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Exclusive: Brazil-based ONEVC Closes On $38M Cross-Border Fund

In recent years, Brazil’s startup scene has exploded as investor interest in Latin America as a whole has increased. And ONEVC, a cross-border fund dedicated to investing in U.S. and Latin American startups, is ideally poised to capitalize on that.

The firm, with offices in São Paulo and San Francisco, has closed its first fund, ONEVC FUND I LP, Crunchbase News has learned exclusively.

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The firm has $30 million under management, along with $8 million to invest in “special opportunities” (more about those later). Since it was formed in November 2017, ONEVC has already seen two portfolio companies become unicorns and another (San Francisco-based HeyDoctor) exit.

ONEVC claims to be the only seed firm “to have a presence in Silicon Valley and São Paulo.”

“We invest in both geographies acting as a strategic partner for U.S. companies that want to become global early and Latam founders that want to connect with Silicon Valley, either to set up offices here or raise capital from U.S.-based VCs,” said ONEVC founder Pedro Sorrentino. “We believe this is one of the most unique and profitable opportunities available now within VC.”

In general, Brazil has been the largest recipient of venture funding in an increasingly hot investment climate in Latin America. Earlier this year, we reported that venture funding in the region’s largest country exploded in 2018 to $1.3 billion, representing nearly two-thirds of all venture money raised in Latin America as a whole last year, according to LAVCA, the Association for Private Capital Investment in Latin America.

“Now is the perfect time to build a cross-border seed firm between the U.S. and Latam,” said Sorrentino.

ONEVC’s first close on the fund was of $10 million in July 2018. It decided to double its target, raising $20 million about a month later. Then it put a $30 million cap on the fund, which it closed in July, according to Sorrentino.

The remaining $8 million is in special-purpose vehicles that were created for later-stage investing in companies like Colombian on-demand delivery unicorn Rappi (which we reported on here) and Brazilian shipping logistics platform Loggi. In both cases, members of the ONEVC team had previously backed the companies at earlier stages).

“We see it as a systematic way to allow investors to co-invest on almost every opportunity out there,” Sorrentino told CrunchbaseNews. “LPs love it as well. Some want access to direct investments when companies are more mature so we structured some deals around that  because we knew there was market demand.”

Strong Background

Prior to forming ONEVC, the six-person team (all Brazilians) invested in 71 companies (including fitness discovery platform Gympass, real estate unicorn QuintoAndar (which we reported on here) and Creditas, which we covered here) and saw a combined 27 exits in less than five years. With those investments, the team achieved a combined return of nearly eight times, “cash on cash,” (or an 87.8 percent realized IRR), according to Sorrentino.

“We were able to personally anchor our first fund, having almost five times more skin in the game in our deals than your average emerging manager,” he said.

Since its inception in November 2017, ONEVC has backed 15 startups, including three U.S.-based companies. As mentioned above, the team was an early investor in Colombian unicorn Rappi and back-office integrator Pipefy. Rappi went on to raise over $1.4 billion from the likes of SoftBank, Sequoia Capital, DST Global, Andreessen Horowitz and others.

“We were able to partner with Rappi, by making a commitment to…help them open their operations in Brazil, by hiring the first set of local employees,” Sorrentino said. “We continued to be involved in further financing rounds, investing and making connections for the founders.”

Its story with Pipefy was similar, but in that case, ONEVC was “deeply involved” in the hiring of the company’s first two employees in its San Francisco office.

Sorrentino said ONEVC also introduced Pipefy CEO Alessio Alionco to other U.S.-based investors. In August, the startup closed a $45 million Series B led by Insight Partners.

Investment Philosophy

ONEVC invests from pre-seed through Series A from its flagship fund, writing checks ranging from $350,000 to $1.5 million. As mentioned above, the firm will consider later-stage deals, and structures special purpose vehicles that are primarily offered to its LP base.

The firm looks for companies that primarily fall into two different categories. One, those that are global from day one, according to Sorrentino. It is also focused on companies that are tackling multibillion dollar markets with “inherent barriers to entry,” whether they are regulatory or cultural.

The six main sectors it is drawn to are urban mobility and logistics, financial services (fintech), e-commerce and marketplaces, enterprise software, healthcare and agricultural technology.

Brazil is particularly full of opportunity, Sorrentino said, considering the interactions that Brazilians have with the internet “are massive.”

“The key here to helping them is to identify people that, irrespective of macroeconomic and political challenges, can build a business that can thrive and grow.”

Despite its focus, Sorrentino said you will never see him “waving the flag of Latinx.”

“We’re just here to help phenomenal founders build massive companies in Latin America,” he said.

Quality Deals Take Priority

ONEVC said it’s all about quality over quantity. It intentionally invests in fewer startups because it is very hands-on and involved with its portfolio companies. Its three main goals are to help them raise more funding, recruit talent and sell, according to Sorrentino.

“We believe if we serve our entrepreneurs with excellence in these three areas, there will always be a place at the table for our firm,” he said.

The firm’s deep commitment is evident to Y Combinator visiting partner Brad Flora, who has invested in a handful of deals alongside ONEVC, including both backing HeyDoctor (which was recently acquired by GoodRx).

“The ONEVC guys are kind of like the investor equivalent of the type of founder that the YC community looks for,” Flora told Crunchbase News. “They’re animals, just real hard workers. They have a lot of energy and put it to work for their founders. As an investor, it’s easy to write checks but they go beyond that and really dig in and help companies figure things out operationally.”

As a result, Flora said, ONEVC has a reputation of working closely with its founders and for sticking to their investment thesis.

“When they get excited they do their homework and are really disciplined,” he added. “They say no to a lot of stuff other investors would look at if not on thesis. But they’re consistent. They have a certain way of investing and stick to it.”

Adhemar Milani Neto, co-founder and CEO of ONEVC portfolio company Kovi, can attest to Flora’s statements.

The São Paulo startup, which provides rental cars for on-demand drivers in Latin America, was the only Brazilian startup in Y Combinator’s most recent winter batch. It’s been growing its revenue about 30 to 50 percent every month since it was founded in June of 2018, according to Neto.

In March, Kovi raised a $10.6 million seed round led by Y Combinator and Brazilian VC firm Monasheesthat included participation from ONEVC, Global Founders Capital and others.

Neto first met Sorrentino during the YC program when Kovi was raising its seed round.

“We were looking for a cross-border VC that had experience in Latin America, and also a presence in the U.S. that could better understand our market and needs,” he told Crunchbase News. “As VCs, ONEVC has been very hands on which is great for this stage. And we’ve built a great trusting relationship to share the most critical problems we have with them.”

In announcing the new fund, ONEVC also noted that it has tapped Bruno Yoshimura as a new full-time general partner of the firm, alongside Sorrentino and Arthur Brennand. (The firm also has three venture partners). A recent Stanford Business School graduate, Yoshimura  will be primarily based out of São Paulo.

Blog Roll Illustration: Li-Anne Dias

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