By Patrick Haller
Trying to become a “one-stop-shop” in Latin America for both angel investors and entrepreneurs, ChileGlobal Angels is trailblazing with its steadfast and focused approach to matching funders and entrepreneurs. The group extends beyond Chile with investors and opportunities in other Latin American countries, Europe, and the US. When we spoke to Nils Galdo Nogales, co-founder and CEO of ChileGlobal Angels, he stressed that the organization needs to look outside the typical model of an angel investment, which it has been doing in more ways than one since its founding.
NSAM: Tell us about the history of ChileGlobal Angels.
Galdo Nogales: This initiative started around April 2008 but was formally launched in August 2009. It has been quite a challenge to run this activity and to pursue a sustainable model. It is quite tough to find one particular model. We have seen networks start and end quite quickly. The companies need to develop a network of talent, and at the same time run a sustainable business. ChileGlobal Angels started under umbrella of Fundacion Chile, one of the leading development agencies in Latin America. We first try to open up scope of new business opportunities from the exterior.
We are an angel investment group with a vast array of investors looking for Chilean entrepreneurs. We are looking for dynamic or high-impact businesses. Not only a very sound entrepreneurial theme, but a business opportunity with reasonable competitive advantages and interesting growth potential.
NSAM: Why was Chile Global Angels started?
Galdo Nogales: In Chile the financing starting from seed capital has worked for a long time, but there is an opportunity between the seed money and venture capital. In this sense if we have an investment opportunity for over $1 million USD it would make more sense for an institutional investor, but something under $400,000 makes more sense for angels. Maybe one or more angels can provide some experience and knowledge if not capital.
Since we are not a fund, or a business incubator or an accelerator, we try to have alliances with actors in order to provide development assets, such as Movistar in Chile, and others.
NSAM: How do you find angels?
Galdo Nogales: We started with 13 angels and in the end the angels decide who is allowed to stay in the club. We have to make sure the angels are trustworthy and have a proven track record. We never had a case where we have said no.
Now we have 23; 48% are international and the rest are Chilean. They are all individuals – not companies. In the last board meeting we established a goal to reach 30 members. The more the better but not everybody is suited for this game.
A certain level of income is required, but in the end there isn’t a requirement for a number of investments they fund, or the amount they have to allocate within a year. The angels have to sign a membership agreement that regulates the behavior of the angels, pay membership fees, and be open to investment opportunities.
NSAM: Who manages the investments?
Galdo Nogales: We don’t manage the investment, the angel looks after their own portfolio – we facilitate but we are not administrators.
NSAM: Is there a mentoring process?
Galdo Nogales: We do so during the assessment process. We are not an accelerator or incubator. We are talking about early stage ventures, and understand that not everyone will have all the answers. We have analyzed more than 250 investment opportunities, of those only 30 are presented to our investors. We conduct a very thorough assessment of the business model and the internationalization model. And in the process try to play the devil’s advocate.
NSAM: What is the goal for the number of investment opportunities?
Galdo Nogales: The more the better. If we can make five this year it would be good. In Latin America it is typically two deals per year per network. We will try to analyze everything but if you come up with something like nuclear energy none of the angels in this network are in that industry and they would not be interested in funding that.
NSAM: What industries are they funding?
Galdo Nogales: We are quite open because as we have 23 Angel investors with different profiles; there are certain areas like ICT and energy that investors might be interested in. If there is an opportunity in a sector where none of our angels have experience or knowledge we might have to pass.
NSAM: Are there a lot of IT companies?
Galdo Nogales: From the eight, six are IT. We try to find this mixture where you have the best entrepreneurs, a promising business and a good investment opportunity. Not all ventures have these factors and that is why we have such a sharp assessment process.
NSAM: What does the assessment process entail?
Galdo Nogales: Analysis – looking for a team rather than the Lone Ranger. Do they have advisors? Because that is of value. Then focus on the business – we need to find exponential growth rates, internationalization. And how sound the investment opportunity is. We need to find something that balances out the risk and benefit for the investors and entrepreneurs.
NSAM: What is the range of investments?
Galdo Nogales: From $20,000 USD to $500,000 USD.
NSAM: What is the typical percentage earned back?
Galdo Nogales: We are looking for something that is less than 20%. Every deal is different. If something is very risky, maybe the investor will look for a higher percentage. If the opportunity goes well, you cannot appropriate a lot at the beginning because then the entrepreneur becomes an employee. It has to be something where everyone feels happy and is well-measured.
NSAM: When do you expect to see a return?
Galdo Nogales: When we review their spreadsheet – Excel can say beautiful things depending on how good you are with it. We look for an exit strategy within five years. The investors are the main support for the entrepreneur and maybe together they can make it to M&A. We have only been at it for two and a half years and right now we have more donors than investors.
NSAM: What is the total annual investment amount?
Galdo Nogales: $950,000 USD spread over eight ventures.
NSAM: How do people find out about Chile Angel Investors?
Galdo Nogales: The staff goes out to the market to try to find these revolutionaries. Maybe 20% come from references and 10% come from entrepreneurs that have heard about us through the media or a seminar. We are trying to strengthen this.
NSAM: What is the typical company profile?
Galdo Nogales: Would see a small team of up to five, maybe with some employees and an advisor. Maybe they already have a big model or webpage and they are going to start increasing sales. They will be looking for about $500,000 USD or more and we will try to fund this on our own, or co-invest with others.
We have the mandate to look for opportunities in a market where we have at least one angel. Let’s say it is an American entrepreneur looking to develop in Latin America, and we have an angel in California, and one in Chile – it makes sense for everybody.