a company when the time difference isn’t so great.”

Despite the swelling interest in Latin America, Heesen believes that stimulating major investment traffic in Latin America will depend as much on effective promotion of the region to U.S. investors as on investment-friendly policy environments in individual nations.

Transcript of Interview:
What led to the formation of the National Venture Capital Association in the U.S.?

NVCA was created as a result of the need to have a presence in Washington. A number of venture capitalists over 30 years ago said, you know, if we want to be a part of changing the United States in how it does business and creates companies, we need to have a public policy component to our actions. That was the genesis of the NVCA.

Do you see any similarities between NVCA’s development and LAVCA today?

LAVCA is a little different from NVCA. LAVCA is more like the European venture capital group (EVCA) in that you have a number of countries involved instead of just one country like NVCA. You have an extra level of bureaucracy in the respect that you have to deal with not only trying to highlight Latin America but also the individual needs of your countries. Brazil may want to raise itself as the center of venture capital in Latin America where the Argentines might want to do the same sort of thing, or Chileans, or somebody else. So for you it’s more like the United Nations in that you have to keep all of these nations happy while trying to move Latin America forward as a whole. That is a lot more work, I think, that has to be done by you all than NVCA. The first thing you have to attempt is—and it’s hard to do this—to make the country status lower than the regional status. You want to highlight Latin America and not so much each specific country, because if you do it’s going to be very difficult to move the region forward as an entrepreneur culture, I think. After you’ve raised the importance of the region itself, VCs and entrepreneurs and market people will go from there and decide which individual country they’re going to deal with.

You’ve said that U.S. investors look to emerging markets as strategic for the long term. What needs to be in place to increase investment in Latin America now?

Stable governments are certainly important, as is a stable currency. I think we have seen that very solid trade agreements have arisen between the United States and many Latin American countries and that will only help this process more. I think certainly some of the countries have had their issues but particularly when you look at Chile, Argentina, Brazil, Mexico—there’s a lot of interest! I don’t frankly think there’s as much interest in Colombia because some are still concerned with the drug influence there. In Venezuela the government has been a little unstable, but I’ve still not heard of anyone shying away—the oil revenues there are also important!

What in your opinion are the true, lasting benefits of venture capital on economic development?

Venture capital creates high quality jobs that are not just high quality but are also for people who believe that everything is possible. These are not only good professionals, but they also have an entrepreneurial spirit, so they’re not going to stay in the same job for 50 years. They’re more than happy to move forward, go out and create another company, or go out and work for an upstart company. It’s the quality of people that are employed—that continue to create new ideas, new companies, and keep this process moving. Basically, the high tech economy is based solely on ideas. We’re no longer dealing with factories and trying to get a product out the door. Most of what we do is intellectual property today. So we have to keep those people, and keep them happy and motivated. That’s what the venture capital community in the U.S. has helped to do over the last 30 years.

And with respect to emerging market economies?

I think once professionals within emerging market countries see the very positive aspects of technology and of entrepreneurialism—creating your own company and being able to grow that company and be your own boss, or being part of a company where you share in the ups and downs through stock or through options—I think that that is an experience that will make these people not want to work for some old fuddy-duddy company, or go back on the farm or whatever! They’ll want to be able to continue to be very aggressive and basically be independent, to shape their own lives. Once they have that, it’s very hard to give that up. It is something that is already happening in many emerging market countries. It might not being getting venture capital yet, but the idea of entrepreneurialism, of owning your own business and growing that company, is certainly starting to take root all over the world.

Sectors of interest to investors in Latin America tend to be IT, infrastructure, energy and retail, reserving hot sectors such as the life sciences for the U.S., Europe and Asia. What strategies might Latin America apply toward closing the science gap?

One thing you have to look at is that a government simply can’t throw money at this issue and think they’re going to create a venture capital hub next week. This is a very long-term issue, literally a generational issue, not—as within political administrations—a “period.” You have to not only have a government that encourages high technology and entrepreneurial development, you also have to have powerful universities and research facilities that understand the importance of taking that basic research out of the research lab or university and being able to apply it in a practical, everyday commercial setting. If you can do that, do it easily and have good intellectual protection and have the ability to grow those companies because you have good management, good infrastructure—and when I say that I mean a good patent system, a good legal system, accountants and lawyers who understand how to grow these companies, then you’re going to move forward. As I said, this does not happen overnight, and people can get discouraged that it doesn’t, but it will happen if you build these blocks one on top of the other over the years.

Can you describe an ideal scenario for a U.S. venture capitalist seeking to invest in a Latin American nation?
I’d say a highly motivated and educated workforce, policies by the government which make it easy for investors from outside the country to invest in that country and then, at the end of the day, get their money out of that country. Easy entry, easy exit for foreign investors is critical. I think a solid legal system that protects foreign investors while making sure that the citizens of that country are protected as well is important. And, as I’ve said, the long-term stability of that government and its currency is also very important.

Lastly, how can LAVCA help NVCA better serve the needs of U.S. investors interested in Latin America and the Caribbean?

I think any deals done in Latin America that seem to be working—if there are any U.S. or European-based firms that come into Latin America and invest in a company and that company does well—I think getting that word out to U.S. venture capitalists is very helpful, not only to Latin American countries but also to U.S. VCs who may be thinking of investing in Latin America but are a little squeamish about going there simply because they don’t know of someone else who did it. It’s always good to know someone who has been successful in a country—they can learn from them, they can co-invest with them, and it just makes it a much easier process all around. Basically, getting the word out about deals that have been done in Latin America that have been successful and who did those deals, an education process, would be a very helpful thing.

About the Latin American Venture Capital Association

LAVCA promotes the growth of the venture capital and private equity industry in Latin America through methods of research, education, networking, best practices, and the advocacy of sound public policy. For more information on LAVCA and its activities please visit www.lavca.org.

Contact:
Ramona DeNies
Communications Manager
Latin American Venture Capital Association
1.503.239.7449
[email protected]