Last month, a group of Argentine investors gathered in Buenos Aires to learn about an up-and-comer in Latin America’s venture capital community: Cygnus Capital. Spearheaded by Ignacio Plaza and Diego Gonzalez Bravo, Cygnus funds early-stage digital entities in Latin America. Currently, it’s in the process of raising the capital needed for its first round of investments.
Cygnus’ first endeavor will be its Nest Fund, with which it plans to back 12 to 15 companies. With an anticipated total of up to one million dollars to invest, the fund will write tickets of between US$25,000 and US$100,000 for each entity selected for the portfolio. It will seek out angel and seed opportunities for investment terms of five years.
The organization is on the fast track to getting the Nest Fund up and running. It has set a deadline of October to raise the necessary capital, the idea being to have its initial portfolio complete by 2014.
Should all go well, in 2015, Cygnus will move on to a more ambitious endeavor – a five-million-dollar fund, Cygnus VC. It will set its sights on 10-20 digital economy and technology projects, investing between US$100,000 and US$500,000 in each. Investment terms will be extended to 10 years, its focus on seed rounds as well as series A and B.
For Cygnus, Latin America the Source of the Next Big Thing
The Cygnus team laid out the what for their potential investors, but they also had to lay out the why. What makes Latin America, and, specifically, Argentina, prime territory for investments?
Latin America’s digital market is on the up-and-up, and while the region has yet to produce a plethora of bit hits, for Cygnus, it’s only a matter of time. Gonzalez Bravo advised:
You have to see what’s next and look ahead – take a risk on something that doesn’t yet exist.
He pointed to numerous trends that indicate good things to come in Latin America. E-commerce spending is on the rise, as is the amount of money going to market research and mobile advertising. The growth rate of internet users in Latin America is 2.3 times the global average.
Gonzalez Bravo also pointed to specific industries, such as social media, e-commerce and games. He highlighted mobile, the area that Cygnus believes has the most potential. Global mobile traffic is growing 1.5 times over each year, and mobile device sales are booming. Roughly 50% of all mobile phones sold in the world during the first quarter of 2013 were smartphones, and because Latin America still represents a low regional traffic share, there is a huge potential for growth.
As for Argentina, Cygnus has especially high hopes. Gonzalez Bravo remarked:
Argentina is a relevant country. Of Endeavor’s top 10 companies, eight are in Buenos Aires. And the only NASDAQ company, MercadoLibre, was founded here.
Sourcing from Accelerators
The entrepreneurial lifecycle, in terms of capital, starts out small and has the potential to end up big. Commencing with one’s own funds and the backing of family and friends, entrepreneurs move on to angel investors, seed funds, larger investments and, eventually, exits and IPOs. Cygnus is leaning on one element the cycle – accelerators – to decide on investments and move ahead.
A plethora of accelerators and incubators have popped up all over the world, following in the footsteps of acceleration pioneer Y Combinator. And Latin America is no exception, with organizations like Wayra, NXTP Labs, itBAF and 21212 in the mix. It seems to be Cygnus’ approach to source many of its investments from the portfolios of local accelerators, especially judging by the startups it’s already picked.
Thus far, Cygnus has made six investments. And if the names seem familiar, they should – they’ve all been backed by local accelerators, and one is even accelerator itself. The fund has backed NXTP Labs, investing US$50,000 in the accelerator’s first two-million-dollar round. It’s subsequently invested in Everypost (NXTP), Educabilia (Wayra), ProductGram (NXTP), RingCaptcha (NXTP) and The Other Guys (NXTP).
Angels Club, a Unique Opportunity
In order to facilitate deal flow beyond the Cygnus portfolio, the organization has created the Angels Club, a platform to connect investors in search of opportunities with startups in need of funding.
Cygnus will vet companies and investors joining the club, bringing Cygnus Nest investors and other invited backers together with approved digital economy startups looking for between US$50,000 and US$500,000 in investments. The private online platform will connect the Latin American investment and entrepreneurial communities, the idea being to grow the network and foster new opportunities.
Learn more about Cygnus Capital at www.cygnusvc.com.