Julio Vasconcellos: Scaling to $100M and 1,200 Employees and then Cratering | 20VC #928

1. 0:00 – 2:04

   Julio’s Background

   1. HSHarry Stebbings0:00

      Three, two, one, zero. (beeps) You have now arrived at your destination. Julio, this is such a joy to do. When you sent me the names of people that I should speak to before the show, I mean, we had Hugo Barra, what a hero, Miki Malka, I mean, the most wise man in venture, Scott Belsky, product OG, and Andy Ratcliff, one of my heroes. So thank you so much for joining me first today.

   2. JVJulio Vasconcellos0:26

      No, thanks- thanks for having me here. I mean, I'm a huge fan of the show, so I think it's gonna be a lot of fun to be on.

   3. HSHarry Stebbings0:31

      Oh, it's gonna be great. We have so many great topics. The- the schedule is quite long, (laughs) so I'm excited for the discussion. Tell me though, how did you make your way into the world of venture, and how did you come to found Atlantico most recently?

   4. JVJulio Vasconcellos0:45

      So the CliffsNotes on- on me is that I've spent the last 15 years or so in tech, uh, mostly as a founder and operator, half that time in, you know, Silicon Valley, San Francisco Bay area, and half the time down here, uh, in Brazil. And, you know, w- when I was an operator, I think similar to- to a lot of folks out there, I started investing, right? It was first as a, as an angel investing. This is over 10 years ago. Uh, and then, you know, ultimately over time, just started to fall in love with- with investing, and- and ultimately when I- when I, uh, wrapped up my last company a few years ago, I decided to just dive headfirst into investing, and, um, basically build that fund that I always dreamt of having when I was an operator and entrepreneur. And- and that's what Atlantico is today. Uh, I'm originally from Brazil, so, uh, it w- it seemed to me to be quite obvious to go all in on Latin America. I think it's probably one of the most exciting regions in the world. I felt like, you know, I obviously had a personal edge being here and having started a company down here. And I think today, you know, with Atlantico, we've built what's one of the leading early stage funds in- in the region, and I think we're still in the early days of building what we think is gonna be the dominant ver- venture firm for Latin America.

   5. HSHarry Stebbings1:54

      Listen, I- I- I have so many things I want to unpack from that, but like, we have brilliant and beautiful chronology to your career, and so I'm gonna stick to structure, because it's actually I think gonna be the

2. 2:04 – 4:27

   Julio’s Experience Running Facebook LATAM

   1. HSHarry Stebbings2:04

      best way to do it. So if we unpack first running Facebook LATAM, this is a pretty cool thing to do. As we said, Facebook LATAM, you were really the start and the first person running it. How did that experience impact your mindset? Are there one or two big takeaways for you from that experience?

   2. JVJulio Vasconcellos2:22

      Yeah, so I- I joined Facebook at, uh, the end of 2009, actually early 2010. That's when they- they shipped me down to Brazil, uh, to really focus on, uh, driving growth in Brazil. And- and- and as a reminder, you know, Facebook had something around a million users at that time in Brazil, uh, and our biggest competitor, which was Google's social network, Orkut, had over 35 million users. So I was shipped down by- by the growth team and said, "Look, go and figure this out, and sort of kill Orkut and make, and make things happen." So I was everyone from, you know, the- the intern, to the CEO, to the secretary, to the janitor, uh, of Facebook Latin America. So it sounds like a grandiose title, but when the company is that small and there's sort of hundreds of employees, you got to do a little bit of everything. And I think that, uh, when I think about the- the main learnings I had of working at Facebook, I would say that the first one is about just the power of product market fit. I think when- wh- when you're in a rocket ship like Facebook and everything you do can kind of only go right, um, i- i- it's really a testament to how product market fit really solves all problems, and if y- and- and if you don't have it, to take the flip side of it, it doesn't really matter what you're gonna do because you're never gonna be able to achieve greatness. So I think that's probably point number one, is how dominant and important that kind of product market fit can be. I think that the other thing I learned, which I- I still carry to this day as an- as an investor, is just the overwhelming importance of a founder's vision, right? And I think, you know, Mark Zuckerberg, probably chief amongst many tech founders out there, is- is just an amelling- uh, an amazing, compelling founder with just a huge vision that helped se- serve to unite everyone and really sort of drive and motivate this amazing team that Facebook had created in the early days. And I think that that's probably the single most important thing a founder can have, and one of those things that anyone that's not a founder can never have, is really have that- that, uh, authority to, you know, create and shape and communicate that vision in a way that- that- that drives the- the team.

   3. HSHarry Stebbings4:20

      Now, I- I am actually gonna fuck the schedule up here, because those- those are too important for me to dig in on. You said there about kind of the power of product market

3. 4:27 – 5:50

   Markets vs. Founders

   1. HSHarry Stebbings4:27

      fit, and actually how almost it can hide a lot of sins. I always go back and forth on really what comes first, a great, great market with mediocre founders or amazing founders and maybe mediocre or challenging markets? How do you view the centrality of markets when investing today, given what you said about product market fit really solving a lot of challenges and sins?

   2. JVJulio Vasconcellos4:53

      I- i- in my view, market comes first, and- and- and I think if you have the right model and the right product in that market, I think that's- that's more important than ultimately the team. That's not to say that the team doesn't matter. I think in a lot of cases, you do have a lot of competitors, and actually the team's ability to navigate and- and tr- try and eventually find that product market fit is actually probably the biggest driver to building that- that model. But once you've found it, uh, I think every- everything else kind of fall- falls into place, and your ability to hire people that are better than you, build an amazing management team, and kind of scale things up is- is really critical. You know, in- in- in my experience, um, when- when you do have, uh, uh, that kind of unique experience like we had at Facebook, and that I later on had at Pace Urbano, uh, your ability to close b- the best clients, you know, raise the best funds, bring on the best team, everything else kind of just falls into place once you have that kind of growth curve and can... that kind of traction.

   3. HSHarry Stebbings5:47

      I- I totally agree with you. The- the second thing, and then we'll move on

4. 5:50 – 7:25

   When to persist and when to give up

   1. HSHarry Stebbings5:50

      to the next chapter, you said about kind of the importance of vision. I always find it quite hard for founders, because sometimes when you don't have product market fit, you hear, "It's all about resilience, stick to your vision, and always hold onto it." But then there's also a time when you need to let it go and you need to change. How do you think about having enough data to keep going versus when to give up?

   2. JVJulio Vasconcellos6:14

      I, I think I'm a big fan of the strong opinions loosely held. Right? I think you, you have to have a, a high degree of, uh, conviction on, on where you're going, and I think ultimately what the long-term vision is of what you're building and for who you're building it and, and why it matters in the world. Uh, and, and the way you get there, I think, is, is sort of a second, uh, uh, a second point that you have to define. And I think that's where you need to have the flexibility and the, and the c- capacity to change your mind and change your path and explore different things and pivot around, but ultimately sort of with that same end goal that I think is what ends up attracting a lot of the early employees, and I think just keeps people, keep people motivated, right? Like, what, what gets you coming in to, to work every day and sort of working hard seven days a week and really pouring your heart and soul into something? Is, is usually what... where you're going in the long term, right? What's the problem that you're solving and who are you solving it for and why, and why does that matter? And I think that's a lot about the vision rather than the specific road that you're taking to get there.

   3. HSHarry Stebbings7:12

      I, I totally agree with you there. I do wanna move into, you know, Paseo Urbano, which I, I hope I, you know, said very elegantly and, and correctly. Um, (laughs) it's a work in progress. Um, but I wanna start there. So, uh, a

5. 7:25 – 9:25

   Scaling Peixe Urbano

   1. HSHarry Stebbings7:25

      question from a mutual friend, Hugo Barra. He said, "What was it like being a part of, at, at the start, what was a kind of Groupon clone gold rush?" And, and what was that like and what's your favorite memory from that time?

   2. JVJulio Vasconcellos7:38

      Yeah. Just to give you a sense of the, the breakneck speed that, that we were going, uh, with, with Paseo Urbano, you know, I, I probably worked, I don't know, 100-hour weeks for two years straight. So it was, you know, both, uh, exhilarating to have that, that kind of growth and that kind of traction, but also, you know, exhausting, right? You're just, you're just sprinting a, a marathon and, and, and it's, and it, and it, and it tires you out. Uh, you have a lot of adrenaline to keep you going, but it definitely tires you out. And, and, and to give you a sense, we started, you know, myself and my co-founder Alex, uh, working out of his living room, uh, in his apartment in Rio de Janeiro in Brazil. And, you know, fast-forward two years later, we were over 1,200 employees present in six different countries across Latin America. The company was doing over $100 million a year in, you know, net revenues. So sort of a, uh, sort of a, a, a very large, uh, company in every sense of the word, uh, word in a very short amount of time. And I think, uh, one, one of the things that probably is, is most, um, memorable for me was probably one of the first offers that we put live on the site. This is probably in the first or second month of the, of the website. But we just started selling so many, uh, uh, coupons of that particular offer. I remember we would press, you know, refresh on our keyboards on the browser and the number would go up by three, it would go up by five, it would go up by 10. You know, these weren't cheap offers that we, we actually thought that there was a big bug. And I remember Alex kind of went in with, "Oh, hey, we've been hacked. Something is happening." But in reality, it was, it was true, you know? Kinda reminded me a lot of, I think, that early Amazon story of the bell ringing every time you, you, you made a sale. Uh, they, uh, ultimately they had to turn off the bell, and I think we were in a similar situation where we ultimately had to stop, you know, pressing refresh and just, you know, believe that we had, we had landed on this, uh, model, uh, which was the Groupon model from abroad that had this amazing product-market fit and it could kind of just grow as fast as, as, as you being able to pour fuel on

6. 9:25 – 10:54

   First things to break when you’re growing fast

   1. JVJulio Vasconcellos9:25

      it.

   2. HSHarry Stebbings9:25

      Can I ask, when you're growing that fast, what are the first things to break?

   3. JVJulio Vasconcellos9:30

      When, when you're going that... When you're growing that fast, you're bound to make a lot of mistakes, right? And I think it's, it's important to grow fast and make mistakes because it's the only way that you can move so fast. But it's also important to just be cognizant that you're making those mistakes and you're gonna have to clean things up. I think there's some types of mistakes that you really can't make, right? That you really can't compromise on. You can't compromise on culture, you can't compromise on the, the people you hire and the way that you treat them and the way that they behave, uh, with each other. But I think there's a lot of, a lot of problems that you end up solving by just throwing more bodies at them. And I think that those typically are the first kinds of problems or the first kinds of things that you break. You know, processes that probably should've been optimized and you probably should've solved through software, but while you're building the software solutions, you probably ended up hiring, you know, 20 or 30 people to kind of keep pressing, uh, keys on a keyboard and solving them. And ultimately when you have anything that's so people-heavy, um, and so, uh, mission critical, s- it's, it's bound to break, right? The site's, you know, gonna go offline, or, you know, some reimbursement's not gonna happen, or some client's gonna be unhappy. And, and it's, and it's, uh, your responsibility as the CEO and the founder to ultimately, uh, go back, clean that up, have a more permanent solution that can deliver the same kind of, um, same kind of effectiveness at a much level... a much higher level of quality.

   4. HSHarry Stebbings10:47

      I, I, I totally agree with you in terms of the kind of importance of processes there and, and, uh, not having them being a challenge. Can I ask, you know, you, you also

7. 10:54 – 12:16

   When is the right time to expand product lines?

   1. HSHarry Stebbings10:54

      expanded into multiple different products. We mentioned kind of the Groupon clone, which is very unfair labeling in the early days.

   2. JVJulio Vasconcellos10:59

      Mm-hmm.

   3. HSHarry Stebbings10:59

      But it expanded well beyond that. How do you think about and advise founders on when's the right time to expand product lines and add second and third and fourth products?

   4. JVJulio Vasconcellos11:10

      Yeah. So when we launched Paseo Urbano, back to the question of the topic of vision, right? Our vision was to build the ultimate local services company in, in Latin America. And we started with the Groupon model for, for daily deals, and then subsequently we, we, we launched a food delivery business, a restaurant reservation business, a local content business, kind of really executing on that overall vision of what we, what we wanted to build. I think that what we got wrong is that we probably did that too early. And what I would tell founders is that you have to pick one market, right, and probably one market and one customer, and you really have to nail it and you really have to win that market before you move on to the next one. I think trying to fight a multi-front war and trying to win multiple markets at once, especially in a hyper-competitive market like the one we had, is a recipe for, for disaster. Uh, so what we always tell our founders is, "Look, focus on one geography, one product, one customer, win that, and then go on and move on to the next one. Don't try to do everything in parallel." I think focus is probably one of the most important and, and often underrated skills in a founder and importance in

8. 12:16 – 13:10

   What does “winning a market” mean?

   1. JVJulio Vasconcellos12:16

      a, in a, in a startup.

   2. HSHarry Stebbings12:17

      Can I ask, what does winning a market mean? When founders think about winning a market, what does that actually mean in reality?

   3. JVJulio Vasconcellos12:25

      I think it, it, to me it means a, a achieving a level of excellence and market share, um, and, and barrier to entry that a new competitor can't easily come in and undermine you and sort of steal market share. So oftentimes, uh, it's, it's about building those competitive moats, making sure that they're strong enough that no one can easily come in and sort of dethrone you. Uh, and a lot of times just getting to sort of the market share or getting the network effects to start kicking in, in a way that sort of the, the acceleration curve is very clear that as you grow that, that moat or that competitive advantage is only gonna get greater and no one else is gonna be able to, you know, reliably or, or no one else is going to be able to come in there and, and reliably challenge you in a way that you should be worried about.

9. 13:10 – 14:49

   Mistakes made at Peixe Urbano

   1. JVJulio Vasconcellos13:10

   2. HSHarry Stebbings13:10

      Can I ask, we mentioned the incredible hyper growth there and scaling to 100,000,000 in revenue, 1,200 people. You know, then challenging times came. Uh, Enrique actually at Brex asked this and he asked, "You know, when you look back at that journey, what are one or two elements that maybe you made mistakes on that caused that sharp decline in company performance?"

   3. JVJulio Vasconcellos13:31

      Yeah. Uh, it, it is great that you, you spoke to, uh, Enrique. He's a good friend. I think I met him when he was probably 16 or 17-

   4. HSHarry Stebbings13:38

      (laughs)

   5. JVJulio Vasconcellos13:38

      ... starting his first company, um, in, in Brazil. So, uh, it's an amazing career he's had since. And it's a great question because, you know, I think, I think the ups and downs of being a founder and I think sort of the reality of just life in the trenches of what it is to run a startup is, is, is challenging. And I think that we made a lot of mistakes. I think some of the biggest mistakes we made were around focus, was probably expanding into too many product lines, was probably expanding into too many geographies, uh, too fast. And I think all those things, uh, ultimately started to consume cash and probably more importantly started to consume, you know, management attention and management focus. Uh, and we, we eventually had to pay, had to pay that bill, right, that eventually arrived when the market as a whole, and I think sort of this was a global phenomenon, showed that that daily deal model wasn't as great and wasn't as sustainable honestly as the entire world had thought. And when that market started to, to fall from under us, we had a lot more fronts to be able to, uh, to have to fight on. We had a lot more fires to put out. And a lot of that was just because we had expanded and we had so much surface area that we were operating in that it was much harder to balance all those things and get the company back to profitability.

10. 14:49 – 16:05

    What would you do differently if you started another company in Brazil?

    1. JVJulio Vasconcellos14:49

    2. HSHarry Stebbings14:50

       Mickey, I mean, I did no work for this show. I just spoke to our mutual friends-

    3. JVJulio Vasconcellos14:53

       (laughs)

    4. HSHarry Stebbings14:53

       ... and they gave me all the answers. But Mickey asked a great question, which was, "If you had the time again and you were starting a company today in Brazil, what would you do differently? Who, and who would you partner with and who would you not partner with?" (laughs)

    5. JVJulio Vasconcellos15:08

       This, this question of who, who would I would partner with and who would I, you know, raise money from, honestly I think I would probably do a lot of it the same. You know, I think we had really amazing partners at Pace Urbano, right? We raised our first round from Benchmark Capital. You know, I went on to start another company and raise money from Benchmark Capital again, so I've definitely done that before. I think even our growth investors at, you know, General Atlantic and T. Rowe, I think that what was, um, what was most important there is that not only were they helpful and supporting us when we were hyper growth and we were doing excellent, but actually when the company was, you know, going through a lot of rough patches and I think was in the process of even, um, of... When the company was going through a lot of rough patches and was really in a lot of trouble, I think that's actually when they really leaned in and helped us out, right, and were supportive to make sure that we did well. You know, obviously I don't think every single partner

11. 16:05 – 17:24

    How did your VCs help out when times were bad?

    1. JVJulio Vasconcellos16:05

       was great, but I-

    2. HSHarry Stebbings16:06

       Can I ask, how did they help out when times were bad?

    3. JVJulio Vasconcellos16:11

       It was, it was a variety of things. I mean, just to give you like one example, you know, we had, uh, several fundraising and M&A conversations that were happening, you know, throughout our history. Uh, and at times we were just short-staffed to be able to handle all these requests and all these things that we needed. I remember, you know, very clearly, um, that GA, um, sent in a couple of analysts that they basically kind of lent us to come work with us for a couple of months and help us organize sort of our finance team and a lot of our reporting. I think I remember also with, um, you know, T. Rowe Price at the time, it was Henry Ellenbogen that was running the private investment team there. Um, and he helped, you know, get us in front of some pretty critical, uh, partners globally, uh, both from an M&A standpoint, from a fundraising standpoint. I think he really kind of opened up his Rolodex and helped us open some of these doors when we, when we most needed them. When the, when the investment wasn't an important investment for them anymore, it was, you know, a fairly small one when you consider the size of their fund, and it was one that was on the rocks. And even then, he was using his reputation and I think really going to bat for us as far as being supportive of the company.

    4. HSHarry Stebbings17:20

       That's amazing to hear. Sorry, I like to drill down when it's like, you know, how people

12. 17:24 – 19:28

    How did your experience with Benchmark impact you as an investor?

    1. HSHarry Stebbings17:24

       move the needle, especially in tough times. You mentioned Benchmark there, though. Such an iconic and institutional firm. And obviously you became an EIR there, um, which is where you met Scott. But how did that experience with Benchmark impact how you think as an investor?

    2. JVJulio Vasconcellos17:37

       Yeah. So as you said, after we sold Pace Urbano to Baidu, I moved back to the Bay Area and I took a role as an EIR at Benchmark. You know, the partner who had invested in Pace Urbano, Matt Kohler, said, "Look, you know, this, you know, this didn't go exactly the way that we expected, but we really liked the experience of working with you. Why don't you come hang out here and let's try to figure out what we can do together?" And that period that I spent at Benchmark and interacting with all the partners and getting to see how they operated in the day-to-day, you know, was definitely a huge learning experience. I'd say that...There were probably two things that I took away from, you know, watching the best of the best kind of doing their thing at, at Benchmark, and I think the first one that was really striking to me was just the incredible level of, of focus they had, right? They really stick to their knitting. They know that they're the best at, you know, the craft of early-stage venture and investing in these great breakout companies and being sort of the supportive, uh, partner that these, that these founders want. Uh, and I think that, that, that focus and the, and the ability to say no to many other things that might come up, you know, they don't raise the opportunity funds and the growth funds. They don't do SPACs. They're kind of just focused on, on, on what they do best, and, and, and they're the best at it in the world. And I think we, we, at least at Atlantico, have tried to steal a little bit of that, that playbook and try to be, you know, entirely focused on early stage and, you know, being, being the best at it. One of my mentors once said that greed is the number one enemy of returns, and that, you know, being greedy and kind of expanding your fund or expanding your strategy into multiple different things that maybe you're not the best at probably is, you know, short term profitable, but sort of long term, I think really chips away at what you're doing. And I think that Benchmark focus on the long term and that focus on being the best in the long term is something that was... that really stuck with me.

    3. HSHarry Stebbings19:25

       Can I just dive in there? In terms of, like, you know, uh, focus

13. 19:28 – 20:56

    Staying Focused vs. Moving with Markets

    1. HSHarry Stebbings19:28

       and knowing where your knitting is, you know, I had Bill Gurley on the show a year or so ago, and he mentioned their public markets activity now. And my question to you is one of, I totally get you in terms of the importance of focus, but you also have to move with markets. How do you think about that balance of know your knitting, but also seeds are now what Series As were, Series As are what Series Bs were, and actually there's fluidity to the ecosystem we inhabit, and you have to move with it. How do you think about that dichotomy?

    2. JVJulio Vasconcellos19:59

       Yeah, an- and I think that part of focus is, is knowing what you're good at and, and, and knowing what you're good at doesn't necessarily mean abiding by labels that the market has put out there, right? So, you know, just because something is called a seed today, but it used to be called a Series A in the past, I think you have to be very clear to yourself and to your investors and to your founders, you know, what's the stage of life of a company that you're most effective in. Uh, and I think, you know, Benchmark has always been an early stage investor, and I think early stage in the past meant Series As, and early stage today means, means seeds, and I think that's how they've evolved. They, they've been very, very true to the, I think the underlying nature of what they do and what they're good at. And I think as, as the market has shifted around, they've shifted around with that market, but still continued to double down on what their, on what their edge is.

    3. HSHarry Stebbings20:47

       You, you, you know, you met Scott Belsky while at Benchmark, and you guys started Prefer together. I do want to touch on this experience. You know, again, spoke to Hugo and he said,

14. 20:56 – 23:00

    Biggest Lessons from Prefer

    1. HSHarry Stebbings20:56

       um, "Ask this one, what were your biggest lessons from the Preferred journey and not getting to product market fit there?" What did you take away from that two- to three-year journey?

    2. JVJulio Vasconcellos21:05

       I'd say the, the, the first thing is just how much I had underappreciated the fact that my two prior experiences at Facebook and then with Page Urbano, how, how important product market fit had been there, and how lucky I was to be in those places. Because finding, you know, true and amazing product market fit is, is so, is so hard and it's, and it's quite rare. Uh, and I think I underestimated the difficulty of doing that in such a, in such a complex market as the one that we attacked, uh, at, we attacked with Prefer. You know, just to give you some context, you know, Prefer was trying to basically reinvent the nature of the firm, right? Thinking about the firm for the 21st century, what would be this platform for the future of work? So obviously a, a, a very grand vision and a problem that's very, very hard to solve. And I, and I thought that, look, I'm gonna, you know, get together with Scott, get together with these other, uh, you know, great co-founders and we're gonna kind of iterate and try a bunch of things and eventually get there. Uh, but we never did. You know, we, we kind of hit our head against the wall for three years and tried a bunch of things u- until eventually, you know, so we ran outta steam. And I think one thing that, you know, Scott always pulled me to do, and I think that, you know, if I could do it over again, I probably would've listened more to him, is just how much time we spent on each iteration of the product. I think I, I, I always had the mindset of, you know, try things out, if they don't work out, iterate, kind of throw away the product, just kind of this very rapid iteration, you know, test and repeat, uh, mindset, which I think had, had served companies like Facebook well, had served me well at, at, at Page Urbano. And I think Scott is much more of a, of a craftsman, right? A much more of a product builder. Uh, and, and, and we probably ended up somewhere in that spectrum of, you know, move fast and break things and, you know, build sort of the most beautiful, polished, and crafted products that was probably a little bit too much on the rough, on the rough side. And we probably just didn't give enough time to some of the versions and some of the things that we tested, much, much counter to I think what, what Scott probably would've done, and I think that's probably what I would've done

15. 23:00 – 24:08

    Best Strategy for Shipping Product Today

    1. JVJulio Vasconcellos23:00

       most differently, uh, if I were to do Prefer again.

    2. HSHarry Stebbings23:03

       What do you favor in founders today in terms of their product strategy? MVP, iterate, customer feedback, test, ship, test, ship? Or do you prefer the craftsmanship, the beauty of product design, really stressing the details?

    3. JVJulio Vasconcellos23:18

       Right, so the, so, so that's a, it's a spectrum that you, depending on the, the company and depending on the product and depending on the market, you might want to be in different, uh, parts of that spectrum. So it's, it's neither all the way to one side and n- not, not on the other side. I still have my own personal bias to like the scrappy founder that, you know, iterates and try things and is sort of very numbers based. But I think today, especially after the experience with Prefer, I've gained a much, much higher appreciation for the craftsmanship I think that, you know, Scott Belsky, uh, always advocated for. And maybe I was, you know, 10%, uh, craft and 90%, you know, uh, scrappiness and iteration, and now I'm probably 60/40. You know, I'm much more still on the scrappy side, still on the iterative side, but I still see the value of, you know, great design, great experiences, greatly crafted products in a- being able to craft that early nut

16. 24:08 – 26:12

    The shift from Angel Investing to Institutional Investing

    1. JVJulio Vasconcellos24:08

       that is, you know, product market fit.

    2. HSHarry Stebbings24:10

       Uh, I, I want to ask you now, post Prefer, you then obviously started Atlantico, and you'd been investing for the last, you know, decade or so, and during a lot of what we discussed, you'd been investing as an angel as well. When you think about the transition from angel to institutional investor, uh, h- how did your mindset shift when making that transition?

    3. JVJulio Vasconcellos24:32

       I think when you're investing your own money, you have the luxury of investing in things just because you like them, right? Um, maybe it's off strategy, maybe it's not your focus, but you like the founder or you like the idea. You might invest in things that are, you know, non-tech or not, not your core competency. And, and, and what changes when you're investing other people's money is that when you, when you go out there and you raise a fund, you, you promise a, a particular strategy in a par- particular area of focus. And, and, and now it's your responsibility to deliver on what you, what you sold, right? So you can't go off and say, "I'm going to raise an early stage fund and start making, you know, growth investments or, or sort of seed stage investments." Uh, you really have to be able to, you know, deliver on, on what you sold. And I think that's, that's important to LPs, the consistency in, um, in what you sell and what you deliver, so sticking to that strategy, um, that you, that you, that you outlined. I think the other thing also is that as an angel, you probably have a lot more leeway to be a friend, let's say, to the founders and to the entrepreneurs. Um, and you can be a little bit more of a cheerleader. You can have a little bit more fun with them as people. But I think that once you're investing other people's money, you're, you're really there to maximize return. So you're not, you're not there to be a founder's friend, but you help, you're there to help that founder win. And sometimes helping that founder win may be uncomfortable, right? It might involve giving sort of harsh, you know, but constructive feedback. And I think you need to be able to be a, a little bit more cutthroat to some extent in the way that you partner up with founders and help them be successful in a way that's not always pleasant for everyone, but it's the way that maximizes the return for your investors and ultimately maximizes

17. 26:12 – 27:34

    Most common ways you have to be cutthroat as a VC

    1. JVJulio Vasconcellos26:12

       the return and the outcome for that founder.

    2. HSHarry Stebbings26:14

       What are the most common ways that you find you have to be cutthroat?

    3. JVJulio Vasconcellos26:17

       So sometimes it's just about giving feedback that the company is going down the wrong path. I think a lot of times it's just about, you know, putting up a mirror in front of that founder and making it clear that they maybe don't have product market fit, right? That maybe what they think is, is working really isn't working, uh, and kind of bringing reality down. Um, and, and I think that founders are optimistic by nature, and they, and they think things are going well, and they're going to end up well. And sometimes you just have to say, "Look, this is, this isn't working. You have to try something else." And maybe you have to, you know, make cuts, maybe you have to pivot, maybe you have to fire your co-founder. And making those, making those decisions are, are tough. And sometimes when you're stuck in the day-to-day of running a company, you may not be able to zoom out and see, see the big picture in the same way that maybe, uh, an investor might. And it's my role as an investor to be able to help the founder see the big picture and make those tough decisions.

    4. HSHarry Stebbings27:08

       Uh, I have... For me, it's twofold. One is like inputs and outputs. So many people focus on MRR. It's not about fucking MRR. It's about seed expansion, number of new projects, that your MRR is your output. Your inputs are what drives it. Focus on the inputs. Do you know what I mean? And then the storytelling and the branding I just find, stay woeful, um, which is, uh, something that I'm obviously very passionate on. Can I ask you one?And I don't know the answer to this, Giulio, but,

18. 27:34 – 29:12

    What to do when you lose confidence in a founder

    1. HSHarry Stebbings27:34

       you know, I use these shows for lessons. What do you do when you lose confidence in a founder, when you don't believe that Giulio is actually right for this company anymore?

    2. JVJulio Vasconcellos27:43

       It's, it's a great question. I, I haven't been there yet. Um, but I, I believe I w- I will one day get there. You know, you definitely, um, do at times have more, more confidence in a founder's ability, and then that foun- that confidence goes, goes low. But, uh, what happens when that confidence goes to zero, right? And, and I think that what is your responsibility as an investor is to have that honest conversation with the founder, uh, and tell them, "Look, I think that maybe you're not the best person for this company, or maybe you're not the best person to kind of get to product market fit or sort of turn us around. And y- you may, you may not be the best CEO, uh, you may not be the best executive, but you're still a shareholder in this company. And I think let's, let's try to come up with a, a good way that we can, you know, maybe put this company back on the right track." And, you know, hopefully through, um, you know, an objective and frank conversation, the founder, you know, agrees with you and thinks that the, the, the best path for the company might be, uh, changing the executive team or changing the leadership team. Uh, and if ultimately he or she doesn't agree with you, um, you know, you may just need to part ways, like whe- wheth- whether or not you're able to replace the founder and bring someone else in is, is a separate topic. But, you know, if the founder doesn't want to hear you and, you know, you're not aggregating any value and you're kind of, you're not getting along well, uh, it might make more sense for, for them to bring on some other investor onto the board and simply bring on some other investor as an advisor. But I think the importance is for you to be transparent, for you to be frank about that conversation and try to find something that's going to be the best for the company and ultimately all the, all

19. 29:12 – 31:44

    Do boards add value?

    1. JVJulio Vasconcellos29:12

       the shareholders.

    2. HSHarry Stebbings29:13

       Giulio, do you think boards add much value? I've sat on boards with some of the best, rarely have they added any value. Genuinely, do you think they're valuable?

    3. JVJulio Vasconcellos29:24

       In, in my experience, having a moment where you bring in different investors and different advisors together, you know, to, to check in and talk about strategy and talk about direction, that conversation i- is valuable. Whether that has to happen at a f- board meeting and whether it has to happen sort of in the formal construct of a board of directors, I d- I don't, I don't think so. I think a lot of the most valuable conversations I've had and strategy planning conversations I've had weren't in board meetings. That doesn't mean to s- that doesn't mean that board meetings can't also be helpful, but I don't think that they are, they are necessary elements of having those important strategic discussions and conversations that guide a firm. Uh, and that's a little bit of also why I, I think that being, you know, formally on a board or, you know, listening only to your board members isn't necessarily, uh, as, as important as, uh, I think a lot of investors make it out to be. Because a- as a founder, a lot of the, the people that helped me the most weren't on, on the board, right? I think you mentioned Miki Malka. Miki Malka started as an angel investor, uh, in Pace Urbano and is probably one of my, my greatest mentors. He eventually joined our board, but he probably added as much value before he was a board member as after he was a board member. So I'm, I, I'm a believer that getting the right people to discuss, uh, the, the company's future together, uh, is important, but I don't think that needs to happen within the construct of a board.

    4. HSHarry Stebbings30:41

       What makes Miki so good?

    5. JVJulio Vasconcellos30:46

       Miki has the empathy of being a founder, a founder that has seen a lot of success, and he's also seen a lot of failure. So I think he really understands the life in the trenches. And I think that empathy for what it's like to run a business is critical, and it's probably one of the things that is most underrated and is probably least present out there, uh, when you, when you talk to investors. I think few people have had experiences, uh, like Miki, sort of have, sort of been in the trenches, um, you know, working through and slogging through, uh, I think some of the ups and downs of a startup. And a lot of times, what you need is, i- is psychological, right? You need to get the founder to the, to have the right mindset to, to be thinking about how to, you know, break out of a, of a particular rut or, or, or break through a particular challenge in their business. And that's much more of a mental game than a tactical game. And, and having been there and being able to empathize and kind of connect with a founder psychologically is, is critical. And people like Miki that have been there are really

20. 31:44 – 34:16

    Atlantico’s First Fund Raise

    1. JVJulio Vasconcellos31:44

       able to do that.

    2. HSHarry Stebbings31:45

       Can I ask, how was the first fundraise for Atlantico? It was, you know, early in the LATAM, you know, it was earlier than it definitely is today from an ecosystem perspective. How was that first fundraise?

    3. JVJulio Vasconcellos31:56

       It was, it was slower than I expected. I think that, you know, when you, when you're trying to get a first-time fund off the ground, things just move slow. I think people want to understand your strategy, want to understand what your edge is. And that, and that requires, I think, more, more conversations than you would, than you would normally need to have once you already have a fund with an established, uh, track record. You know, that said, I think we were, we were very lucky that I, you know, personally had a, a s- a very strong track record as an investor prior to Atlantico, and I had a, a pretty extensive sort of operating background that I had met a lot of people, and I think a lot of people that were willing to make a bet on, on me as a person and me as an investor. Uh, so we were able to get the fou- the, the fund off the ground, you know, fairly quickly. But it definitely took longer than, than I expected when I first sought out to, to go raise the money.

    4. HSHarry Stebbings32:40

       How many conversations did you have? How long did it take?

    5. JVJulio Vasconcellos32:45

       Definitely hundreds of conversations. Uh, so it's a lot of stuff that we're talking about here. Um, it took me a good, maybe six months, probably for when I, when I said, "Look, let's start raising this fund," and first, and did the first close. Um, so yeah, it was very, very time-intensive. It required meeting a lot of people. It required, you know, hearing a lot of nos before we eventually got the fund off the ground.

    6. HSHarry Stebbings33:09

       Is there anything you would do differently with the benefit of hindsight, and how do you advise managers today raising a first-time fund?

    7. JVJulio Vasconcellos33:16

       I think the, the main thing I would advise, uh, a new manager is just that there's no shortcuts, right? Like I said, it took me hundreds of meetings, and I think that's just, that's just the way it is. I don't think there's a shortcut to raising a fund magically. It requires hearing a lot of nos and trying to find, honestly, what the right product market fit is for your fund, right? Who are the people that want to back you and who want to back this strategy? And once you find them, just look for more people like them. I think start out with people that know you and that trust you and are willing to make a bet on, on you as a person, uh, and then try to have other people that, that think in a similar way than they do and kind of go and expand, expand it that way, rather than, I think, try to follow any formulaic way for, for getting a fund off the ground.

    8. HSHarry Stebbings33:57

       With every committed LP, I always say, "Hey, ask for three subsequent ones. Build a flywheel in your LP acquisition funnel." Like, if they've already committed, they're incentivized to help you get it off the ground. "Julio, I'm so grateful for your support. Who would you recommend that I speak to?" "Oh, you should speak to X, Y, and Z." "Fantastic, would you make the introduction?"

21. 34:16 – 37:26

    Julio’s First LP Letter

    1. HSHarry Stebbings34:16

       "Yes, of course." Always fun. Um, I do want to ask, uh, (laughs) I spoke to Andy Ratcliffe before this, um, obviously of Benchmark and now Wealthfront, and he said in terms of your LP letter, the first strategic positioning of your LP letter was rather jarring for your LPs. Why was it jarring? How did they respond, and how did Andy respond?

    2. JVJulio Vasconcellos34:40

       So, so an- Andy's been a, a, a long-time, uh, mentor of mine and has just been incredibly giving and generous with his time, uh, I think, and his advice over my, my entire career. Uh, and he's someone that I, I listen to a lot, and, you know, he, I, we have him as a, as an investor today, and, you know, he's, he's been a, he's been a supporter sort of since, since day one. Uh, and I think that what he's referring to was, you know, one of the early letters that I, I, I, I think I wrote something along the lines that, you know, our goal is to win, right? Our goals is, is really not to miss the next huge hit. Uh, and it's not to minimize losses. Uh, and I think some, some investors, especially some more traditional investors, kind of reacted a little negati- negatively to that idea of not trying to minimize losses. And I remember having this conversation wi- with Andy and, and him just saying how it kind of just never ceases to amaze him, like, the number of people i- uh, in venture that play not to lose, right? And, and, and how you really can't win by playing not to lose. I think that, that really stuck to me, and I think it's something that I had a little bit of my, my gut instinct, right? That you have to play to win. You don't have to play not to lose. Um, and I think that, you know, as you said, well, how did, how did Andy react to that? I mean, Andy actually then, uh, at that point, decided to kind of double down on his investment and kind of putting a pretty big check, at least for us, uh, into, into our new fund. So it was great to have his vote of confidence, uh, behind that strategy.

    3. HSHarry Stebbings35:59

       So this is my point. If we think that outcomes are so much bigger than we could ever have expected in our biggest companies, it could be your MercadoLibres, it could be your dLocals, it could be y- you name it, but they're so much bigger than we ever expected, you should have a very diversified strategy. You should have as many lines as possible, because the outcomes are so much bigger. And actually, just being in those companies is all that matters if you have a small enough fund. How do you think about that, it only matters to win, versus the concentrated picking craftsmanship approach?

    4. JVJulio Vasconcellos36:34

       Yeah. S- so everything, um, is a balance, right? So, I, I think I'm, I'm definitely not advocating for you to have, you know, three positions that you go all in on and kind of really think that those are the ones. But I do think at the early stage, it's, it's just so hard to pick the winners. I think it's, it's-

    5. HSHarry Stebbings36:51

       Yeah.

    6. JVJulio Vasconcellos36:51

       ... so hard to say, "This company is gonna be the next-"

    7. HSHarry Stebbings36:54

       Right.

    8. JVJulio Vasconcellos36:54

       "... MercadoLibre." But I do think that you can narrow down that universe and say, "Look, I'm gonna build a portfolio of 20 companies," let's say, which is, you know, in early-stage venture is a, a, a more concentrated portfolio. And although I don't know which one of these 20 is gonna be the next MercadoLibre, I know that one of them is gonna be the next MercadoLibre. Uh, and I don't think you need to go and build out a portfolio of 100 companies to do that, because you do, uh, at that point, start diluting your, your returns. I think you start diluting your time, start diluting your attention. So what's the right balance? And I think for each fund, and I think each manager and each geography honestly,

22. 37:26 – 38:41

    How do you think about reserves management?

    1. JVJulio Vasconcellos37:26

       uh, that balance is, is a little bit different.

    2. HSHarry Stebbings37:29

       How do you think about reserves management? I don't... If you actually run the numbers, I, I believe strongly that actually it's better to have more lines of diversification and not reserves management than, you know, heavily reserve. How do you approach reserves management and concentration of capital?

    3. JVJulio Vasconcellos37:46

       Again, every, every fund has its strategy, so the, the answer... there's no right answer for any one given fund. I think w- with us at Atlantico, we, we've defined very clearly what our goal is. And our, and our goal is to be the number one venture capital fund in Latin America. And we've, and we've defined that by saying, "We're gonna be the fund that's gonna return the highest multiple on capital for our limited partners." And for you to be able to return the highest multiple on capital, something very similar, I think, to what, what Benchmark aims for, you need to concentrate a lot more capital on that first check. And you need to operate with thinner reserves than to what is typical. So t- to give you an example, an early-stage fund today probably reserves about half the fund, right, for follow-ons? It's probably a typical number you hear.

    4. HSHarry Stebbings38:27

       Yeah.

    5. JVJulio Vasconcellos38:28

       Um, i- in our case, we reserve 25% of the fund, right? So we're much, much thinner. We try to have more bets, and we try to concentrate more on those bets once we have that level of confidence.

    6. HSHarry Stebbings38:37

       Yeah. No, listen, I, I totally agree with you there, and I think we very much share

23. 38:41 – 40:47

    Contrarian Thinking

    1. HSHarry Stebbings38:41

       that thought and perspective. Can I ask, when you think about being contrarian in venture, I spoke to Mate, obviously, at Loft, um, and he said about you being a contrarian thinker, and everyone kind of bandies it around kind of bullshit often, but he said he really is. How do you think about yourself as a contrarian, and does it make sense to be a contrarian in venture anymore?

    2. JVJulio Vasconcellos39:06

       So I, I wouldn't describe myself as a contrarian. I would describe myself much more as an independent thinker, right? I think we, we in the fund, we try to come to, I think, the right answer or what the truth is in, in any one given case. And, you know, that's something that we try to build from the inside out and kind of bottom up, really thinking about what are our true beliefs about this, about this market, about this model, how we think this is gonna evolve. So we aren't necessarily seeking the next hot deal just because the market is chasing it. Uh, we're investing in companies because we truly think that they're gonna be massive in the future. And I think that sometimes that approach leads us, uh, to non-consensus investments, right? And from the outside, it may seem like it's a contrarian investment, but that's really a result of our process, not the goal of our process. But, but just to also get the hook that, that, that you left there, I do think... I, I am particularly happy when our process leads us to a non-consensus view because I, I, I do believe, and maybe, you know, some people think this is outdated, I, I, I would disagree with them, I do think that the best returns still are those non-consensus and, and right investments, right? Sort of the, the, the Howard Marks, uh, two-by-two matrix. Uh, and, and, and I think I've heard a lot of times that, "No, in venture you might need to look for consensus investment because someone has to go in there and they have to, you know, follow you on and have to mark up your deal." I think that's a very, that's a very short-term strategy if you wanna have a lot of great, you know, paper markups and hot deals. But if you're, if you're investing for the long term, you're trying to build a company that's gonna be massive in 10 years, I think you really need to be able to be kind of a, a bottom-up thinking thinker. And I think you have to go into companies sometimes that no one else wants to go in that ultimately prove to the world that they were, that they were right and you sort of by extension were right and end up being

24. 40:47 – 41:55

    Julio’s Biggest Hit

    1. JVJulio Vasconcellos40:47

       re- the really massive returns that we're gonna be able to see.

    2. HSHarry Stebbings40:50

       Julio, what was your biggest hit from an investing standpoint? Could be with Atlantico or as an angel, and how did it impact your mindset?

    3. JVJulio Vasconcellos40:57

       I think my, my biggest hit was either an angel investment in ipsy, uh, up in the US, uh, or in QuintoAndar, uh, in Brazil, you know. And both of those were probably around, you know, 100X returns, maybe even more than 100X returns, but it was... they're, they're massive returns. Uh, and I think that what... w- when, when you make those investments and eventually sort of that money hits your bank account, I think it really solidifies the importance of the power law in venture, right, and sort of these asymmetric returns that exist only in venture capital and o- only in the early stage. And what, what, what it's done to me as an investor is to think about, "How do I get into these massive, massive kind of category-defining companies that are probably coming around in Latin America once every, you know, couple of years?" I need to be able to get into those because that one hit, that one return is probably gonna be more valuable than the sum of all the other, uh, investments that I'm gonna make in that fund. And that's all that matters really

25. 41:55 – 43:19

    Julio’s Biggest Miss

    1. JVJulio Vasconcellos41:55

       to be successful in the early stage.

    2. HSHarry Stebbings41:57

       On the flip side, what's the biggest miss, and what did you take away from that?

    3. JVJulio Vasconcellos42:02

       I'd say the biggest miss I had was not investing at the, the seed round of Snapchat. Uh, so just to give you some context, at the time, I used to invest with a, uh, a bunch of friends from, you know, both Stanford and, and Facebook. Uh, and, and one of my, my friends, uh, had, uh, Evan as a student in his class and had sort of gotten a, an early, uh, glimpse of Snapchat. And because some of our, some of our crew, uh, still worked at Facebook at the time, we had to run it by, uh, Facebook Conflicts Committee. Uh, and I remember Facebook Conflicts Committee said, "Oh, you guys can't invest in this because it could potentially be competitive." Uh, and, and, and all, all... there, and there were a couple ways we could have done this kind of, uh, you know, sort of outside that or some of us could have done it in, you know, individually, but we kind of just backed off from it. We said, "Oh, this whole, like, disappearing messages thing doesn't make any sense. Sure, like, the numbers are kind of just off the charts, but let's forget about it. It's probably, you know, it's probably just a fad." And I think we didn't, we didn't insist on it and we didn't insist on going in the deal once we had the sort of that, that, that no from the, uh, from the Conflicts Committee. And then obviously that probably would have been the, the best investment I would have ever made.

    4. HSHarry Stebbings43:07

       Uh, uh, i- i- yes. (laughs) I'm sure it would've done. It goes back to that kind of undeniability of product market fit. Um, well, listen, you have IPSI and, you know, you have many other winners, uh, so (laughs)

26. 43:19 – 47:26

    Comparing LATAM to USA

    1. HSHarry Stebbings43:19

       to- forget about it. FOMO is for losers. Uh, I do wanna talk about LATAM though, 'cause you said about kind of being in the winners, in especially in the region, is kind of really all that matters. If we think about LATAM as an ecosystem, I think a lot compare it to the US, and when we l- compare it to the US and the COVID boom and tech adoption that we saw in the US, how does it compare as an ecosystem, LATAM versus the US?

    2. JVJulio Vasconcellos43:42

       Yeah, let, let's talk about, uh, the ecosystem and compare it, but then let's also talk about the COVID boom as, as you mentioned.

    3. HSHarry Stebbings43:48

       Yeah.

    4. JVJulio Vasconcellos43:48

       You know, Harry, as, as you know, we, we every year publish, uh, this Latin American Digital Transformation report, uh, which is a little bit of this Mary Meeker's internet trends for Latin America, that's how it's gotten to, to be known here. And one of the things that we publish every year in that report is something we call the Atlantico Digital Transformation Index, where we try to compare the level of tech penetration that exists in different markets around the world, obviously including Latin America. And what we, and what we see, and this is coming out in, in this year's report, is that when you look at that tech penetration index in a, in a more developed country like the United States, that's around 52%. Uh, even if you look at, you know, China, that number is 20%. You look at India, it's 15%. But when you look at what the tech penetration level is at Latin America, it's 1.5%. Even Brazil, which is more advanced, is at 3%. And I'm not here to say that, you know, Latin America's 1.5 is gonna be, you know, the 50% that we see, uh, in the US, but I do think that it's very likely that it'll eventually catch up to where India and China are today. And we're talking about, you know, sort of a 10X, uh, increase in value there. And, and, and any of these kind of, you know, catch-up opportunities, we're talking about your value creation that's measured in the trillions of dollars, right? So we're talking about massive amounts of money, obviously that are not gonna be created overnight. Uh, but, you know, over the next decade a little bit, you know, decade plus. And that's, that's ultimately why I decided to focus my career on, on Latin America, and that's the, the macro long-term picture. But when you look at-

    5. HSHarry Stebbings45:17

       I don't... So I j- I just don't understand one thing. (laughs) And I sound really stupid here. What are the barriers to adoption? Like, why is it only 1.5%?

    6. JVJulio Vasconcellos45:26

       The main thing is just time, right? I think L- Latin America and a lot of sort of company creation, uh, started just a lot later than, than in the US. And, and the way that we measure, uh, this tech penetration index is just looking at the, the, the value of all the tech companies that are from the region and kind of comparing it to, to the levels of GDP as kind of a good, a good sort of baseline. Uh, and the fact that, you know, the tech ecosystem here probably took, I don't know, a good 10 years or 15 years to really get up to speed compare to more developed countries like the US. And even probably another, you know, seven years behind China and India, just means that we need more time to develop talent, to have the, the good examples, and for companies to be able to grow. And we're, we're on that path, but we just started late.

    7. HSHarry Stebbings46:07

       Yeah. I totally get you. In terms of the COVID boom, how is it different?

    8. JVJulio Vasconcellos46:11

       So, what, what's happened in the COVID boom when you look at the US is that you had this, you know, massive acceleration o- of digital adoption for everything from e-commerce, grocery delivery, your usage of your Peloton, what have you. And now that we're in a post-pandemic, uh, world, we, we're seeing a lot of these numbers just revert back to the long-term, uh, historical trends. Uh, it, it's very clear when you look at it in the data in the US. What, what's happened in Latin America is that you had a similar boom during, during the COVID period, but you didn't have the reversion to the long-term average. So if you look at, just give you one example here, if you look at e-commerce penetration in, in Brazil, to take one specific case, we're right now about almost three years ahead of where we would've been in that historic growth curve. And I think a lot of it is, again, because a lot of Brazilians were trying things out, like e-commerce, or digital banking, or telemedicine for the first time, and they saw how much better it was than, you know, waiting in line at their bank branch or waiting in line at their doctor's office, that they weren't gonna go back to the old world. And th- that was a little bit different than I think what happened in more developed countries like the US. So really, the pandemic, you know, pushed us ahead three years into the future, and we didn't, and we didn't fall back down after that step function increase. That, that, that has

27. 47:26 – 50:10

    Will investors flee LATAM during a downturn?

    1. JVJulio Vasconcellos47:26

       persisted and that growth has continued in Latin America.

    2. HSHarry Stebbings47:29

       There's, there's so many things to be excited about with LATAM. I've invested actually quite a lot in LATAM and remain incredibly bullish. One thing that worries me is, like, I've done early stage investing in LATAM and I'm scared about the removal of growth funding. Within traditional macro kind of environments, when we see recessions, you see international investors retrench to core markets. And when we look at LATAM today, you have amazing early stage funds, whether it's Atlantico, Kanary, Monashees, Kasik, but there's not billions and billions of dollars set aside for growth like the US has or like some parts of Asia and India have. Am I right to be as worried as I am, and do you share my concern on the reduction of growth capital?

    3. JVJulio Vasconcellos48:11

       I don't share your concern, and, and let me tell you why. I think that wh- where you've seen a lot of the retrenching of, of growth capital has been, uh, with the crossover funds, right? A lot of crossover funds were investing very actively in Latin America over these last couple years. Uh, and they've retrenched and they started to put more, more and more of their focus on their public positions. But that's not a Latin America specific, um, factor. That, that's something that we see a- around the world. But you, you still have here the dedicated growth capital of, you know, great global funds that have local offices, local teams, have been here for the long term, are not leaving, and those are names like, you know, you know, General Atlantic, uh, Riverwood. You have some of the, the sovereigns like GIC and Temasek that have been here for a long time and they're not leaving. And, and, and honestly, the kinds of capital that those great blue chip investors bring is plenty for the size of the market we have today. Sure, that might be different once the market is much bigger in 10 years, but it definitely allows the great companies and the breakout companies to be funded all the way through to the public markets.

    4. HSHarry Stebbings49:11

       Why do you think all the other LatAm managers are also worried about it then? (laughs) 'Cause I speak to them and they're shitting their pants about portfolio being funded. And I agree with you, crossovers are the ones who've largely left, and larger US multi-stage who are being very aggressive. Regardless of whether it's LatAm or not LatAm only, it's still a reduction in capital.

    5. JVJulio Vasconcellos49:33

       It, it's definitely a reduction in capital. And what that's going to translate into is a greater mortality rate and a greater loss ratio in the next couple of years. But to be honest, I think that where we're gonna be in the next couple of years is the normal. I think that where we were the last couple of years was atypical, right? You shouldn't have companies that are, you know, going sideways, being able to raise money forever. So a lot of companies that honestly should have probably died in the last couple of years are gonna die now. Uh, and I think that that's, that's healthy and that's normal, and the reduction of capital is going to bring us to something that looks much more like, I think the long-term, long-term averages o- of

28. 50:10 – 51:51

    When to take cash off the table

    1. JVJulio Vasconcellos50:10

       loss ratios and, and follow-ons that we had in the last couple of years.

    2. HSHarry Stebbings50:13

       Can I ask, one of my biggest mistakes over the last years was I didn't take cash off the table. I could have done and I didn't. I believed in the Doug Leone, always, you know, hold on to your winners. (laughs) Thanks, Doug. Um, but my point being, did you take money off the table? And how do you think about secondaries and providing DPI?

    3. JVJulio Vasconcellos50:33

       A- as an angel investor, we often... I often took money off the table, um, and, you know, that was probably 10 or 20% of the total position value. It was never sort of selling the entire position. So definitely kind of guaranteeing some returns and guaranteeing some of that money is, is in the bank. And I think for the biggest investments I made, uh, definitely we sold when there was, when there was an opportunity, and I think that we, we look back and we're, we're happy about those decisions. You know, as a, as an investor, you know, frankly, I haven't been, uh, in the venture business for long enough to have had, you know, great opportunities for liquidity. But I think that honestly, um, I would probably think about it in a similar way. You know, if, if a company is a big enough position where selling 10% of it, maybe even 20% of the position might be able to return your fund, might be able to distribute to limited partners. That might be, that, that might be a good trade-off to guarantee some of the returns in the short term, but still leaving plenty, plenty of exposure for, for the upside cases, because you want to make sure that you're gonna be compensated for that huge risk that you're taking at the early stage. I would probably never sell an entire position, um, you know, before, before a final exit. But I, but I would, I would seriously consider, uh, taking maybe 10% off of a position off the table and guaranteeing some returns for, for limited partners.

    4. HSHarry Stebbings51:46

       I totally agree with you in terms of never selling it all, but, um, I wish I'd sold some of it.

29. 51:51 – 54:03

    Advice for LATAM Founders During the Downturn

    1. HSHarry Stebbings51:51

       Um, but, uh, my, my, my final question to you before we do a quick fire is, you know, you've seen this, uh, boom and bust cycle before as an operator and now obviously seeing it as an investor. Um, when you think back to the Paseo Urbano days and advising founders today, how do you advise founders in this current boom and bust cycle on operating today in these current conditions in LatAm?

    2. JVJulio Vasconcellos52:17

       I'd say rule number one is just to be in the game and stay in the game. And I think that what that means is sometimes being a little bit more cautious, right? And I think what that means is, again, maybe you should cut a little bit more than you think you need. I think a lot of founders, they err on the side of just cutting a little bit of the fat. I think it's healthy sometimes to cut through the fat and into the muscle, uh, because you can always undo that later if you were wrong. Maybe you cut a little bit too much. You might have to rehire people or you might have to, you know, reinvest in things that you reduce investment in. But if you cut too little and you end up being wrong and you run out of money, you can't undo that, right? And you're out of the game. So I would, number one, just over-index on being more aggressive and having more runway and being more conservative in times of uncertainty like we have today. I think the other thing I learned is that you can always do less with more and your team and yourself, you're always going to think, "Look, if I, you know, cut 20% of my workforce or I reduce this investment, we're never gonna be able to deliver this." And, and I guarantee that you're gonna be surprised at how much, you know, smaller and more, you know, motivated teams can do, even when compared to bigger teams. I think you're gonna have better and even more output with less people. It's, it's, it's counterintuitive, but it's true. And I think it also, uh, hopefully gives some comfort to founders that are may... that are struggling with making tough decisions to, you know, cut investment, cut teams, because they'll be able to make it through. You, you can, you can make it through with less, as, with, with less, um, e- even in, e- even in these tough spots. And probably got a little-

    3. HSHarry Stebbings53:48

       I'm so with you.

    4. JVJulio Vasconcellos53:49

       ... lost part there. A little. (laughs)

    5. HSHarry Stebbings53:49

       No, no. I'm totally with you in terms of the leanness, like ensuring... Well, I mean, quality, but also, as you said, you can do a lot with little. Um, I do want to move into my favorite, Julio, which is a quick fire. So I, you know, I say a short statement, you give me your immediate thoughts.

30. 54:03 – 54:17

    Julio’s Favourite Book

    1. HSHarry Stebbings54:03

       Does that sound okay?

    2. JVJulio Vasconcellos54:04

       Yeah, perfect.

    3. HSHarry Stebbings54:06

       So what's your favorite book and why?

    4. JVJulio Vasconcellos54:09

       The New New Thing by Michael Lewis. It's that story of Netscape and Jim Clark. It was what got me into tech and got

31. 54:17 – 55:00

    Most Underrated Angel Investor

    1. JVJulio Vasconcellos54:17

       me into investing, was really about reading that Jim Clark adventure.

    2. HSHarry Stebbings54:21

       Who is the most underrated angel in the ecosystem and why them?

    3. JVJulio Vasconcellos54:25

       I would say Sarah Smith from the Sarah Smith Fund in Silicon Valley. Sarah's a good friend that we, we overlapped at Facebook. You know, she was an amazing sales and, and people leader both at Facebook and then at Quora afterwards. Uh, and she's been sort of a huge inspiration to anyone that wants to build high performance teams and build great culture. And now she has her own fund.

    4. HSHarry Stebbings54:45

       Huh. That is fantastic. I'm looking at it now. Sarah Smith Fund. There we go.

    5. JVJulio Vasconcellos54:48

       She was, uh, she was, uh, at, uh, Bain Capital Ventures, uh, right before spinning off and doing her own thing.

    6. HSHarry Stebbings54:54

       Oh, no way. I had Sarah... I didn't know she spun off and did her own thing.

    7. JVJulio Vasconcellos54:57

       Yeah.

    8. HSHarry Stebbings54:58

       Huh? That is amazing.

    9. JVJulio Vasconcellos54:59

       Did you have her on the

32. 55:00 – 55:46

    What have you changed your mind on recently?

    1. JVJulio Vasconcellos55:00

       show?

    2. HSHarry Stebbings55:00

       Yeah, I, I, I've had her on the show and we've actually spoken a lot. Um, (laughs) uh, tell me, what have you changed your mind on recently?

    3. JVJulio Vasconcellos55:10

       Oh man, th- this is gonna sound like I'm backtracking, right? But I was talking about, you know, being non-consensus and, and, and I think that...... in Latin America or in, in markets that are a little bit more risky and, and less familiar, sometimes you have to... In the spectrum of non-consensus to consensus, you might need to, uh, sacrifice a little bit of, of doing something that's not consensus in order to honestly just invest in founders that are backable. Thinking that means here, founders that speak good English, right? And, and a lot of times they're more polished because I think international investors, they, they overvalue those attributes. Uh, and, and being able to be fundable and being able to raise an next round is actually

33. 55:46 – 56:25

    What do you know now that you wish you’d known when you started Atlantico?

    1. JVJulio Vasconcellos55:46

       a pretty critical thing in, in new markets like Latin America.

    2. HSHarry Stebbings55:50

       What do you know now that you wish you'd known when you started Atlantico?

    3. JVJulio Vasconcellos55:53

       You know, I think, I think that it's, it's probably something around, you know, uh, LP management. I think I, I was definitely surprised at how much more time I spend with LPs than, than I expected. Uh, and I think a lot of those are these really amazing conversations where I, I can learn a lot from, and some of them are more just kind of straightforward, you know, reporting, uh, discussions. And, and, and had I known that, I probably would have optimized more to have, in my LP base, folks that are, are, are there for interesting debates where I can learn from, uh, rather than more the, the, the types of LPs that are just looking to

34. 56:25 – 56:58

    Who is the LP that you wish you had?

    1. JVJulio Vasconcellos56:25

       update numbers, since you're gonna end up spending the same amount of time with both of them.

    2. HSHarry Stebbings56:28

       Who is the LP you don't have that you would love to have? Mine, candidly, is Yale. (laughs)

    3. JVJulio Vasconcellos56:35

       I, I've had some amazing conversations with the folks at the Penn Endowment, right? I'm a, I'm a Penn alum, so obviously I'm, uh... I have a huge bias, and one of my main mentors, Andy Ratcliff, is, is, is chairman of the, the endowment there. And I've, and I've been able to learn a ton from, uh, Peter Amann and David and everyone there on the team. And I would love to have them as LPs one day and be able to kind of give back also to my alma mater.

    4. HSHarry Stebbings56:57

       Well, I mean,

35. 56:58 – 57:31

    What one thing would you most like to change about startups?

    1. HSHarry Stebbings56:58

       if they're listening to this, they now have no choice. So, uh-

    2. JVJulio Vasconcellos57:00

       (laughs)

    3. HSHarry Stebbings57:00

       ... that was an easy one. Uh, what would you most like to change about the world of startups, Julio?

    4. JVJulio Vasconcellos57:06

       Uh, I definitely think that the game that entrepreneurs and investors play around fundraising and valuations and that whole dance, uh, and the pretend, I think, I think a lot of it wastes a lot of time. And, and, and I think that, you know, if we could all just kind of be more objective and more practical about who, who do you want to work with and kind of come to a good deal and kind of get, get down to, get down to business and get down to building, I think it would just be a lot

36. 57:31 – 59:18

    Julio’s Most Recent Publicly Announced Investment

    1. JVJulio Vasconcellos57:31

       more, a lot more efficient and a lot more pleasurable.

    2. HSHarry Stebbings57:34

       Final one, what's the most recent publicly announced investment, and why did you say yes and get so excited?

    3. JVJulio Vasconcellos57:41

       So, the la- the last investment we, we announced was an investment in a company called, uh, Fooda, which is, uh, is a leading restaurant management software and, you know, point of sale solution in, in Latin America. It's kind of a, a Square meets Toast for, for Latin America. They, you know, they have over, you know, 10,000 clients, uh, restaurants across the region. Uh, they've been, you know, they've been profitable and bootstrapped, uh, since the beginning. Uh, and our friends at, uh, Andreessen Horowitz, uh, were investing in them and kind of brought us into the round along, along with Maya Capital to, to all lead this new round of the company. Uh, and it was an amazing, you know, leadership team where they had deep experience in software, specif- specifically software in the restaurant industry, and had just brought in an amazing CEO from MercadoPago that obviously understood, you know, POS, uh, and Fintech, uh, and was really a... and really is a very inspirational leader. It's, it's a, it's a curious thing because a lot of these verticals, when you look at them in Latin America, they may, they may seem small at first because Latin America is simply just a smaller market. But what's different, and what I think a lot of investors underestimate, is just how big some of the adjacent opportunities can be. In, in a, in a competitive market like the US, all the adjacencies are always very occupied and there's a lot of competition. But in Latin America, a lot of the adjacencies are green fields, and, and the summation of all these adjacencies with your core market can actually lead to an outcome that's much bigger than even the, the US comparables that you might see.

    4. HSHarry Stebbings59:06

       Julio, thank you so much for doing with, uh, this with me. I've so enjoyed chatting, and I can't appreciate enough your, your patience with me going off schedule.

    5. JVJulio Vasconcellos59:15

       Yeah, Harry, this was awesome. Had a lot of fun. Thanks for having me on.

Episode duration: 59:18