Hernán Fernández is the Founder and Co-Managing Partner at Angel Ventures, where he manages deal-flow, investor relations and shares duties in creating value for the investment portfolio. He is also the founder of the largest angel investment network in Latin America.
He currently serves as a Board Member at the Mexican Association of P.E. & V.C. Funds (AMEXCAP). Prior to Angel Ventures, Hernan started his professional career as a corporate lawyer in PwC’s Mexico City and Paris branch offices, as a consultant for the Sustainable Business Initiative of the United Nations Development Program in the U.S. and Paraguay, and later as a management consultant for Strategy& (formerly Booz & Company) in Mexico City.
He has been named one of CNN/Expansion 30 Mexico’s Promises and the Most Influential Angel Investor in Mexico, according to TechCrunch. Hernán holds a Master’s degree in Business Administration (MBA) from the MIT Sloan School of Management and a law degree from ITAM in Mexico. A.V. has put together a strong and flexible team, best-in-class, in-house developed processes, and attracted a multidisciplinary group of advisors, mentors, and allies that not only provide capital but, most importantly, talent, relationships, and brainpower.
The managing team has extensive experience in company development and growth, private equity transactions, management and operation of venture capital funds, mergers and acquisitions, launching startups and new business units, as well as strategic consulting and operational administration of multinational conglomerates.
In an exclusive interview with AsiaTechDaily, Hernán says:
I make sure that I meet interesting people every day. One day it could be an entrepreneur, the other one an investor or an ally. This is truly a job where you never stop learning. You can have breakfast listening to the pitch of a travel comparison site and have lunch talking about Medical devices. It is important to understand your own limitations. In a way, I feel like the Wizard of Oz, many people come to me for answers, and many times I do not have them. You have to be humble and surround yourself with people smarter than you. Each time you achieve this, you raise your own bar and become better at what you do, but you need to always have empathy and humility towards an entrepreneur that is betting his life on a project that you are about to approve or discredit in 60 minutes of your time.
Never take yourself too seriously, but do take your own happiness very seriously. You do not need to be the best at anything. Just be good and humble to find people that at better than you at a specific topic to advise you. Luck is for people that work really hard for it.
Read on to know more about Hernán Fernández and his journey.
What background and domain expertise do you have?
Hernán Fernández: We started the first professional Angel Investor Network in Mexico back in 2008. The asset class was still nascent back then. Our expertise comes from managing the network, pipeline, and investments until 2013, when we launched our first Co-investment Fund.
When did you first think about starting a fund?
Hernán Fernández: After a few years of managing pipeline and investments for the network, we saw that there was an interest from investors to have access to industries outside of their expertise. As we were generalists (and sort of still are), we were the right vehicle, and we had to ensure that we had best-in-class processes and that we could leverage the network to deliver superior pipeline and business development capabilities for the portfolio company.
What kind of startups/ sectors have you invested in till now?
Hernán Fernández: We have a very broad portfolio in terms of industries, ranging from Fintech (I many of their newer verticals, such as Proptech or Insuretech), Healthtech, Foodtech, Media/IT, Ecommerce, Smart Cities, among others. We generally look for companies that might have a good fit in Latin America, leveraging a huge population and a fast emerging middle class.
What types of companies do you look to invest in? And What’s your mental model for investing?
Hernán Fernández: Founders Founders Founders. Venture Capital is all about a solid team that can execute. They will be resilient and resourceful to navigate the tough times and make the best out of the good times. Venture Capital needs to enhance its support network and help bring the best out of a team.
What is your typical investment range, and how many startups you invest in per year in general? Additionally, can overseas headquartered startups get funding from you?
Hernán Fernández: We usually do first tickets from 1-3 M USD but can do smaller deals from a carveout fund. We are doing between 10-12 investments per year, and yes, we can invest in companies with an overseas HQ, as long as there is a Latin American Angle. We invested in B2Link. A very successful Kbeauty Ecommerce/Marketplace, which is now expanding to Mexico, as Latin America’s market for beauty and cosmetics is huge and even larger than China today. So it is a matter of finding where Latin America makes sense for a good founder, and we have a huge population that is getting more global and savvy every day.
What would be the KPI that you usually check about the startups’ growth?
Hernán Fernández: It may be diverse in each industry like LTV, CAC, MoM, etc. but it will be helpful to understand more about your additional investment factors. Definitely All of the above, always looking for solid unit economics. In our markets, to think about perpetual growth and bottomless funding is naive, so we want to see that all the KPIs add up to tell a story about scale with a clear path to profitability.
How do you handle this COVID-19 outbreak situation for your fund’s survival in the future?
Hernán Fernández: Fortunately, most tech-enabled companies are doing quite well. Perhaps 30-35% of the portfolio has been benefited from COVID dynamics (Edtech, Ecommerce), another 50-60% has had an impact but not a severe one (Mobility, Proptech), whereas a 10-15% has been hit the hardest (Travel, luxury goods). We did a quick intervention in all of our companies in a big push for cash preservation above anything else until we were able to see how this was going to play out.
Right after being an investor, like in the early days, there must be some tough times in building up the first fund along with building up a second fund or giving back the good returns to those LPs. If there is any similar tough time like this, please tell us more about it and how you (or your team) overcome the difficult times?
Fund 1 is about selling a dream—a thesis, a star team that will perform, an untapped market, or opportunity. To raise a Fund 2, you need a few winners from that Fund 1 (Ideally realized gains), but certainly, good portfolio companies will drive those conversations. There would not be a discussion for Fund 3 if you were not able to deliver exits from your Fund 3. It is all a balancing act, understanding your key strengths, always building rapport with your key stakeholders (Entrepreneurs and Investors), and transparency above all.
Additionally, Do you have advice for anyone looking to start a fund?
Hernán Fernández: Be resilient, J. Even if you start small, you have to love the job that you do. A good VC is not necessarily a finance guru. You need to be a coach, a cheerleader, a friend, a mystery shopper, a fierce critic, an ambassador. I think of a good VC more in terms of a Talent Agent for a Movie Star (Like the character of Ari Gold in Entourage). You need to be one with your entrepreneurs and help them solve their problems, not become one of them. A good entrepreneur will know that they will run out of money in 6 months. It does not need your financial model skills to figure that one out. He needs you to help him to solve the problem at hand.
What mistakes do you see founders make when raising money?
Hernán Fernández: Raising too much or too little money. Being cocky. Pitching more than one project. Not being upfront with a potential conflict of interest.
What’s your advice to entrepreneurs who have a chance to meet investors like you? What are the top 3 questions that you always ask the founders?
Hernán Fernández: I will tell entrepreneurs to do their homework. Visit the website, understand our investment thesis, be curious about our portfolio companies, and how you would fit in.
My three questions: – Why you and why now? What kept you up at night while building this company/solving this problem? Who is joining you in this endeavor (Wanting to hear from other team members but also Family and friends investing- the fact that your support network is investing in your startup says a lot about you and who you are.)
What’s your general thought about the term “Global,” and What are the important factors (criteria) for local startups to consider for international expansion?
Hernán Fernández: How similar markets are. I think we see a nascent South to South opportunity. We have founded, alongside Iliad partners from Dubai, the South to South Venture Alliance. Startups in Mexico City are solving similar problems to the ones in Bangkok and Jakarta, more likely so than the ones in Amsterdam or Tokyo. There are many business models that travel well among similar countries with similar challenges, and that has been fascinating to explore.
What kind of startup or tech industry will impact the world in the future, like 2-3 years locally, in your view?
Hernán Fernández: I am a big fan of Mobility, and particularly Shuttle transport systems. In NY or Tokio, public transportation works. You can complain that it is crowded, that there are minor delays, etc., but generally speaking, it is safe and efficient. A commute in Mexico City, Cairo, Bangkok for a blue-collar worker can take up to 4 hours a day. If additionally, you have to do it in hazardous and uncomfortable solutions (Heavily subsidized public transport), it becomes a nightmare. Now you have companies like Shuttl, Volt Lines, SWVL, and in Latin America, our portfolio companies of Urbvan, MiAguila, and Viapool. These are real problems for huge chunks of the population that perhaps cannot afford a car or an Uber/Taxi but can pay more than the cheap, subsidized transport option. The emerging middle class in emerging markets is a massive opportunity to do good and make serious money.
What are the top-three books or movies (TV series) that changed your life and why?
Hernán Fernández: The Hard thing about hard things by Ben Horowitz is a classic in my job. It just portrays the tough choices we will face building a company. The Movie Big Fish by Tim Burton tells us about how good storytelling is important in our lives and how no matter how mundane you think your life is, if you look around, you will always find magic. I simply love that movie. I love the Simpsons for their humor and pragmatic approach to life. There is so much wisdom in every episode if you know how to find it.
How do you keep yourself motivated every day?
Hernán Fernández: I make sure that I meet interesting people every day. One day it could be an entrepreneur, the other one an investor or an ally. This is truly a job where you never stop learning. You can have breakfast listening to the pitch of a travel comparison site and have lunch talking about Medical devices. It is important to understand your own limitations. In a way, I feel like the Wizard of Oz, many people come to me for answers, and many times I do not have them. You have to be humble and surround yourself with people smarter than you. Each time you achieve this, you raise your own bar and become better at what you do, but you need to always have empathy and humility towards an entrepreneur that is betting his life on a project that you are about to approve or discredit in 60 minutes of your time.
What are the top- three life lessons that you want your (future) sons and daughters to know?
Hernán Fernández: Never take yourself too seriously, but do take your own happiness very seriously. You do not need to be the best at anything. Just be good and humble to find people that at better than you at a specific topic to advise you. Luck is for people that work really hard for it.
What would you like to be remembered for?
Hernán Fernández: A good grandson, son, father, spouse, nephew, cousin, and friend that was a pioneer in an industry he loved in a country he always strived to make better.
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