A Look Inside One of the World’s Most Active Venture Capital Funds: Endeavor Catalyst
By Igor Piquet, Endeavor Brazil Entrepreneur Selection & Growth Director
With investments ranging from Rappi in Colombia to Creditas in Brazil, Endeavor Catalyst has recently been recognized as one of the most active funds in Latin America and the Middle East by LAVCA and Forbes respectively.
Endeavor Brazil Entrepreneur Selection and Growth Director Igor Piquet shares a snapshot of how Endeavor Catalyst works, why it exists, and the impact the fund has had on the ecosystem of Brazil and on other growth markets.
The venture capital ecosystem in Brazil has changed dramatically. When Endeavor launched in Brazil twenty years ago, the venture capital ecosystem was practically nonexistent. Today, however, founders can access capital in a variety of ways, largely due to the hard work of a number of funds, entrepreneurs and pioneering organizations.
While Brazil is still far from having an ideal entrepreneurial ecosystem, the market has come a long way. For example, angel investors are becoming professionalized, seed capital is more accessible , accelerator programs are emerging, and the number of Family Offices and Brazilian funds seeking to invest in innovative companies is growing rapidly. What is rarely acknowledged is that there are significant differences in the dynamics of fundraising for each phase of a business’ life cycle: start-up, scale-up and the consolidation phase. Capital may come from different sources, and the founder’s role in the process also evolves. Fundraising at one stage versus another is neither easier nor more difficult — it is just different.
A key determinant of success when it comes to a founder raising capital is his/her ability to navigate the fundraising process and identify the right resources, raise the appropriate amount of money at the right time, and engage with the right investors. Yes, too much money at the wrong stage can hinder, rather than help, growth.
Brazilian entrepreneurs — and all entrepreneurs from emerging countries in Latin America and the world — still face challenges when it comes to raising “growth capital” (usually Series B onward) from Brazilian funds.
The funds that are available usually prefer to make this type of investment by co-investing with similar funds. For this reason, the overwhelming majority of funding rounds of this nature are led by international funds (mostly American, European, and now, more recently, Chinese and Japanese). International funds, although becoming increasingly global, still have difficulty understanding the dynamics and local context of a country like Brazil. They also often lack the contacts and resources on the ground to identify and vet entrepreneurs with the highest potential.
So, we have entrepreneurs building innovative businesses globally, yet capital providers are often not comfortable exploring non-US markets. How do we harness this potential?
This mismatch was the driving force behind the creation of Endeavor Catalyst, a global rules-based co-investment fund built on top of the broader infrastructure of Endeavor. Endeavor is the world’s largest, high-impact entrepreneur support network. Among other support services it offers, Endeavor connects scale-up entrepreneurs with the largest and most respected venture and growth equity funds.
How It Works: Connecting and Catalyzing the Investment Process
Endeavor Catalyst takes a unique position by curating the investment process on both sides of the table. To start, Endeavor Catalyst invests solely in the companies of Endeavor Entrepreneurs — these companies have successfully passed Endeavor’s rigorous selection process. Of the 5,000 companies screened by Endeavor Brazil last year, only 12 companies were selected to join the Endeavor network. Endeavor also curates introductions between Endeavor Entrepreneurs and venture capital and growth equity investors through its Investor Network program.
Endeavor Catalyst participates in rounds of $5MM+ of equity capital led by a qualified, institutional investor. Often, having Endeavor Catalyst in a funding round serves as a “seal of approval” or positive signal to the market. To date, Endeavor Catalyst has co-invested alongside 100+ funds, including General Atlantic, TPG, Kaszek, Riverwood and many others.
Endeavor Catalyst operates as a separate entity from Endeavor, but benefits from Endeavor’s network and infrastructure in terms of sourcing and pipeline cultivation. Endeavor Catalyst’s Limited Partners are primarily individuals or organizations who already actively participate in the Endeavor network as mentors, board members, and even Endeavor Entrepreneurs themselves.
How Can Endeavor Catalyst Be So Active and Invest in So Many Companies?
Endeavor’s rules-based co-investment approach is key in allowing “friction-free” participation in all eligible deals. Additionally, Endeavor’s vast and growing network fuels Endeavor Catalyst’s investment pipeline.
The main rules of investment by Endeavor Catalyst are:
- Investment only in the companies of Endeavor Entrepreneurs;
- Participation in rounds of at least US$5 million in equity capital;
- The round in question needs to be led by a qualified institutional investor.
If these criteria are met, Endeavor Catalyst seeks to invest in up to 10% of the round, with a maximum investment of US$2 million. Endeavor Catalyst portfolio companies continue to receive support services from Endeavor.
Brazil, like other emerging markets, is full of high-potential entrepreneurs who are well-prepared and eager to create the next big global companies.
