Financing Innovative Companies

Venture capital (VC) and seed funds invest in small companies and help increase their competitiveness. As a regional leader in this industry, the Multilateral Investment Fund (MIF) makes strategic investments in numerous venture capital and seed funds within Latin America and the Caribbean (LAC) that invest in small enterprises.

Through such investments, MIF facilitates corporate governance and management improvements in small entreprises. MIF’s contribution to the growth of the VC and seed fund industry also helps develop the nascent capital markets in LAC.

Resources for Growth

MIF does not directly invest in or finance companies, but always uses the seed and VC funds as financial intermediaries. MIF does not leverage funds: its contribution is equity in the fund. The VC and seed fund industry serves as a catalyst for entrepreneurship, business innovation, job creation, and higher management and operations standards.

From 1996 to June 2009, MIF has approved investments in a total of 60 seed and VC funds, representing a US$ 260 million commitment to the industry in LAC. As the industry grows in the region, MIF’s role has shifted toward that of a catalyst stimulating the entrance of private sector investors into the industry, effectively diminishing the amounts invested by MIF while its participation remains pivotal for the funds’ operations.

Target Groups

Each VC or seed fund invests the capital injected by MIF and other investors in 6-12 companies. These dynamic and innovative small enterprises operate in a variety of sectors, including manufacturing, technology, education, software, renewable energy, and medicine. Both startups and established small enterprises with up to 100 employees and sales and/or assets of up to US$ 5 million are considered for investment by the funds.

Types of Funds

The funds invest in seed, early stage and growth stage companies. Funds use equity, quasi-equity and debt instruments when making investments.

MIF’s investment strategy for VC and seed capital is to test new approaches toward the establishment of the VC and seed industry in LAC, replicating the experience of certain markets and countries. As such, MIF also works with government agencies and the private sector to create an enabling ecosystem for VC and seed capital, and to attract local pension funds to the industry.

Documents on Management

• Environmental and Social Guidelines

  This document discusses MIF/IDB environmental and social guidelines for financial intermediaries, such as microfinance institutions, banks and investment funds, that work with MIF.

• Best Practices Manual

  Guide for new management teams operating VC and seed funds that invest in SMEs (In Spanish).

• Lessons Learned

  This document is based on MIF’s experience in the VC and seed fund industry. It discusses lessons learned and recommended best practices for the industry in LAC.