Is Quasar Ventures the new Rocket Internet for Latin America?

Argentina-based firm Quasar Ventures has raised a $5.4 million round of financing led by Silicon Valley VC fund Emergence Capital Partners to develop ten new technology companies in the coming four years.

Several big names from Latin America’s tech scene also took part in the round, including co-founders of Globant, Despegar.com and Patagon, as well as Argentine fund CAP Ventures, Alex Mendez from US fund Storm Ventures and Veronica Serra from Brazil-based Pacific Investments.

This impressive list of investors owes a lot to the track record of Quasar’s founding trio. Back in 1997, Andy Freire and Santiago Bilinkis co-founded the office supply chain Officenet, which Quasar’s CEO Pablo Simon Casarino joined as early employee. After becoming Argentina’s leader and expanding into Brazil, Officenet was acquired in 2004 for $23.2 million by US giant Staples (it changed its name to Staples Argentina in 2011).

This successful exit turned Officenet’s top executives into well-known figures of the entrepreneurship world, in which they remained active both as players and as supporters. In addition to his role at Quasar, Freire is the President of the Argentine chapter of Endeavor, a non-profit network for high-impact entrepreneurs whose co-founder Peter Kellner also participated in Quasar’s financing round.

Latin America’s new company builder

In a recent blog post, Bilinkis defined Quasar Ventures as “a company that builds companies.” Rather than a fund or incubator investing in existing projects, it will dedicate itself to pairing promising business ideas with talented entrepreneurs, while investing seed money to take these startups off the ground.

In other words, it will be a company builder, a model that TechCrunch recently described as being on the rise around the world, mentioning entities such as Betaworks, IdeaLab and Rocket Internet. The latter already boasts a presence in several Latin American countries, but Quasar Ventures’ team isn’t very fond of comparisons between the two entities.

“We don’t have ANYTHING to do with the Samwers. I don’t understand the comparison,” Bilinkis wrote in a tweet reply (translation ours). When we brought this up with Quasar’s CEO, he was more willing to acknowledge the resemblance, but was also very quick in pointing out differences.

While the managers of Rocket Internet companies receive high salaries from day 1 and get very little equity in exchange for their efforts, Quasar took the opposite view, he explained. Rather than treating CEOs as employees, it acknowledges them as entrepreneurs, intentionally using the term of “parallel entrepreneurship” to describe its approach.

This is also reflected in the company structure, with Quasar reportedly planning to end up with a 45% equity stake in each company in which it invested seed money, as long as it successfully helped said company subsequently raise external financing at a valuation of $1 million or higher.

Quasar is confident that its extended network gives it a good access to capital, and the example of Restorando seems to confirm it. As you may remember, this restaurant booking startup raised a 3.2 million round from Atomico, Emergence Capital Partners, Kaszek Ventures and Storm Ventures.

What you may not know is that Restorando was already following the model that Quasar is now implementing. While Argentine entrepreneurs Frank Martin and Franco Silvetti manage its operations, they also received hands-on support and seed capital from Quasar’s founders from the very beginning. “Restorando was created before Quasar; we saw how the model worked, and Quasar is based on that experience,” Simon told us.

Matching ideas with entrepreneurs

Quasar’s business models will come from two sources. On one hand, it will hold brainstorming sessions with internal and external participants to come up with innovative ideas to solve problems that may or may not be specific to Latin America. On the other hand, its team will identify existing business concepts from other markets that could work in the region.
However, Quasar doesn’t plan to blindly clone these models; before settling on an idea, it will decide which Latin American country is the best market for it, and define which tweaks are necessary to tune the original concept to the local context.

If identifying market opportunities is not easy, finding the right entrepreneurs to pursue them may be even harder. Here’s how Quasar define its dream candidate:

“Because human capital is a fundamental pillar, the ideal Quasar entrepreneur must have a cluster of unique personal and professional skills: he/she must be intellectually brilliant, ambitious, creative and an extraordinary leader.”

The questionnaire it established to filter out applications leaves the door open to first-time entrepreneurs whose previous experience may be in the corporate world and who may find Quasar’s model attractive.

In addition, Simon expects Quasar to work with entrepreneurs who have already launched a startup but are still eager to succeed because their first experience turned out to be unsuccessful or didn’t provide significant returns for their founding team.

Interestingly and somewhat unusually for Latin America, Quasar doesn’t see previous failures as a stigma. According to Simon, the fact that some founders have already launched a company and failed at it reduces their risk, since a lack of experience makes first ventures more fragile.

While Quasar isn’t quite ready to disclose its first selection of companies, it is already working with a team that will focus on an e-commerce project for Argentina, and it has two other projects in its reviewing pipeline – one for Mexico and one for Brazil.

Once the list is confirmed, it will be done selecting companies for 2013 – Quasar’s founders only plans to develop 2 or 3 concepts per year, due to the level of involvement this requires from them. While they see this new venture as a proxy for entrepreneurship, they also understand it takes effort, and Bilinkis noted on his blog that he planned to dedicate almost all of his time to Quasar.

Looking for Latin America’s next success stories

Quasar’s declared ambition is to build the Officenet, MercadoLibre and Despegar of tomorrow – something that the team sees as missing from Latin America’s market.

“For some reason, all of these companies were founded in the late 90’s or in 2000. But despite the huge entrepreneurial momentum, the last 10 years haven’t produced almost any companies that can compare with them,” Bilinkis wrote in the above-mentioned post (translation still ours).

One of Quasar’s hopes is that its network, together with its company builder model and know-how, will help its ventures find the exits they deserve. In addition, its contacts outside of Argentina will add a pan-regional vision, with a particular interest in Brazil due to its market’s size and relative maturity.

According to Emergence Capital Partners’ Principal, Argentine national Santiago Subotovsky, Quasar’s focus on Latin America is one of the main reasons why the fund decided to add it to its portfolio, which already includes names such as Box, Salesforce and Yammer.

Talking to Argentine business newspaper El Cronista, he said that Emergence is convinced there are still huge untapped opportunities in Latin America. Will Quasar manage to meet his expectations and generate companies with billion-dollar valuations and beyond? Only time will tell.

Image credit: ESO/M. Kornmesser