After the storm

Building a new future for Latin American tech

That spring morning of 2008, our CFO confirmed to the management team the solid 2007 financial results. We were about to report a preview to the Mexican Stock Exchange. I was happy. As the CEO of the retail division since 2006, I was about to show good progress to shareholders. What is more, I had put our company on the offense by securing new financing, opening a record number of new stores, relaunching our brand, and revamping the organization. The looming financial crisis wouldn’t distract me from my ambitious plans.

Snow Storm,J. M. W. Turner, 1842

Some of you reading this might have been in a similar position three months ago. Everything changed.


Like you, we’ve been thinking about what’s on the other side of COVID-19 for our organization. ALLVP strives to be a good steward of our LPs investment and to serve as good advisers to our portfolio companies. To that aim, our team embarked on a thorough analysis of 90 sub-sectors within our four-pillar investment focus: fintech, the future of commerce, smart cities, and human capital.


We analyzed startups under two dimensions.


First, it is now clear the pandemic will have a cyclical impact. The economic consequences of government actions to contain the health emergency will be widespread. Mass layoffs and salary reductions will cause consumers to spend less and more cautiously. Companies will focus on their core business and essential activities, critical to financial viability. The world moved from a want economy to a need economy. The cyclical impact is economic in nature and stronger in the short term.


Second, the health and economic crisis will also have a structural impact. Social distancing and financial constraints will accelerate technology adoption across the board. Digital life will evolve arising out of the current massive forced human training in work-from-home, homeschooling, online shopping, and mobile banking. In China, experts separate the e-commerce industry before, and after the 2003 SARS epidemic. Vast consumer and business adoption ensued. In Latin America, where we’ve lagged behind in global technology penetration, the shift can potentially be stronger. The structural impact in the long term looks bright for most tech companies.


We created the following framework to serve as an investment compass with the segmentation of positive and negative outlook for each dimension. While each sub-sector position may be inaccurate, it provides a simple guideline for our investment work.

ALLVP Investment Strategy Shift, sub-sector analysis

‘The virus is rewriting our imaginations. What felt impossible has become thinkable. We’re getting a different sense of our place in history. We know we’re entering a new world, a new era. We seem to be learning our way into a new structure of feeling.’ — Kim Stanley Robinson

Some popular VC commentary suggests you’re either on offense or should abort the mission. Others manifest that tech startups are in a war and should, therefore, adopt military extremes. Both may be relevant, but these precepts will make you miss half of the story.

To guide our portfolio, we use the following priority map.

In the cyclical negative and structural negative box, your clients and consumers face a considerable cash crunch and a fear of corporate and personal distress. Maybe your business model had leveraged cheap capital to scale and technology was never central to your vision. In this case, it’s time to re-evaluate. Some D2C models or capital intensive mobility plays face this challenge. The short term will be hard and the upside of pulling it off may be limited.


Imagine running a large hotel or retail group. How long can a strategic change take: years? decades? Tech startups have the superpower to pivot. Fast. In the cyclical positive and structural negative box, your business benefits from the economic crisis but is not built for the future. Maybe it’s a good-to-have technology for corporates as opposed to a need-to-have. Perhaps your service is essential today but it’s hard to differentiate from multiple me toos. The current environment gives you a chance to re-imagine your future. The problem you’re solving can surely be solved with more impact, more tech, or more innovation.


Just as daring for starting your own thing carries a bonus in of itself, surviving the pandemic and its consequences will bring a similar dividend for some tech startups. Some of the best tech outcomes of the 2000s came from companies that withstood the dot-com bubble burst.


If your company fits the negative cyclical and positive structural box,transform your company into a mean cockroach for a couple of years. Focus on your product and technology. Retain and reward your best talent. Reduce costs to the absolutely essential, watch obsessively your cash position and raise additional capital. If it helps, think of yourself as a wartime CEO.


A few startups were more fortunate. Only a few. Positioned on positive cyclical and positive structural, these companies benefit from the short term environment and have great prospects for the future. Online payment, remote work tools, online grocery businesses are doing better than ever. Seize the moment, scale methodically, and build the best organization at speed. Don’t waste your luck.


Four years after that forsaken year of solid financial results, I sat in front of the group Chairman’s wooden art deco desk. Behind him, a framed old collage of velvet scraps reminded with dignity the textile conglomerate origins. To its right, four framed engraved XIXth century French textile factories stood with discretion, gradually disappearing due to decades of sunlight. After an uncomfortable silence, I said:

– I’m going to give myself permission to fail.

– Of all the things you’ve come to tell me in the past, I have to say, I agree wholeheartedly with your statement, he responded with his unique raw kindness.

A few months after my father agreed with me in his office, I left the company to start a new career in venture capital. The company I led for six years, the most difficult period of my professional life, filed for bankruptcy the following year.


This pandemic will mark the worst professional phase for many founders and investors. Against all odds, true entrepreneurs will have a tendency to persevere, to survive, and to push forward. It’s in their nature. Workdays will inevitably become more arduous. Nights will get long and harrowing. When this happens, remind yourself why you started your company in the first place. Try everything, yes, but remember, it’s possible that you won’t be able to fix this. Maybe nobody would.


It’s okay to fail.

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