Latin America Net Arena Offers VC Opportunities

Venture capitalists focused on Latin America's technology market say the region offers a much better investment climate than in years past in the Internet market, with opportunities both in consumer and enterprise segments.

Angel investor James Gray injected US$600,000 into the seed round of VivaReal, an online real-estate marketplace startup operating in countries including Brazil, Mexico and Colombia.

Gray, who became the company's chairman, sees big growth opportunities in online advertising for the company, which was launched in June 2009 and has seen its traffic climb quickly.

"Eventually, we would like to see an IPO on a U.S. or Brazilian stock exchange," Gray said via e-mail.

Mexico City-based Latin Idea Ventures is actively meeting with social media, online advertising and mobile content startups, although it hasn't invested in any yet, as it would like to tap a company with some traction.

"Overall, we're very interested and optimistic about the Internet sector," said Alex Rossi , Latin Idea's managing partner.

So far, Latin Idea has invested in more mature, infrastructure-focused companies, like carrier-of-carriers MetroNet and online marketing services provider Cacto, Rossi said.

Factors that attract investors to Latin American Internet startups include a healthy pipeline of computer science engineers, lower development and infrastructure costs and widespread use of cell phones and the Internet, said Ariel Muslera ,director of strategy and product development at the Latin American Venture Capital Association.

"Relatively speaking, the Latin American region is definitely better positioned today than five years ago. There is considerably more money available for venture capital and private equity investments," he said in a phone interview.

ComScore recently reported that in March, Mexico had 15.5 million home and work Internet users age 15 and older, up 20 percent year-on-year, which makes Mexico one of the world's fastest-growing markets. Last year, comScore found that the most popular Brazilian sites drew a "substantial" percentage of their visitors from outside of the country. And in a study on global search engine usage, comScore found that in July of last year, Latin Americans ranked as the world's heaviest search users with an average of 13 search usage days that month and 130 searches per searcher.

In Sao Paulo, Brazil, Invest Tech targets companies that have at least $1 million in annual revenue and sees opportunities in e-learning services, telemedicine technology, software for agro-businesses and enterprise mobile applications.

For Invest Tech president Miguel Perrotti, it's very encouraging to see in recent years a shift among many Brazilian entrepreneurs to place more emphasis on corporate governance and regulatory compliance in their companies.

This encourages VCs to invest in these companies, because their operations are more efficient and solid, and their chance of long-term success much higher, Perrotti said. "This is a very good thing," he said in a phone interview.

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