Manifesto
For the best of them we created Newtopia, a Latam’s VC firm investing in very early-stage startups -from idea to product-market fit.
We are a Community, with a combination of LPs and advisors who have succeeded in entrepreneurship, and founders who engage every day in peer to peer collaboration.
Investment Thesis
“Newtopia I” is our $50M first fund launched in August 2021 and will invest in 100 amazing latinamerican startups, and the plan for the upcoming future is to raise more funds to invest in more entrepreneurs with dreams beyond measure.
Our first check is usually between $100k and $250k in exchange for 5%-7% of the future equity of the company (using a Post-Money SAFE, the YC’s standard). But that’s not all, Newtopia’s first fund was specially designed for us to be able to increase the ownership in the top performers of the Portfolio, that is why in some cases (12-18-24 months after our first checks in the pre-Seed rounds) we make follow-on investments when the startups raise their following round: the Seed; and then after a while potentially an additional follow-on in their Series A.
So, we are a Venture Capital firm focused on the very early stages but with the ability to invest up to $500k in the Seed round and up to $1M/1.5M in the Series A as a follow-on in the top performers of the portfolio.
We seek to maximize the returns in the mid/long-term resulting from the investments in startups by setting the guidelines of a strategy which are included in what is called “The Investment Thesis”. Every fund has (or should have) an investment thesis, and if you are an entrepreneur it would be ideal to know the specifics before applying and/or talking to members of that fund.
These are the main characteristics that we analyze to see if a startup falls into our Thesis:
We are looking for outstanding entrepreneurs trying to solve huge (immensely huge) problems from the Region and/or the World. The size of the problem that the startup is solving, the innovativeness of the solution and the scalability factor are the key elements that we look at in relation to the industry and business model of the startups.
We have decided to be vertical-agnostic, which means that we might invest in startups that belong to a lot of different industries without narrowing the list down to 1-5 specific verticals as many other funds might do. But this does not mean that we cannot have preferences towards certain kinds of startups considering in which industries we can add more value to founders. For example, since we launched, we have been mainly inclined to Fintech, B2B SaaS, Web3 and Future of Commerce, but for example Insurtech, Edtech, Wellness, Healthtech and Future of Work are among other industries that we are fond of too.
Regarding the stage of the startups, companies might be somewhere in the path from “idea” to product-market fit, entrepreneurs don’t need to be present in several different markets and with hockey-stick metrics before applying to Newtopia, on the contrary: the earlier, the better.
Although startups do not need to be in several different markets while applying to Newtopia, we will analyze which is the target market that the startup is aiming to. The companies need to be operating in (and/or targeting) super large markets such as Mexico, Brazil or United States.
We enjoy working with latin founders and teams that want to lead the solutions tackling the region’s toughest challenges and build the admired companies of the future with a long term vision.
/ A key characteristic of the teams that we take a look at is if the founders have already had a startup in the past, in other words if they are 1st time or 2nd time entrepreneurs. If it is a team with 1st time entrepreneurs we would need to see evidence of their ability to execute, therefore in most of those cases it might be necessary for the startup to have some kind of an MVP and proven early traction before raising the round in which we get involved; and the investment will probably be $100k for 7%. While in the cases of 2nd time entrepreneurs we might stretch the ticket size and for example we could directly invest an average of $250k for 5% since there will be evidence of their ability to execute according to their past experience.
/ We know that startups need to be led by a complementary team in order to succeed, so having a technical founder in most cases is a must because technology will be at the center of the startup providing the means to scale the solution to hundreds or thousands or even millions of customers depending on the case.
/ The captable is another crucial part of the analysis, here the basic things to be considered are: try to have a balanced equity distribution among the founders (the best is when the equity is evenly distributed, e.g.: 50%-50% if they are 2, and ⅓ each if they are 3, and try to avoid for example things like: Cofounder CEO with 85% and Cofounder CTO with just 15%), implement a vesting schedule among the founders (4yrs + 1 yr cliff, the standard) and try not to be diluted “a lot” in each financing round.
Last but not least, there is a concept that is not as widely spread as we would like it to be, which is called “Fund Maker”. Every startup that we invest in needs to have this characteristic, the potential to be a Fund Maker. It means that a startup must have the ability to return (eventually) at least 1X the fund size, which in our case of “Newtopia I” is 50 million USD. It is important to state, that the VC industry, despite being a risky one, it might return higher profits to its investors than other asset classes, but the vast majority of these returns in most of the cases come from only a handful of startups from the portfolio of the funds, that is why all of the companies must have the potential of becoming a Fund Maker, since its is known that there is a high mortality rate in the tech startups scene (and even higher in the “very” early stages).
Q&A
So.. are you an entrepreneur and you want to get in touch with us to analyze what you are building? That’s great! We really appreciate that interest.
If after reading our Manifest, you consider that you check all of the boxes, do not hesitate applying to Newtopia! You will find the APPLY button on our website and it will direct you to our Application Form (it is not long, it just is the basic info our Investment Team needs to read before deciding whether to schedule a call or not). You can apply to Newtopia at any time during the year, we are receiving applications 24×365.
We will review the form and in case we see fit we’ll contact you. We value and love every entrepreneur’s effort to apply to Newtopia and we try to answer every application but sometimes it becomes impossible since there are thousands of startups per year. Therefore, if you don’t hear from us a couple of weeks after your application was submitted, please don’t take it personal but we are sorry because probably we decided there was something missing in the application in order to fulfill our requirements to schedule a call with someone from our team; in most cases we try to provide feedback but there are times when it is impossible to.
You will receive an email to schedule a 30 min call with the Analysis Team. During this call we expect to hear your pitch and ask you a few questions to get to know you and your startup better (try to keep the pitch short hopefully around 5mins, max. 10 mins., so we get to talk deeply the rest of the time). If after that call we decide to move forward, you will receive an email to schedule a call with at least one of the Partners of Newtopia. During this call we expect you to deepdive on the main topics of the startup and try to reply to any new question that might arise. After this call, we will provide feedback in case it is a “no-go” (or “not-yet”), but if it’s a “go”, then you will probably be asked to talk to join one last call with other Partner and that would be the final step prior to arriving to the Investment Committee stage.
Every month we hold at least 1 Investment Committee, usually during the last week of each month, where the Committee Members discuss and vote whether to invest or not in the startups that have arrived up to this stage. We won’t ask you to participate in the Committee, but the investment decision is based on: all the information you have provided during the calls with our Investment Team, all the additional information that the Team will/might ask in a deepdive call and/or questionnaire, and all the research that we have done in the meantime (this research might include: experts’ opinions, background check on the founders, competitive landscape analysis, business model double-click, risks assessment, key metrics and forecast analysis, exit path scenarios, among others).
This whole process should last approximately a month, and depending on the timing of the upcoming Committee your startup might go for the current month’s Committee or to the following month’s edition.
We are looking for outstanding entrepreneurs trying to solve huge (immensely huge) problems from the Region and/or the World. The size of the problem that the startup is solving, the innovativeness of the solution and the scalability factor are the key elements that we look at in relation to the industry and business model of the startups.
Let’s explore a couple of other considerations in relation to the innovativeness and the scalability potential of the business model. The key factor will be how the startup can grow generally allowed by the Software component of its solution addressing a very large market through the right channels. That’s why even if we do not say no to Hardware, when we invest in Hardware is because the secret sauce will not be the device but what the startup does with the information, technology and software behind it. Moreover, B2B and B2B2C solutions are often in our preference of choice because usually they represent an opportunity to scale with an efficient usage of the available resources (resources that in the very very early stages are very very scarce); but of course when we love a team and the opportunity they are chasing we sometimes invest in B2C, D2C, B2G, etc.
We have decided to be vertical-agnostic, which means that we might invest in startups that belong to a lot of different industries without narrowing the list down to 1-5 specific verticals as many other funds might do. But this does not mean that we cannot have preferences towards certain kinds of startups considering in which industries we can add more value to founders. For example, since we launched, we have been mainly inclined to Fintech, B2B SaaS, Web3 and Future of Commerce, but for example Insurtech, Edtech, Wellness, Healthtech and Future of Work are among other industries that we are fond of too.
Regarding the stage of the startups, companies might be somewhere in the path from “idea” to product-market fit, entrepreneurs don’t need to be present in several different markets and with hockey-stick metrics before applying to Newtopia, on the contrary: the earlier, the better.
Usually it would be great for us to get to know the teams as soon as they come up with the “idea”; sometimes we can invest at that point (it will depend on the team and the opportunity that they are chasing) and sometimes we might say “not yet” but keep an eye in that startup with further interactions with the entrepreneurs to see how they go and progress, and re-analyze the opportunity at some point afterwards.
These are some of the questions we ask ourselves during the process of scanning a team: Why is this team building this? Do they move forward towards a vision?; Are they passionate, ambitious, resilient, talented and humble?; Are they open to receiving feedback and evolving?; Do they learn fast?; Are their previous experiences a good background for solving this problem?; Can they become the leaders of the industry they want to change?; Do they have the skills to attract the best talent and form a winning team?; Do they work with discipline and methodologies to find product-market fit?; Are they metrics-oriented?; Is their solution going to positively impact LATAM?; Are they a good fit with the Newtopia Community?
Every startup that we invest in needs to have this characteristic, the potential to be a Fund Maker. It means that a startup must have the ability to return (eventually) at least 1X the fund size, which in our case of “Newtopia I” is 50 million USD.
This potential will be determined by a combination of different factors, e.g.: the current ownership that the Fund can have (ticket size and valuation), the future opportunities to invest as a pro-rata to maintain ownership or even as a follow-on to increase the ownership in the startup, the future equity financing rounds which will (and/or might) dilute the Fund’s ownership, the potential size of the “exit” produced by an acquisition or initial public offering, and several technicalities about how that exit is distributed among investors, founders, and other shareholders of the startup at the moment of the liquidity event in the future.
We believe that the key part of our value proposition is the Community, which is formed by a combination of masterminds (our investor and/or advisors) coming from different spaces, such as: successful entrepreneurs (the founders of: Mercadolibre, Globant, Mural, Auth0, Technisys, Nowports, among other unicorns and amazing companies), top elite athletes (professional players from different disciplines, i.e.: basketball, tennis, fútbol, rugby), and other wonderful thinkers with a strong willingness to help our portfolio companies. See the full list here.
Newtopia’s Partners are operators and serial entrepreneurs, and they have witnessed in the past the lack of support at the earliest days when it’s even harder to flourish, this is the reason why Newtopia aims to truly contribute to the long-term success of Latin American founders. We offer entrepreneurs a hands-on approach that includes: office hours for strategic mentorship, fireside chats and workshops provided by members of our Community, intros for biz dev, fundraising strategy design, and a vast network of regional and global VCs that want to hear about our portfolio to analyze the opportunity to invest in them.
We are not an accelerator program, although we consider our greatest added value is in the earliest stages, and in that sense we create and offer all those resources for the teams to reach their full potential at the pre-Seed stage towards the establishment of a solid product and business model that will act as the foundations for fundraising their Seed and Series A rounds.
