An “accelerator” for Latin American angel investors

If you attend any conference on Latin American startups or startup investing, you indubitably will here someone talk about the lack of local angel investing in early stage startups.  Such an utterance will usually get a lot of heads nodding in acceptance of this problem.  What’s not usual is to encounter new options created to solve this problem, but I’d say that is what SSX, an early stage company stock exchange, which is also part of the Dutch Caribbean Securities Exchange, has done with Latam Incubated One.  This new offering allows potential angels to invest the amount of money they wish (starting at $2) in a liquid vehicle (traded shares) that will provide much more learning than they’d get trying to choose one startup investment for themselves.

On the learning front, angel investors wishing to get started in startup investing can make one investment in Latam Incubated One and distribute their exposure across several investments.  Latam Incubated One will invest (from $50k on up) alongside some of the top accelerators in Latin America which include Wayra, 500 Startups in Mexico, 21212 in Brazil and NXTP in Argentina.  The investments will be made in startups that graduate from one of these accelerators’ programs.  Additionally, investment decisions will be made by investment committees with regional advisors of which I am one.

For a first time angel investor, this is indeed an opportunity to not only make an initial investment, but to tap into the knowledge of their local accelerator and regional advisor as well as the extended network of each of these.  The learning that is possible by tapping into these networks and discussing these investments is exponentially greater and faster than by traditional means.  Also, investors will be privy to key investment documents used to invest in startups and get up to speed on the same documents used by local accelerators.  I see it as an “accelerator for angel investors.”

This is by no means the only option available to angel investors in Latin America.  Nonetheless, in a market where many potential angel investors exist, but a minuscule minority has actually ventured into this arena, this is a viable option.  Latam Incubated One takes some elements of public markets while working with established ecosystem players (e.g., accelerators, accelerator funds with their own investors and regional advisors) to create a new vehicle. As with any investment, there are associated risks and the newness of this vehicle invites criticism, but it’s also true that current traditional solutions have their own associated risks:  lack of local investors stymying ecosystem growth.

The roadblocks to “activating” Latin America’s angel investors are well-known and these include education and uncertainty about which investments to choose as well as which companies are viable.  By leveraging the expertise of local players in the startup space as well as their due diligence infrastructure, the benefits can be shared.  Also, because their shares are part of a public stock exchange, they can sell these if they choose (something that is nearly impossible with traditional angel investments).