Strategies for Investing in Latin America from an Asian Perspective

Welcome to another episode of the Asia Business Podcast! In this episode, host Art Dicker engages in an in-depth conversation with Edmond Hui, the founder and managing partner of Acacia Venture Capital Partners. Acacia is an early-stage VC fund focusing on emerging markets, particularly Latin America. Edmond shares his insights on the evolving investment landscape in Latin America, drawing parallels with the development patterns in China.

Introduction to Edmond Hui

Edmond Hui is a well-known figure in the venture capital space, particularly for his efforts to bridge the investment corridors between Asia and Latin America. A graduate of the London School of Economics and Political Science (LSE) and a seasoned graduate from the Global EMBA and AMP program at CEIBS, Edmond has a wealth of experience to share.

Why Latin America?

Kicking off the discussion, Art and Edmond dive into why Acacia Venture Capital Partners has chosen to focus on Latin America despite being based in Asia. Edmond explains, "Latin America has immense potential to catch up with China's growth trajectory. The region's expected GDP per capita rivals that of China, providing fertile ground for emerging markets."

Identifying Great Founders

Art delves into the challenge of identifying great founders in Latin America, a region that traditionally lacks a deep pool of entrepreneurial talent compared to the U.S. or China. Edmond highlights the unique approach they take by looking for founders with extensive educational backgrounds and entrepreneurial experience, regardless of whether their past ventures were successful or not.

Talent and Infrastructure Challenges

The conversation turns to the well-documented shortage of engineering talent in Latin America. Edmond notes an emerging trend where individuals who study abroad in the U.S. return to their home countries, bringing valuable skills and knowledge with them. Additionally, he mentions various educational programs similar to the Lambda School that are nurturing the next generation of tech talent.

Investment in Infrastructure

Art and Edmond discuss the significant opportunities that Latin America's infrastructure gaps present. Edmond shares insights on how Acacia has invested in logistics and FinTech companies, leveraging the growth in e-commerce and the rapid adoption of smartphones.

Mitigating Political and Economic Risk

Addressing the elephant in the room, Art asks how political and economic instability in Latin America affects Acacia's investment strategy. Edmond explains that while they avoid extreme cases like Argentina and Venezuela, they focus on the microeconomics of businesses in more stable countries like Mexico, Colombia, and Chile.

Sourcing Deals from Asia

Given that Acacia is based in Asia, Art queries how the firm sources deals in Latin America. Edmond reveals that the digital shift brought on by COVID-19 has tremendously minimized geographical barriers. Regular Zoom meetings and bi-annual trips to Latin America help maintain strong relationships with portfolio companies.

The Role of Pattern Matching

One of the core strengths of Acacia's investment strategy lies in leveraging their extensive experience in China to identify potential winners in Latin America. They apply a unique pattern-matching approach, comparing emerging sectors in Latin America with those that have matured in China. This strategy helps them foresee trends and potential outcomes, providing a competitive edge.

Overcoming Depressed Valuations

The current environment of depressed startup valuations presents a golden opportunity for contrarian investors like Acacia. Edmond explains how their rigorous investment process ensures they identify and invest in high-potential companies at attractive valuations, positioning themselves for future growth.

The Path to Exits

Finally, Art and Edmond discuss the critical aspect of achieving successful exits. Edmond outlines various exit strategies, including trade sales and IPOs, emphasizing that macroeconomic conditions and robust market fundamentals in Latin America make it possible to achieve substantial returns.

Conclusion

As the episode draws to a close, Art thanks Edmond for sharing his invaluable insights into the opportunities and challenges of investing in Latin America. Edmond's expertise and Acacia's strategic approach make a compelling case for the tremendous potential that lies in this dynamic region.

For anyone interested in learning more about how emerging markets like Latin America are reshaping the global investment landscape, this episode is a must-listen. Thank you, Ed, for coming on the show and enlightening us with your perspectives!

Timestamps

00:00 Introduction and Guest Welcome
01:13 Why Invest in Latin America?
02:18 Identifying and Supporting Great Founders
05:29 Addressing Talent Shortages in Latin America
07:00 Infrastructure and Financial Opportunities
11:06 Navigating Political and Economic Instability
13:56 China-Latin America Investment Corridor
17:11 Acacia's Investment Process
22:48 Leveraging China Experience for Latin America
29:42 Current Market Valuations and Opportunities
31:42 Exit Strategies and Market Potential
35:56 Conclusion and Final Thoughts

Producer

Jacob Thomas

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