Monashees Capital, the Venture Firm to Know in Brazil, Nears Close on New Fund

Much has been made of the early-stage investors competing to take a leadership position in Brazil. Last month, the New York Times spotlighted Redpoint e.Ventures, a joint effort between Redpoint Ventures and San Francisco-based BV Capital that just raised $130 million to invest in young Brazilian Internet startups.

In June, Reuters featured Accel Partners’ Kevin Efrusy, calling him “perhaps the most ambitious of a growing number of U.S.-based venture capitalists who see opportunity in a country with a large population, a fast-growing middle class, big growth potential and political stability.”

But before Accel and Redpoint, before BV Capital and a growing list of other players that includes Valor Capital in Connecticut, Felicis Ventures in San Francisco, and London-based Atomico (which now employs a principal in Sao Paulo), there was Monashees Capital, a brand few may recognize in the U.S., but one that’s among the top firms in Brazil — and which LPs appear eager to back.

At least, according to an SEC filing, Sao Paulo-based Monashees began raising a $54.5 million sixth fund just three weeks ago and it has already collected $41 million. (The total offering amount is 110,000,000 Brazilian Reais, which converts into $54.5 million at the current exchange rate. It isn’t clear from earlier SEC filings how much Monashees, founded in 2005, has raised in previous years.)

The firm’s cofounders, Eric Acher and Fabio Igel, did not respond to an interview request this week, but seemingly those on the Brazilian scene already know the duo well. For example, Monashees is the firm that talked its way into an early investment in the online handicrafts marketplace Elo7, which last year raised its Series A from the firm and from Accel Partners. (Monashees reportedly brought Accel into the deal. Meanwhile, Atomico, cofounded by Skype co-founder Niklas Zennstrom, was evidently trying to woo Elo7, too, but lost out on the opportunity.)

When the Brazilian deals company Peixe Urbano raised its first round in 2010, it also turned to Monashees, along with Benchmark Capital. (Tiger Global and General Atlantic are among those investors that have backed the company in later rounds.)

And Monashees led the first round in Baby.com.br, an online baby products retailer that was founded last year by students from Wharton and HBS and that has since raised roughly $22 million, including from Accel and Tiger Global — which reportedly backed the site because of Monashee’s early support.

Whether the firm — which lists 16 portfolio companies at its Website — will reap the rewards of zeroing in on Brazil early remains an open question. Its portfolio company, Baby, for example, has acknowledged that among the many challenges it faces in Brazil is bureaucracy. As its founders told the Times in June, it still has a 50,000-square-foot warehouse that it can’t use because it hasn’t yet obtained the right license.

Acher also acknowledged to the Economist in June that copycat companies — which Peixe Urbano, Baby, and Elo7 are widely considered to be — face particular challenges, including trying to compete with their globally ambitious predecessors.“With innovation you have a global upside, but with copycat innovation you have geographical limits,” said Acher.

Still,  last year the New York Times recognized Monashees as somewhat uniquely positioned to identify promising Brazil-based entrepreneurs, develop ties with them, then bring in heavy hitters from Silicon Valley.

“Brazilian investment firms,” observed the paper, have “traditionally had distant relationships with the companies they finance and are held in low regard by entrepreneurs.” Not so with home-grown Monashees. For now, at least, Acher, a Kellogg graduate who previously worked for General Atlantic, and Igel, an entrepreneur who also heads an athletic clothing company, look prescient for planting themselves in Brazil. And they look that much smarter for doing it years ahead of the crowd.

 Photo of Eric Acher courtesy of Lagbooth