FoF in Mexico Nears $120M Close

Mexico City´s Fondo de Fondos expects to roll out a $120 million venture capital fund of funds in September, which will be the country’s first of its kind, Jaime Sanchez Cortina told VCJ.

The fund, called Mexico Ventures, expects to invest in 10 VC funds across Mexico, Central America and the United States, and it will co-invest in another 10.

In addition to Sanchez, Brian Birk of U.S.-based private equity firm Sun Capital, and John Eavirett of Greenspring Associates, will co-manage the fund.

Fondo de Fondos is a private equity fund of funds owned by Mexican development banks Nacional Financiera, Bancomext, Banobras and Focir.

Mexico Ventures has already received a $70 million capital injection from Nacional Financiera and the Secretary of the Economy. It is currently seeking investors to bankroll the remaining $50 million of the vehicle.

“We are making good progress and we already have soft commitments for $25 million,” says Sanchez, director of venture capital investments. “We hope to close the fund in September.”

Potential backers include wealthy investors, three private investment funds, three multilateral institutions and a pair of local fund managers. Sanchez says that three U.S.-based family offices and three Mexican wealthy individuals residing in the United States have already committed to the fund.

Mexico´s venture community is relatively small with few institutional investors willing to provide startup capital to a growing number of cash-starved small and medium size companies.

With a fund of funds “we can invest and develop the VC sector in Mexico,” Sanchez says. “If I were a VC fund, I could invest in 10 companies, but it’s much better if I can invest in 10 funds that invest in eight companies and we can also fund another 10 companies directly. There is a great multiplier effect.”

Sanchez hopes the fund will hold stakes in as many as 90 companies by the time the fund is fully invested in 2015.

Sanchez says the firm will invest up to 20% of a fund’s size and will seek to bankroll those willing to commit at least 20% of their funds to Mexican companies, although he says that 50% would be preferable.

Mexico Ventures has already earmarked some $15 million in commitments for Mission Ventures in San Diego and Latin Idea Ventures, a Mexico-based firm founded in 2002.

Fondo de Fondos seeks to invest in funds that have a minimum target of $50 million. Sanchez says that the fund will seek “innovative” businesses in Mexico’s emerging biotech, agro-industry, education, entertainment and consumer industries and could invest $3 million $7 million in each company, either directly or through its fund network.

Ivan Castano is a Mexico-based contributor. He can be reached at reporter360@yahoo.com.