Interview with Alejandro Diez Barroso

Name

Alejandro Diez Barroso

Fund / Group

DILA Capital

Founded

2013

Location

Mexico City

Number of Portfolio Companies

42 investments across 3 funds

Focus Areas

Latin America, US Hispanic

Stage(s)

Pre-Series A, Series A

How and why did you get started in private investing?

I got into venture capital investing because I saw a need in the market. I think the simplest way to explain this is by telling you a little bit about my story. I started as an entrepreneur, I ran my company for four years and I went to look for capital, but there was no venture funding in the market back in 2004. There was not a single venture capital firm in Mexico, so I was obliged to sell my business and that’s when I realized that there was a great opportunity to invest in entrepreneurs in Latin America. So, as many entrepreneurs do, I started investing because I saw a problem and I was compelled to fix it.

What is the single most important thing you value in an investment opportunity?

If I had to choose just one value when analyzing investment opportunities it would have to be the Team. As time goes by, I am more and more convinced that venture capital investing, especially in early stages, is all about execution and teamwork. The team that you are investing in is the most important component when analyzing the capacity to execute.

We, in DILA Capital, invest in people. We would much rather invest in the A team with the B business model than in the A business model with the B team. Ultimately we’re investing in people that are trying to make a difference so the thing I value most with our investments is the team behind the business. The team has to have passion, they have to have a purpose, and they have to be a diverse group. It is also really important to have a solid team with enough equity so they can maintain a sufficient equity percentage given the dilutions going forward.

What are the best innovation themes that you see in the market today?

We are currently living in unprecedented times where digitalization and adoption of new technologies and e-commerce have hit a very important tipping point in Latin America. We, as venture capital investors, have been waiting for a moment like this for many years. We have seen tech companies in the US and Europe explode in the past decades, and while countries similar to Mexico such as India, China, Israel and Turkey have really taken off, our countries have been lagging. Even Brazil has grown exponentially in the past years, but other Latin American countries had not yet detonated despite having great internet and smart phone penetration. We are certain the time has come.

The adoption of new technologies and the use of digital products and services have now hit the explosion we need as tech investors. Now, and in great part due to the current situation that we’re living in, these critical adoptions have finally become a norm and it’s not going to go away. So now more than ever we are very excited about investing in these companies that are tech enabled and that can scale to the mass market that we’re seeing in Latin America.

Beyond economic return, what kind of impact do you hope to make with your portfolio?

In DILA, we look for companies that, rather than chasing short-term profits, are pursuing long-term value while generating well-being for people and the entire planet. Notice how I mentioned long term value first. It is extremely important to note that we do not look for companies that have an impact-first approach; we invest in companies that pursue profits for their shareholders. However, we do look for founders that have a longer-term perspective on their organization and its mission, looking beyond the next quarter or fiscal year to the next decade and generation.

We’re investing in people who we believe will build companies capable of positively impacting millions, if not billions, of people, increasing the standard of living across the world. We are true believers that venture capital is one of the roads to the development of our developing countries.

We are investing in the most innovative companies, that are employing thousands, that are bringing technology and better products and services to our economies.

What are the most pressing challenges or pain points in managing your day-to-day private investment activity?

Venture capital is still a new asset class in the Latam market. Our first investments have a 2013 vintage, so we have still not completed our investment cycles – this means our investment thesis is yet to be proven out. Many institutional investors want to see complete investment cycles before they commit capital to the asset class, so our biggest challenge today remains fundraising. All around the world pension funds, endowments, DFIs and foundations are the main providers of capital (Limited Partners) in VC funds, but in our countries these investors are still not investing in the asset class, and raising large VC fund remains a huge challenge. On the bright side, we are seeing more interest from these large buckets of capital and some have started invested, so while the challenge remains, the future looks bright.

What is the hardest investment lesson you’ve learned and/or the biggest investment mistake you’ve made?

We have learned a lot over these past 10 years. As pioneers in the space, we’ve definitely made a lot of mistakes and I can probably write an entire book on lessons learned, but I guess the message that I would give here is that all of these mistakes and errors have culminated in an ever-advancing understanding of our investment strategy. We are now implementing this knowledge into our new investment principles, which include standards around market sizing, desired founder equity stakes, requiring that founders be dedicating 100% of their time to the companies we are investing in, principles regarding our exit strategies, and so on.

But another really tough lesson that we’ve learned is that we have limited capital and we, therefore, have limited opportunities to invest in. So we are definitely going to let go and say no to many terrific opportunities, and there are many great companies that we’re going to say no to that are going to be very very successful.

What are your favorite industry information sources and/or services?

I am subscribed to many newsletters and blogs, we are subscribed to Pitchbook, Preqin and other information sources.

However, our best sources are internal, we have alliances with the biggest tech companies around the world, we are part of AMEXCAP and LAVCA, and have a very solid relationship with our colleagues from Mexico, Latam and around the world.

What’s your favorite non-business interest or hobby?

Running, Tennis, Meditation, Reading

Please leave us a book recommendation (business or otherwise).

The Hard Thing About Hard Things – Ben Horowitz

What’s your take on the private market overall?

Bearish

Bullish

Title

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Interview with Alejandro Diez Barroso (DILA Capital)