The J Curve podcast: LatAm Power Women in Tech Series
To kick off LatAm Power Women in Tech here at The J Curve last week, I sat down with Izabel Gallera, partner at Canary, one of the leading early stage investors in Brazil, to talk people-first investing, the critical role of early-stage venture capital in the tech ecosystem, and Latin America as one of today’s most exciting emerging markets. Izabel’s background spans multiple industries, from banking to consumer goods to tech — a breadth of experience that deeply informs her approach to investment. Over the past three years at Canary as the first non-founding partner on their team, Izabel has witnessed firsthand the rapid change the Latin American tech market has undergone recently, and I’m excited to be able to share highlights of our conversation here:
Who is the “best founder,” from Canary’s perspective, and what is the framework of evaluating their potential?
As early-stage investors, Izabel and I both understand the critical importance of assessing founders’ individual potential. At this point in a company’s life cycle, Izabel explains, many of the metrics used to gauge a venture’s value, like a validated business model or product-market fit, do not exist yet. In the absence of hard data, founders’ expertise, talent, commitment, and approach are crucial determinants of a company’s potential. That understanding informs Izabel’s people-first approach to venture capital, focusing primarily on “getting to know and access and find quality talent, and very good people with ambition to build great businesses.” Experience successfully building and sustaining teams, capacity to inspire those around them, and ambition are key factors she looks for when evaluating a founder. This latter criteria is especially crucial for the Canary team: their “best founder” is one who has the vision, knowledge, and motivation to think big and build a business that becomes a major player in its field.
What are the ultimate turn-offs when Izabel talks to founders? What are the key mistakes Latin American entrepreneurs make when they talk to VCs in the region?
From receiving pitches from many different founders across diverse industries, Izabel notes two common major missteps in new founders’ initial discussions with venture capitalists: approaching investors with a sense of entitlement and insufficient track record of having built and developed their idea, and making a one-size-fits-all pitch that demonstrates a lack of knowledge about that specific investor and their priorities. Gallera cautions founders against assuming it’s enough to have graduated from a prestigious institution and have an interesting idea. Instead, show what you have created where you currently are, how you have developed your idea and what past experience informs your business strategy.
In addition, she stresses the vital importance of doing thorough pre-meeting research on investors one intends to approach, focusing one’s fundraising strategy on investors that are closely aligned with the venture’s value proposition and tailoring one’s pitch to investors’ particular interests. She urges founders to do their homework and understand who an investor is and what they value, as well as give real thought to why venture capital is well-suited to one’s specific business model — or why not.
What is the ‘right fund at the right time’ mindset?
Speaking of the importance of focus to success on both the founder and the investor side, Gallera voices the centrality of Canary’s ‘right fund at the right time’ mindset to its investing strategy. This approach entails honing in on a specific stage in the business development life cycle and developing expertise in evaluating and guiding ventures at this juncture — in Canary’s case, the early stage. Defining one’s core business with intention and understanding one’s position in the investing ecosystem is critical to this framework: for instance, zero-to-one investors like Canary take on high initial risk that later-stage firms don’t need or want to, consolidating Canary’s role as the local partner for global investors. The aim here is to specialize and target — an approach founders should take as well in creating their fundraising strategy at different stages in their ventures’ development.
How can investors effectively use data to support investment decisions and reserve allocation?
Canary is distinguished in its field for its rigorous and systematic approach to incorporating data collection and analysis into its investment decision-making — something I was particularly looking forward to discussing with Izabel. Canary’s analysis framework looks at a set of over 40 criteria, divided into six main focus areas: 1) background of the team; 2) founder-market fit; 3) ambition; 4) sales ability; 5) reputation; and 6) skin in the game — how personally invested a founder and team are in the problem and solution identified by the venture. This framework serves to guide Canary’s evaluation and decision-making process; after gathering information through meeting with team members both together and individually, ventures are thoroughly evaluated and scored on each criterion. This highly structured process productively directs the firm’s decision-making process, providing a framework in which to comprehensively evaluate the qualitative, subjective information gathered at this early stage.
This theme of deeply understanding one’s context — in terms of a venture’s life stage, geography, and industry — ran through our conversation, and very much echoes my own experience in developing and executing successful early-stage investment strategy. Izabel sees ample opportunity in the emergent Latin American tech investing ecosystem, and I look forward to seeing where she and Canary go next.