Would you be our Valentine's in the Start-Up world?
2024 Valentine's day has gone by and we are excited to tell you what startups and founders we're falling in love with!
Welcome to our newsletter Insights by Pygma where every two weeks you will receive everything you need to stay up to date on LatAm’s startup movement. This Newsletter is a great choice for those looking to understand the landscape better, get deal-flow, get the most relevant articles and books for startups “digested” or simply find useful tools to make your life easier navigating the Latino startup landscape.
TL;DR
$ Insights by Pygma now offers a paid subscription, join this amazing experience.
👩💼 CEO Perspective: Due Diligence on VC’s Uncovered: Get insights into what CEOs of startups are looking into, thinking or using!
🦄 Dealflow: We are open to hearing about the deals you are seeing in LatAm!
🇨🇱 Country Deep-Dive [Chile]: With a foreword from Juan Dominguez from Jelt.
📖 Digest: We read it so you don’t have to. State of SaaS is a must read.
🔥 Bonus Piece on Brex: Get a thought provoking analysis on a note-worthy piece of info we found relevant for founders/investors in LatAm.
💰 Prompting VCs: What are VCs talking about this time?
🛠️ Tool insights: In this edition, we reviewed 2 AI Powered tools for investors.
That’s it, thanks for reading!
We just launched our paid newsletter and we have an offer for you!
We are super excited to deliver value to all of our paid subscribers and we are offering a 20% discount for the first 100 members to join. With the paid newsletter you’ll get deeper insights, tools and dealflow on the best startups in LatAm!
A paid-subscription gets you:
✅ Full access to our newsletter.
✅ Get curated deal-flow from pre-seed startups in LatAm
✅ Post comments and join the community
✅ Write to our founding team for a quick chat about LatAm startups!
Before we start…
We just released our Fintech program PY5 and would love any referrals on your end, feel free to send this to any pre-seed Fintech on your radar.
👩💼 CEO Perspective:
Decoding the SAFE Surge in Pre-Seed Funding
The pre-seed funding landscape is evolving, and SAFEs (Simple Agreements for Future Equity) are at the forefront of this change. Looking at Carta's latest data, there's a big trend: SAFEs are now the go-to choice for startups when they're just beginning. In the last three months of 2023, 89% of money for new startups came from SAFEs.
Here's why this matters and what you need to know:
SAFE vs. Convertible Note: A Strategic Choice
While Convertible Notes have their place, often including terms like a maturity date which can catalyze discussions, SAFEs offer a simplicity that is hard to overlook. The absence of a maturity date with SAFEs removes the ticking clock and allows founders and investors to focus on growth rather than timelines.
The "One Round" Concept: Simplicity or Gamble?
The idea of completing just one funding round is enticing in its simplicity. However, it's essential to consider whether this approach could work for your startup's unique needs. Will one round of SAFE funding provide the runway needed, or will it lead to a complex series of funding stages?
Leading the Charge: The Impact of Lead Investors
When a lead investor negotiates favorable SAFE terms, it can create a ripple effect. These terms often become a magnet for other investors, leading to a swift and successful funding round. However, the ability to craft and negotiate these terms is not universal, highlighting the importance of understanding the nuances of SAFE agreements.
Dilution: The Double-Edged Sword
The ease of obtaining funding through SAFEs can lead to multiple rounds of financing, which can complicate the cap table and dilution calculations. Founders must remain vigilant about their equity pie, ensuring they understand the long-term implications of each SAFE round.
Investor Relations: The Long-Term View
As SAFEs become more prevalent, they may alter the traditional dynamics between founders and early investors. It's vital to consider how these changes might affect long-term relationships and investment strategies.
Angels, Accelerators, and Industry Trends
While some angels may still favor Convertible Notes, accelerators, and venture studios are leaning heavily into SAFEs. The preference for funding instruments varies not only by investor type but also by industry, with some sectors still showing a strong inclination towards Convertible Notes.
Looking Beyond the Hubs
The preference for SAFEs is growing beyond Silicon Valley and NYC, indicating a broader trend that could shape the future of startup financing. As we see this expansion, it's crucial for founders across regions to stay informed and adaptable. Just in LatAm SAFEs have become the new normal. At Pygma, we initially began our programs with Warrants, but this year we made a change due to continuous requests from founders. The goal is to strike a balance where both founders and investors feel comfortable.
Your Thoughts and Stories
Your experiences are invaluable to the startup community. How have SAFEs or Convertible Notes influenced your journey? Share your story with us and contribute to a richer understanding of pre-seed funding's evolving narrative.
Deal-flow, you asked here it is!
Do you want a deal from your portfolio or your own startup to have a shoutout in this section?
Chile 🇨🇱 - Country Deep Dive
In Chile, the startup scene is flourishing due to various factors, including government initiatives like Start-Up Chile, which provides equity-free grants, visas, and mentorship opportunities. The country hosts diverse startups, some of which have achieved high valuations and global recognition.
For example, Algramo, a logistics company, was acquired by MercadoLibre for $40 million, while Clip, a mobile app for booking taxis, was sold to Didi Chuxing for $1 billion.
Chile's strong focus on innovation is supported by organizations like the Chilean Economic Development Agency (CORFO), which manages several programs to foster entrepreneurship, including foreign applicants. Additionally, Chile boasts a favorable environment for starting and scaling businesses, with minimal bureaucratic hurdles and substantial public subsidies.
While Santiago dominates the majority of startup activity, other regions show promise, particularly in areas like fintech, information technology, and artificial intelligence. For instance, Chile has a vibrant fintech ecosystem with approximately 179 startups, and IT companies account for an estimated 8,000 firms nationwide.
However, challenges remain, such as finding local investors and developing a skilled workforce beyond Santiago. Despite these obstacles, Chile continues to establish itself as a regional leader in innovation and entrepreneurship
Events coming up:
Chile Tech Summit: organized by Global Startup Ecosystem August 30, 2024.
ETM: November, 2024.