Redpoint eventures, a venture capital company worth $130 million, is one of the most reputable technology entrepreneurs in Brazil. This company is so popular that it received more than a thousand requests, which were analyzed only in 2016.
Redpoint eventures has more than 20 startups in its portfolio, including FinTechs Creditas, Nibo and Magnetis. In an exclusive interview, Manoel Lemos, the Managing Partner at Redpoint eventures, commented on important hallmarks required by startups to attract the company’s attention.
Please explain startup selection process.
Manoel Lemos (ML): It is a very judicious and time-consuming process. Every month, Redpoint eventures receives dozens of presentations of companies from the most varied segments, seeking to receive a financial contribution. In 2016, more than a thousand companies were reviewed.
We are looking for technology and internet companies that are solving big problems in big markets. In addition, we look for companies that have a business already tested with good traction of users and customers.
Manoel Lemos, Managing partner at Redpoint eventures
Our team analyzes each of the cases and verifies which ones fit into what we understand as a solid business model with high growth potential (so-called “points off the curve”). Series A investment (typically between $1 million and $4 million), the most common of which we do, is aimed at validating and expanding the business model.
Often, we realize that it is not yet time to invest in some companies, but we see that there is a future business opportunity there. Then, we follow the case more closely with the aiming of analyzing and potentially investing in a near horizon. On average, the time between the first contact and the investment is approximately three and six months.
What are you looking for in a startup?
ML: The company must have the potential to solve major problems in the Brazilian market and have a solution that generates real value for its users or customers.
We see big problems that limit growth in Brazil. Those problems can be solved through innovation and technology, and it is precisely the kind of company that we seek.
We analyze companies from all sectors, but we focus on five main segments:
- Solutions for SMEs
One of our main concerns is to find highly qualified entrepreneurs who are engaged in setting up a differentiated team to scale your business.
What are the opportunities and what do you look for in FinTech startups?
ML: Speaking specifically of the FinTech market in Brazil, the lack of banking services (40% of the population is still excluded from the banking system, according to the Itaú Unibanco survey), high interest rates and high penetration of smartphones are some of the reasons which lead us to believe in the potential of this market.
The specific criteria within the FinTech market may vary according to the business model. Generally, having a healthy unit economics and high retention of clients or users are metrics that we analyze for every investment in FinTech startups, for example. For FinTech, it is also fundamental that the founding team has deep knowledge of the space where it is acting.
A good case in our portfolio is Creditas whose focus is precisely the offer of loans with reduced interest rates, thanks to its hybrid financing model that allows secured loans guaranteed by houses or cars.
After the investment, how is the company monitored?
ML: Once we choose to invest in a company, we understand that this investment is not just financial. We always strive to use the expertise of all partners and staff to help companies address their key growth challenges.
The frequency of interaction depends on the stage and timing of each company. In some cases, we meet weekly to discuss the main "pain" of that entrepreneur's growth; in other cases, we participate in monthly council meetings and other more strategic discussions that take place on demand.