May 20, 2021
It's hard to think about tech startups without thinking US and Israel, just like it's impossible for corporations to ignore digital transformation. In Brazil, there's one venture capital firm that is bundling all of that together, by investing in some of the most innovative companies abroad, bringing them to Latin America, and connecting them with big local companies to accelerate their adoption of technology.
Mindset Ventures was co-founded by Camila Folkmann, one of the first Brazilian female founders of a Venture Capital firm. Camila started her career as a corporate lawyer, having worked for major law firms assisting Fortune 500 clients, but made a quick transition to startup and VC life after spending some time in the Bay Area. Back in Brazil, she was looking for opportunities to stay close to the ecosystem, which led her to join Acelera Partners, an investment holding spearheaded by Microsoft.
There, she met her co-founder, Daniel Ibri, and they found out they had similar visions, eventually translated into Mindset Venture's thesis. Today, Camila shares not only what that is and how they invest, but also:
Brian Requarth: Camila, welcome to the Latitud Podcast. It's great to have you here. Now, I want to start off just by having a bit of conversation. We'll dig into Mindset shortly, but maybe if you could start off by just sharing, how do you transition from corporate law to venture capital? And how did you think that experience helped you as an investor?
Camila Folkmann: Absolutely. So thank you, Brian. Thank you for having me here. It's a pleasure.
So usually, corporate lawyers don't want to be lawyers, so they usually want to work with businesses, corporations, multinationals, clients funds, and they already do a lot of transactional work for them. So I had this in me for a while. I mean, since the beginning of college and although I really like and enjoy the legal part, it was not something that I wanted to keep doing for you know, the rest of my life. When I transitioned from corporate law to business, I don't think it was a huge leap because you are already part of the business world, you know, you are already involved in and in the conversations and with the clients, you understand their needs.
So that's why, like, in my previous life I used to deal with all sorts of clients and business in the sense, but the thing that I really had to change was my mentality. You actually need to throw away all your training as a lawyer and start to think maybe as engineers, economists, administrators, or as people that have a different training and that have brains that were formatted in a different way.
I think that for me, was the biggest challenge in transitioning from corporate law to venture capital. But I think that all the experience was really good because as we invest in a lot of companies, we help those companies in getting to the corporations an, having to negotiate different terms.
I think that my experience is really good, in solving those kinds of problems and also negotiating with the startups when we are investing in them. So I think that this was good. Although I don't think it really was a quality, a skill that was strong enough for people when I decided to transition.
So when they saw me as a lawyer, they were like: "I know you're a lawyer. You don't have a financial background." It was hard for me to find a place that would give me my first job in this area.
Brian Requarth: So you broke in and you're now at Mindset Ventures. Talk about the thesis that Mindset has. Because I think it's pretty interesting. There's this cross-border component and I want to hear more about how the firm is positioned and you know, kind of what the thesis is.
Camila Folkmann: Absolutely. I would just give you a few steps back and tell you about how we got to Mindset. So the thing is when I moved to Silicon Valley, it was part of my transition that I started to study Business Administration at Berkeley, focused on a different aspect and try to find startups to work for.
I started studying computer programming to open my mind. So I was having really a Silicon Valley immersion. It was really impressive how Americans were dealing with this market. And when I came back to Brazil, of course, I still didn't want to be a lawyer anymore. I was trying to find a place to start working for and actually really help the company.
I started, I joined Acelera Partners which was a multi corporate fund initiative that was started by Microsoft a few years ago to gather all corporations to actually nurture the Brazilian ecosystem. They had Microsoft, Qualcomm, Banco Votorantim, Monsanto, Banco do Brasil, big Brazilian banks involved in the project. And they were trying to find startups in Brazil and actually maybe even become clients of them, and invest in them. So I started there as an analyst and I eventually became the Head of Operations and that's where I met my co-founder Daniel Ibri, who became CEO after a few months that I joined.
And the fact that we knew a lot about the Silicon Valley market and we knew a lot about the Brazilian market, was really interesting for us because we had an opportunity to invest in a few companies that were being accelerated by Microsoft in Tel Aviv. And we did a pilot. We invested in many companies back there. We were really impressed with how the market worked, the companies and entrepreneurs' mindset. So for us, when we decided that we wanted to keep doing this and invest in Israeli companies, invest in American companies, invest in Brazilian companies and try to help them and find some synergies, we talked to the board at a selector at the time and they were like: "Guys, we cannot do this. Our mandate is only for Brazilian companies who have to keep investing in Brazil. But if you want to do it by yourself, feel free, we're going to help you any way we can."
So Danny and I were like, okay. Let's do this, let's start Mindset Ventures. So we actually, we were working inside for Microsoft here in Brazil and we started Mindset in 2016.
Brian Requarth: So the mandate was okay, Brazil focused. And then you wanted to do some things on your own in Israel and in the US and then where do you go from there?
Camila Folkmann: So this was for Acelera, right? So since the beginning, our thesis has been to invest in early stage B2B companies based out of the US and Israel.
We currently don't invest in Brazilian companies. Our sweet spot is series A rounds, and we focus on the industries that we believe that we can add value such as FinTech, health tech, agritech, cybersecurity, and enterprise software. Our average check size is $1.5 million. And we usually don't lead rounds. We co-invest with local VCs. We have three offices: One in São Paulo, one in San Francisco and one in Tel Aviv. We have partners in California and also in Israel. And we have around 45 companies in our portfolio. Currently, we actually just finished fundraising our third fund. And I think that one of the ways that we support our companies is to help them with their expansion strategy to Brazil. Latin America, but especially Brazil.
Brian Requarth: Got it. So companies are primarily domiciled in Israel or in the US, or both? What's the distribution there? And, how do you help them enter Latin America or Brazil?
Camila Folkmann: It's mostly 50-50, for instance, like in fund one, we had 18 companies and I think that was nine-nine. Second fund, basically the same. And for the third fund it's also going to be the same in terms of the help that we give them. So for instance, we usually try to, first of all, we develop market research for them. To understand, what are the market players? What do you have already here in terms of technology, how corporations would accept your solution in terms of price, in terms of technology, housing integration, who is the champion in terms of establishing a company? So finding the lawyers, finding accountants, finding local representatives, so even hiring people. So we try to cover all the parts of actually helping a company to expand to a different geography.
Brian Requarth: And what are the biggest challenges for those companies in Israel and the US to come to Latin America? What have you seen has been the biggest barrier for them?
Camila Folkmann: I think that there are a few points, a few challenges. There is the bureaucratic part, which I consider to be a real challenge. Open a company, hire people, understand all taxes applicable to your business.
There is the cultural barrier. Brazilians are not used to saying no. We prefer to give signs such as taking a really long time to reply to an email, or even never replying. And this is extremely difficult for Israeli and Americans to understand because their way of communicating is always to be direct. Israelis are even more direct with their chutzpah way.
I think that another one is the language barrier. Most Brazilians are not proficient in English. So when we have a foreign representing their solution, normally the message and differentials of the company are not entirely comprehended and companies might need more meetings than usual.
And I think that the positive side of this challenge, though, just like you experienced in your early days of Viva Real, when Brazilians find out they will talk to a gringo, a foreigner, they are usually more open to listening and scheduling a meeting. I don't know if you've had the same experience, but I think you have.
I think that today, another challenge that is worth mentioning is the current exchange rates. Foreign solutions have become more expensive for Brazilian corporations, and because of that, plans for expanding to Brazil are being delayed at the same time that pricing strategy is being revised. I guess those are the main challenges.
Brian Requarth: So you don't invest in Brazil based companies at all, only those international companies that come to the region?
Camila Folkmann: It's not mandatory to come to the region. But it's something that we do for them.
Brian Requarth: Got it. Okay. And why is it that Israel has kind of created this ecosystem where it's probably one of the largest tech ecosystems in the world? Yet, it's this tiny country.
I remember going to Tel Aviv several years ago with Monashees. They took us there and we met with a handful of companies, really impressive founders, super big visions, you know, and incredibly great operators from an execution standpoint. Why is that? Tell me more about the thesis behind why Israel is so good at going global.
Camila Folkmann: I think that first of all, I would say that it is in entrepreneurial culture. I mean, similar to the US in this point, I think that the US and Israel have always promoted and incentivized their people to become entrepreneurs. You see that in school programs, in the army, with government incentive plans.
So I think that they nurtured this sense and this feeling of becoming entrepreneurs from the beginning. And specifically regarding Israel, they have to be global. Their market is not enough. They have to think outside the box, they have to think of solutions that they can offer anywhere. So I think that this is a huge differential.
And although they have the best universities in terms of tech universities, engineering, et cetera, I think that they still lack the commercial side of it. So if you compare the US and Israel, the Americans have a really nice way of selling, so they have the commercial side of them ready, And I think that the Israelis, they have the tech side, but they still have to work on their commercial one. And I think that, of course, this complements each other, US and Israel, but I think that basically that this is the reason why Israel is such an amazing tech ecosystem.
Brian Requarth: And when we look at some of your background points that you've got, there's these large corporations that exist, right? And that there's these big pain points that need to be solved from these corporations. Do you have any examples of things that you've seen that have worked out great from that standpoint?
Camila Folkmann: So I think that it's been a while, but businesses across multiple industries are feeling the heat from disruptors who are using digital to revolutionize how customers interact with them or how to improve productivity or how to be compliant with new regulations or how to protect your information from hackers or how to measure your cyber risk.
Big corporations know customers are becoming more and more impatient with those who don't keep up and due to that, they need to innovate faster. So when they do that, they need to look at startups. I think that there is no other way.
I think one example that I think it's really nice too to mention is from a company in our portfolio called SeeTree. They are an Israeli startup that provides tree health insights using a combination of drones, sensors, artificial intelligence and multi-spectral imaging in few data collections. With those insights, fruit growers can assess and continually monitor the health and growth rate of their crops, producing personalized cultivation plans for each tree or a cluster of trees. This solution called the attention of the world's largest producer of orange juice concentrate. They understood that technology can revolutionize agriculture and have a transformative impact on the productivity, environment, and the livelihoods of farmers. So, besides becoming a client of SeeTree, they also decided to invest in them and the company last year.
I mean, it was a combination because they saw the need of innovating, of becoming better and also saw the opportunity, like: "We need it really to invest in these guys. We don't know where they're going to go, but we need it. We really need to be there."
Brian Requarth: I've struggled a little bit with the corporate venture capital that comes straight from companies, venture initiatives, and that come through institutional fund.
Walk me through how you see that because a lot of times there's this corporate venture capital, but it's really just a wolf in sheep's clothing. So how do you balance a true kind of venture initiative and the M&A is disguised as a venture fund? How do you think about that and how should founders think about it?
Camila Folkmann: You're right. I think that CVCs are ultimately beholden to the corporate, whereas traditional VC has more aligned incentives to the startups, and that's the reason why startups need to be careful with who they partner with.
I think that there's also the point that corporations don't quite understand what it means to invest in a startup. Sometimes due to being so bureaucratic, they end up harming the company. For instance, they take a long time to decide if they're gonna invest or not, and the company needs the money right away. This could harm the company. And some other times they usually can pull some deal terms, kind of an M&A transaction.
I think that's sometimes what we are seeing with the companies that are looking to fundraise from CVCs, they usually prefer to have more than one strategic corporation in order to avoid all this micromanagement, eventually prohibiting an M&A transaction because they want to buy the company and they are doing great with the terms that the other investor or the other corporation is putting for them.
So I think that if you want their funds, if you want their money, you have to look for more than one strategy. Otherwise it's going to be a real mess. I mean, at least from my view. I don't know if you also, if you also felt that.
Brian Requarth: The first person I had on my podcast was Nico Szekasy from Mercado Libre.
And they had eBay invest in their company and they took an 18% stake and that obviously made it less attractive for Amazon and anyone else that wanted to buy. They ended up going public and that was the only way to kind of figure out the cap table situation.
But I actually recall sitting in a little conference in Tel Aviv. And I don't remember which venture fund, one of the top venture funds from Israel was presenting. I think there's a lot of corporate venture capital in Israel. There's a lot of big corporations and they're very active and he was putting on a presentation about the do nots around corporate venture capital.
And I remember as a founder, I learned this through experience, where I received a term sheet twice from corporates. And both times one time there was a ROFR involved, which is a right of first refusal. And just for the founders listening, if you have a ROFR in your terms, you're selling the company. It doesn't matter if you're selling 20% of the company, you've essentially sold the company. It's definitely a problem. And even a ROFO, which is a right of first offer is something that you shouldn't do early on in most cases. So just be mindful of that because you'll be in a situation where you're essentially selling the company and you might have a majority stake of the company, but you've kind of lost some control because the governance and the economics can be separated in that way.
So anyways, I just wanted to share my two cents on that. I don't know. Does that make sense to you?
Camila Folkmann: Absolutely. And even like, if you, if you're able to get a term sheet from a venture capital fund and not the CVC and have the CVC join the round where the terms are already established, that's much better as well.
Brian Requarth: Absolutely. And I mean, I like your point on when I did think about this and taking money from another company, I wanted to get two competitors or three competitors in the same round, because essentially you're just kind of, you're bidding up a little bit, the future acquisition situation when you've got multiple players at the table, and then you're also just not giving any inside kind of track from one company.
So I think that that can work. I haven't seen it happen very often in terms of multiple corporates going in because all M&A teams want their special path. But it's something that can happen.
Camila Folkmann: Just another comment as well, Brian, I don't know if you've seen this, but sometimes CVCs and also VC funds, they prefer to invest in a company in trenches. And putting some milestones. And I think that when they do that, It's not usually so healthy for the founders because they already have all their goals established and they also have all their milestones that the investors imposed to them.
And then they are connected to receiving the money. So usually if you can avoid that for sure do that.
Brian Requarth: Makes sense. And let's talk a little bit about how you leverage your network to help founders in your portfolio. Every investor likes to say that they are a value added investor. How does that play out in reality?
Camila Folkmann: Yeah. So I think this is true. We are living in a time of experience revolution, right? So today it's not just about the product or the service, companies are racing to transform their customer experience, learning how to create a world-class customer experience. And I think this is applicable to all the industries, including ours.
I think that since the beginning of this year, we decided to actually create a platform area which I am heading today in a sense that we are able to track and support the companies in a more structured way. So we have been helping our companies since the beginning, leveraging our network of investors for instance, because something that we always try to do is to get investors that are high net worth individuals, but also executives in big corporations.
We have big corporations that joined our last fund. So we try to have those investors to actually help the company. So, when the companies come to us and ask like: "Oh, so do you have an entry and have a contact?" We do this for companies X, Y, Z. And then we can, if we don't ourselves, we can try and check all of our investors' base. So I think that this is something that we do, and this is something that attracted our investors. So because we are giving access to knowledge in two different tech ecosystems that are the biggest ones, they are interested in joining us, investing because of that, because they have access to that and they can actually help those companies, right? Not only understanding what is happening in the market worldwide.
And then when we thought about establishing this area, we were focusing more in terms like fundraising, market research, establishing contacts with them and with potential clients, because this is the biggest demand from the startups, right? "I need clients. Help me with that." We are now establishing a way of building relationships with corporations because that's the experience that we have. And that's the experience that our investors have and trying to format this in a way that is easy to plug and play with the companies. I think that's the value added we try to bring to our portfolio.
Brian Requarth: So walk me through how you managed to structure your support to invested founders. And what is the main thing that founders that are entering Latin America, Brazil, need the most help with?
Camila Folkmann: So in terms of the structure, we started building first of all this network of investors and relationships with corporations. We also developed a platform where our portfolio companies can access to find all the works, offers, and discounts from partners that we have, vendors and even the portfolio companies. I think that this is something that is a real differentiator.
And specifically with Latin America, I think that the first step is usually market research. Understanding that we have the advantage that we are here. Like we have eight people from our team in Brazil. We also have people in California and Israel, as I mentioned, but most of our team's in Brazil with a lot of connections and we can help them navigate this space, which is already complicated.
So we usually do this first thing, the market research, we present them the marketplace. Then we start scheduling the calls with potential clients or even potential competitors, potential partners. And then once they're established, they usually come to Brazil and then schedule a bunch of meetings and we are together with them in those meetings.
And then after that, they just like, we help them to establish a company or even having a local distributor that we help them navigate this space in Portuguese. And not only in English, which we mentioned, this is a real challenge.
Brian Requarth: And how do people, if they want to get in contact with Mindset Ventures, who should they do it with and when, at what point?
Camila Folkmann: If you want to partner with us, invest in us or even receive funding, I mean, you can of course send me an email at email@example.com. As I mentioned, the companies that we are investing now, we usually invest around series A, series B rounds.
It's important that you understand our thesis and not only send a random message. You know, I think that this is something that we receive a lot. And I think that venture funds also receive a lot, emails with no recommendation, no research, you know, those cold emails that are really bad when you want to find funding.
I think that if you are looking to contact us, please let us know, be direct and be clear on your message.
Brian Requarth: And what do you like to see in the first message and in a deck?
Camila Folkmann: For the first message, I think it's really good to come with some kind of recommendation of personalization, you know, how did you find out about us? Why is it important to partner with us? Who presented us to you? Who mentioned us to you?
And I think that in terms of information, we invest in companies that already have revenue. So some numbers of, in terms of growing numbers, why the team is the right team for this specific business is also really good to understand.
I mean, it's our phrase, it's our motto. We invest in technology, but we invest in people first and we need to know if the team is actually complementary, if they work together for a while, their experience. And for us, this is something really good to see on a deck.
Brian Requarth: And what's the check size, what does the decision making process look like?
Camila Folkmann: So we invest from $750K to $2 million depending on the round, depending on some matters and the decision process usually, we have the first meeting with the company, then usually the sponsors from each location have this, this first meeting. And then if the company is something that we think that it fits our thesis, we go to a second meeting with all the members of the investment team.
And then they have a internal meeting to decide whether to start the due diligence or not. And once we decided the due diligence, we start getting all the documents and scheduling calls with the team, having some background checks. And after that, like at the end, the company passes our due diligence, so we schedule a presentation to the investment committee and then we have the investment committee meeting right after that, to decide on.
So usually we have taken two weeks to three months to analyze deals and it depends on the situation, but we really try to move fast without losing quality.
Brian Requarth: Got it. Well, thank you so much for your time, and it's exciting to see the bridge between, you know, Valley, Israel and Brazil. Thank you for coming on the podcast.
Camila Folkmann: Thank you. It was a real pleasure.
Brian Requarth: Thank you for listening to the Latitud Podcast with Camila Folkmann, co-founder and managing partner of Mindset Ventures. Be sure to check out latitud.com to find out how to apply to our fellowship program and subscribe wherever you listen to your podcasts for more talks with great founders and investors like her.
I'm your host, Brian Requarth. Vamos LatAm!