Preparing to fundraise and picking investors: the details behind raising from a16z, NfX, and our entire community
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"The information about how to seek out and secure funding shouldn’t be limited to an elite club. Every startup is about a single idea, but taken together, all startups have a common purpose as well: to shape a better world for all of us."
From "Secrets of Sand Hill Road: Venture Capital—and How to Get It" by Scott Kupor, Eric Ries
After walking out of the a16z conference room, I called one of my co-founders Gina Gotthilf from the parking garage across from the a16z office in San Francisco. We had just finished up a partner meeting with 10 people from Andresseen – her via Zoom, me in person.
Brian: "Hey Gina, how do you think that went?"
Gina: "I think it was pretty good, but I’m not sure. I think we could have been better. Do you think they are interested?"
Brian: "Well, what was your take?"
Gina: "It’s hard to tell. I would LOVE to work with them, but I couldn’t get a perfect read."
She continues talking fast about everything on her mind. I continued to let Gina suffer for another 2-3 minutes as she got lost in her thoughts about what we could have done or what we should have said. I didn't tell her what went on after we hung up and I spent another hour chatting about ways we could work together. Then I prompted her with another question:
Brian: "So should we partner with a16z or not?"
Gina: "Of course!…but what do you mean? Do you think there is a chance that this will happen?"
Brian: "Gina, they are ready to make it happen."
Gina: "You are such a dick!"
Brian: "GOTCHA!"
The meeting was on a Friday morning and by the evening we had agreed on deal terms. On Saturday, I woke up and reflected on my journey as a founder.
I instantly transported myself to the moment when I was bootstrapping VivaReal because nobody would invest in us and I couldn’t raise capital. It was during the worst financial crisis in my lifetime, and I was building a real estate tech company when real estate was at the center of the crisis.
I remember staring up at the ceiling as I laid with my wife on a temporary bed placed in the living room of my co-founders’ apartment in São Paulo. We had 20+ people on payroll and exactly $87 in the bank. It was a feeling of desperation.
Fast forward to today, as I sat in my living room, in the house I bought with the proceeds of Viva Real's exit, I cried a few happy tears. Not because of the investment in Latitud, but because of how many obstacles it took to get here.
I don’t actually spend much time celebrating a round anymore. Of course, it feels good to be congratulated by your peers, to be featured on a TechCrunch article, but my immediate reaction is, “congratulate me when we've executed and built a ton of value.”
Raising capital just means you have increased your commitment to what you are building, and I take that with a great deal of responsibility.
Before I dive in about how we raised a $13m seed round, I want to include a quick overview of what we are building at Latitud.
Latitud is building infrastructure and community to elevate the next generation of entrepreneurs that are solving the biggest challenges in Latin America. With the influx of capital and growing number of qualified people building ambitious companies, the infrastructure to support them is outdated.
The entire ecosystem is being stress-tested, and it’s all going to break unless we build the superhighway to make the entrepreneurial journey less bumpy.
I've been public about a HUGE mistake I made when I created the wrong corporate structure for my last company, resulting in us paying over $100m USD in unnecessary capital gains taxes. For better or for worse, there is no person more motivated to help founders avoid that mistake.
This inspired our launch of the region’s first company formation product, Latitud Formation, to help founders create a venture-backable company structure for 5x less $$$ and significantly faster. Soon, we'll also be launching financial services to reduce friction for founders.
Our vision is to become the OS (operating system) for venture-backed startups in Latin America. There is no shortage of problems that founders face in the region, and Latitud works to serve the next generation of tech entrepreneurs.
Latitud raised a large seed round in two closings. The first closing ($11.5m) was co-led by a16z and NfX with participation from a handful of unicorn founders and some complementary VCs.
Then, we did a second closing ($1.5m) with the focus of bringing on additional founders and our community to participate. We have a powerful mission and a compelling vision, so being VC-backed is important to enabling our ambitions, but being community-backed is what we're most proud of. Alongside top-tier investors, we brought on 100+ founders and angel investors to join us.
In this article, I'll cover:
This is not advice on how to raise a seed round. Our process was very tailored to our specific set of qualities, needs, and previous experience. If you want to learn concrete strategies for fundraising, you can apply to our Explore fellowship program. Our fellows have raised hundreds of millions of dollars from local and global investors.
In December 2021 during our offsite in Brazil, we decided traditional decks weren't for us. Instead, we started writing a memo about what we are building, and we had a good portion of the team contribute to it. You can read the memo here – it’s already stale because early-stage startups change so fast, but we're keeping it public as a time capsule of sorts.
From there, we identified a handful of investors who would be good partners for what we are building, and we circulated the memo to them.
We sent a few emails and WhatsApp messages to gauge interest, and we had immediate responses and some unsolicited offers from numerous investors.
Instead of running a traditional process, we did some pre-work coming up with a shortlist of potential partners. This isn’t my typical advice for founders. You should probably go wider.
Having a reputation and building in public accelerated our process and ended up saving us tons of time and effort. We could also lean on the founders' credibility from past accomplishments like:
The ball was in our court, so we came up with a decision-making framework to identify the best partners. We started by listing the top qualities we wanted in an investor, which were:
With a list of the qualities we were looking for in hand, we decided to assign a multiplier to each quality so we could prioritize what mattered most. We stack ranked them to make our assessment of value and then calculate objective results.
We were in a privileged position because I was ready to continue to finance the business until we were happy with a deal. This gave us the confidence and leverage to make sure we found the right partner at the right terms.
This was the final criteria we landed on, with an example of how one of our lead investors squared up against it:
*The lower score here was mainly because we hadn’t really spent much time with the a16z team.
As we got to talking with potential investors and ran the numbers, we had a strong case for a16z + NfX as lead investors, and we also decided to bring on other top firms like Canary and FJ Labs.
In case you're curious, here are the details of the rationale behind choosing our lead investors.
a16z is very active in Asia and other markets around the world as a top global fund, and they've shown an increased commitment to Latin America. NfX's main roots are in Silicon Valley and Israel, but they continue to invest in Latin America.
I have known Pete Flint for over a decade. He is a really solid person that is easygoing and smart, and he has an incredible reputation as an entrepreneur. a16z is world-class with a powerful network, and I've enjoyed all the interactions with Angela Strange, Gabriel Vasquez and the rest of the team. The Hard Thing About Hard Things helped me immensely and inspired me to write my own book. Ben, let me know when we can grab coffee, talk 90s hip hop and discuss how we will change the tech ecosystem in Latam.
Angela is globally recognized as a fintech expert who coined the phrase "every company will become a fintech". NfX came up with the framework around fintech-enabled marketplaces. Both funds have made a lot of smart fintech investments.
I have deep trust with Pete Flint built up over the course of a decade, and have also spent time with Gigi Levy-Weiss and James Currier. I have an outstanding impression of Angela Strange through all my interactions. I think it will be good and important to have a female perspective keeping things balanced at Latitud. Gabe Vasquez is a real hustler.
NfX's roots are in community. They launched NfX Guild and used to do demo days. a16z has interesting community initiatives in LatAm like their BUILD WhatsApp group, and they are expanding this across the globe under Ryan Walsh's leadership.
Both a16z and NfX have said they can help with this. Since we have a fund as one of our business lines, they will both make introductions to potential LPs. Both agreed that Latitud needs to stay friendly and collaborate with all local and global VCs so they wouldn’t have any special access to deals as we can’t put at risk the integrity of our partnerships with ALL investors.
These two firms are pioneers and world-class at creating content. Latitud plans on building media assets and we can learn a lot from both organizations in terms of scaling the brand through high-quality content (podcasts, newsletters, video, reports, data).
It's important to remember that all of this was happening FAST. We shared the memo with a small group of investors on a Tuesday, and then we agreed on terms on Friday of the same week.
Once we fleshed out the reasons why and were confident on who we wanted to work with, it was time to have a frank and open conversation about terms and expectations.
Following a high-level agreement, we had numerous in-depth discussions where we were transparent about what we needed from our investors.
Here are some of the talking points we discussed:
Following these conversations, we felt comfortable with how both a16z and NfX were willing to not only be flexible, but also to commit to supporting us with more than just capital. It wasn't long before we shook hands on it, so it was time to roll out phase two.
Times have changed in the startup world, and I am personally of the opinion that community is the new lean startup. What that meant for us was that we wanted to approach building our business a little differently than most.
You can't solve problems if you don't listen to the people having them, so we started by connecting with founders across all of Latin America. In the summer of 2020, I personally took 150 zoom calls with early-stage entrepreneurs across the region.
First we built value for the community, then we listened to it: once we learned what the community needed, we could bring “power to people” by building scalable products.
There is no version of our fundraising process where the community didn't play a huge part in us having the credibility to pull it off, so it was important for us to allocate a portion of our round to customers, mentors, angel investors, and the founders in the community, because it fundamentally unlocked value for us.
We see a community-supported round as a way to dip our toes into what could be a web3 format in the future. By having a distributed shareholder base, you end up having many advocates that want you to succeed.
We were pretty excited about what we were doing and how we were doing it, so getting the word out about it was the logical next step.
To create brand awareness about Latitud, Gina and our marketing team built a massive PR plan with several moving parts.
The community's participation in this was instrumental, and we wanted them to be actively involved in spreading the word. They learned about the round before it was announced to the world, and we trusted them to keep our secret until D day.
Social sharing is always a big part of our media strategy, and this time wasn't any different.
The PR efforts culminated in a single day where everyone was talking about us at the same time, achieving what Gina refers to as “surround sound”. We saw a huge wave of support across all social media through the hashtag #WeAreLatitud, and we got to witness how connected to the mission everyone was.
We were loud, and the story got picked up by major publications like TechCrunch, Bloomberg Línea, El Financiero, Forbes Argentina, Business Insider Mexico, Exame, Estadão, Gestión and more.
To make the most out of being the talk of the town for the day, we tied in all of the initiatives with an event open to the public, which we dubbed Latitud Futuro.
With this event, we wanted to do something different – you probably noticed by now that that's kind of our jam.
So to the drawing board we went with a question: how can we get the entire Latin America ecosystem involved with what we're doing?
The result was a live 1-hour pitch of Latitud with guest appearances including investors, customers, and members of the community.
We set aside a $1.5M allocation for accredited investors who believed in the vision and, as the livestream went on, people got to watch as intro requests and investment commitments poured in.
The event was open to all on Stonks, and had over 1,200 attendees. Here's a look at its numbers.
And in case you missed it, here's the full recording.
Our next challenge was the definition of a good problem to have: how do you filter through this level of oversubscription in a round?
Again, it was time to create a decision-making framework to make sure we were prioritizing the right things. It all came down to answering one question: who actively cares about what we are building and can help?
We settled on optimizing for two things: tapping into new nodes and networks, and having distribution and alignment.
The way I see it, every new investor becomes a new node in our network. When you bring on an investor who has some specific set of knowledge you seek, that person can share their knowledge or connect you with a reference on the topic. You also open up an entire universe of contacts expanding your network.
And as we share the progress of our company, we now have 100+ people truly rooting for us because our success is their success. That means they're all willing to put in the work and help spread the word not only because it benefits them financially, but because the most powerful part of our mission is that it deeply resonates with people. Latitud creates alignment with the broader LatAm tech community.
Simply put, we came up with a list of people we felt not only shared our vision, but could help amplify it.
Some of the incredible people who participated in the round were:
With an army of people ready to write us a check, keeping our cap table tidy was a challenge that required a very particular solution.
We decided to use an RUV to limit the lines in our cap table.
A roll up vehicle (RUV) is an entity designed to group multiple investors in one place to make a single investment in a company. The advantage is that you can have many investors with a single line on the cap table.
In my last company VivaReal, I had to chase down signatures of angel investors as I was closing subsequent rounds. Spinning up a vehicle where you centralize all investors creates more efficiency, and it allows you to bring in investors that can write smaller checks. We took in checks as small as $1,000, because money wasn't the most important thing.
As we were figuring out a fair way to bring people in given the unprecedented interest in our second closing, we received a suggestion to just raise the price. We definitely could have done that, but since we want to be a community-first company, we chose not to increase the valuation, and everyone came in under the same terms as the lead investors.
We are still looking for ways to bring on non-accredited investors, and we'll continue the conversation as we figure out how to be more inclusive.
First off, thanks for hanging in there with me. If you made it this far, I guess I have your attention. I wouldn’t be a good founder if I didn’t now make the case for you to join us on this journey.
We need the best and brightest mission-aligned people who care about accelerating economic progress and increasing social mobility in Latin America through tech entrepreneurship. Why join?
We are deliberate about the company culture we are building.
You would be joining one of the highest caliber teams of any tech startup in Latin America. Latitud attracts world-class talent. It’s not our first rodeo. The bar is high, but we are constantly bringing on entrepreneurial-minded talent.
We don’t really care where you are in the world as long as you are authentically passionate about LatAm, ideally with some strong connection to the region.
We are a remote-first company, so you can work from anywhere as long as you get things done. Our team is currently located in approximately a dozen different countries. I have been super surprised about the power of remote work, and I even wrote a tweet about it here.
This is why we have in-person gatherings every 3-4 months in cool locations. We just got back from San Miguel de Allende, Mexico, and it was incredible.
During these trips, we create deep bonds, because trust is at the foundation of any cohesive team. We also do deep work on strategy and planning, and we ensure we have some adventures too! We cover accommodations, flights, food and fun. Many people stay an extra week or the weekend and do some exploring, turning it into a getaway.
When I sold my last company, I cherished the phone calls I got from early team members when they received the wire.
We have decided to include equity for every person that joins Latitud. There are no separate classes of citizens. Wealth is built through equity, not salary. It’s going to be a long road, but we hope that we create a lot of value for all team members as we build an impactful company.
When my last journey came to an end, I thought long and hard about what I wanted to do next. I was tempted by a handful of potentially lucrative opportunities, but I questioned whether I would be fulfilled.
I then came across the concept of Ikigai. It’s a Japanese phrase that loosely translates to reason for being. I wrote about it in my book, Viva the Entrepreneur.
It’s a combination of 4 things:
What you love. I love founders. I love building relationships. I love building companies. I love building value for others and myself. I love the journey.
What the world needs. Founders solving problems. Latin America has no shortage of challenges, and the region is filled with brilliant minds that can help make the lives of millions of people better through tech solutions.
What you can be paid for. Latin America has so much potential. Technology businesses will drive future progress and the financial rewards are enormous. We plan to build incredible value for our team, customers, and shareholders.
What you are good at. It’s taken a few decades for me to crawl out of imposter syndrome. I’m old enough now to know that I don’t know everything, but confident enough to know that with an incredible team we can figure things out.
If you feel connected with what we are building at Latitud, don’t be a stranger. You can find open positions here, reach out on Twitter, connect with me on LinkedIn and subscribe to our podcast where I talk with the top founders and investors that are building the future of Latin America.
I hope to hear from you soon.
Vamos LatAm!
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