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At Patagonia Ventures, we consider the following key criteria for funding our portfolio companies:
Industries and markets where we can contribute the highest level of expertise and value. Our target investment areas are the following: E-Commerce, Web 2.0, Online Publishing, Online Marketplaces, Online Advertising, Software, Offshore Service Providers, Mobile, Gaming, Video, Entertainment, SAAS, Applications for mobile and Social Networks, Marketing Services, Enterprise software and business applications. Naturally, we favor ventures that complement rather than compete with our existing portfolio of investments.
We concentrate our investment activity in Spanish and Portuguese speaking markets, mainly in Latin America. Given our commitment to meaningful partnerships with our management teams, Patagonia Ventures believes that such relationships are best maintained through close geographic proximity. We do, however, continuously evaluate investment opportunities on an International basis, as we look for high quality opportunities that best match our investment criteria.
Ventures that generate revenues from US and/or Europe while having competitive operating costs in Latin America. We do, however, invest in ventures that sell and spend on the same market.
Low capital requirements
Ventures that can be launched with little external capital and have profit margins to sustain high growth with internally generated funds.
We look for ventures with little needs of hard assets, such as custom buildings, manufacturing equipment, etc.
High margin for error
Ventures with simple operations and low fixed costs which are less likely to faces cash crunch because of technical delays, costs over-runs and slow build-up of sales.
Timing (Not too early, Not too late)
Ventures whose product or service can make an impact on the market today. We do not invest in pure-science inventions where real-world applications are years away, nor are we interested in entering mature markets that are already crowded with competitors.
Rapid Revenue generation and Break-even point
Ventures with Products/Services that are far along in the development cycle (i.e. ready for sale), with the ability to create perceived or real revenue within 3 months and with the ability to achieve the breakeven point within 6 months.
Strong Management team
Ventures with a committed management team. Ideally 2-4 people involved with complimentary skills. We like frugality and we look for ventures with a frugal management team who are not willing to become employees but entrepreneurs ready for building a profitable company that generates future dividends.
Ventures where the CEO and the members of the management team have a proper proportion of the ownership to make it worthwhile to invest their time and effort into their project.
We are looking for Entrepreneurs that know how to use advisors.
Concentration of Customers and Suppliers
Ventures targeting an atomized customers base who pays in advance, upfront or quickly and an atomized suppliers base that grants favorable credit terms.
Ought to have at least 2 customers already identified.
Ventures tackling a big and rapid growing market opportunity.
Currently, big companies are mainly focused on their core businesses because they need to optimize their resources. This allows new startups to capture new market opportunities following new trends unattended by those big companies. We look for ventures taking that take advantage of that situation.
Vision and Focus
Ventures managed by entrepreneurs with a clear vision and a single focus.
We don’t invest in startups with multiple products, as we believe that having a single focus maximizes the chances of success.
Clear Revenue and Financial Model
Entrepreneurs should know how they are going to make money, which are the customer acquisition cost, customer life time value, cost of sales, margins, operating expenses, taxes, etc.
Ventures with a compelling business model and a scalable concept: at least $10m in year 5.
Concise and convincing differentiation
Ventures that can answer a simple question: Why customers will buy our product or service?