Serial Internet entrepreneur and angel investor Fabrice Grinda took the stage at Le Web this morning to share his thoughts on investing in Russia, Brazil and other emerging markets and general lessons he’s learned as a global angel investor.
Grinda, who is French but currently resides in New York, says he’s made every mistake you can possibly make, but that he’s getting better with every investment deal he inks (he and his team have backed 90 startups to date).
So why does he invest in Russia and Brazil?
Grinda pointed out that Brazil is not just Rio, football and favelas, but also home to an entire ecosystem of Internet companies, some of which have already gone successfully public and some of which are insanely profitable and booking hundreds of millions of dollars in annual revenue.
Brazil is obviously a big market, with 200 million people of which roughly 70 million are in the Internet. It is also a fairly rich country, with a growing economy and the largest e-commerce market in Latin America, which is ideally fertile ground for Internet startups to rise and shine.
Russia, says Grinda, is pretty much the same story. Huge market, booming startup ecosystem, largest country in the world (140 million people, 60 million Internet users) and a growing Internet economy with major players like Yandex and Mail.ru.
Grinda says he started investing in Brazilian and Russan Internet companies because the world is less flat than people would have you believe, particularly when it comes to venture capital, so the opportunities were there. There’s no real globalization when it comes to making investments, he points out, with only about 20 percent of venture capital being deployed across-borders and obvious trading and travel barriers getting in the way of doing it adequately.
Grinda also talked about his early experiences as an angel investor. After selling his last company, which made him a relatively wealthy man, he invested $6 million in 6 startups. All of them failed.
Talking about some of the mistakes he’s made, he shared an anecdote about a Russian entrepreneur encountering problems someone in the US would never face when trying to build an e-commerce business (major logistics issues in a large country, and couriers who steal both products and the cash they receive for, well, not delivering them to buyers).
In Brazil, it’s a different story, purports Grinda. Logistics and payments work there, but it’s a dangerously litigious country, so startups often find themselves getting sued to oblivion. Grinda shared a story with the audience about a local e-commerce company that had its domain name taken away by some Brazilian judge, effectively killing its business overnight.
Grinda says he’s learned the hard way that it’s better to make smaller investments in a lot of companies then bet bigger on fewer companies. He refers to this “spray and pray” methodology as a more realistic model to become successful as an angel investor.
He only invests in consumer-facing companies because he lacks the time for thorough due diligence, and never takes a board seat at any of the startups in his portfolio, preferring to be a passive investor that responds quickly to specific questions from the entrepreneurs he backs.
About 25 percent of his investments are in the US, and 75 percent in the ‘rest of the world’ (meaning big markets like Brazil, Russia, Germany and Turkey, China and UK).
A lot of those are businesses ‘copying’ (aka cloning) successful models that were proven by other companies in the US or elsewhere, which he’s perfectly fine with.
He also talked about his 9 selection criteria for investments, which he outlined in the past, in much more detail, on his blog here.