20VC Marcelo Claure & Shu Nyatta on Lessons from Investing $7.5BN at Softbank & Why Dumb Money has Gone, Why LATAM is Under Construction and the Next 10 Years Will Be the Best & Investing Lessons from Missing Nubank & OpenAI & Investing in FTX

In the latest 20vc episode, Harry Stebbings interviews Marcelo Claure and Shu Nyatta, co-founders of Bicycle Capital, a new growth equity firm targeting Latin America with a $500 million fund. Claure, former CEO of SoftBank Group International, and Nyatta, ex-managing partner at SoftBank, discuss their vision for Bicycle Capital, emphasizing selectivity and the art of investing over rapid scaling. They reflect on past investment lessons, including a missed opportunity with Nubank and a regrettable investment in FTX, underscoring the importance of understanding and not following FOMO. The duo aims to make Bicycle Capital a significant player in LATAM's venture scene, similar to Sequoia China's impact in Asia, by being builders in a region they describe as under construction, ripe with opportunities, and in need of growth-stage funding. They also touch on the importance of integrating personal life with work, the changing venture landscape with the withdrawal of "tourist capital," and the potential for Latin America given its economic prospects and talent pool.

• Marcelo Claure emphasizes that being the biggest is not equivalent to being the best.
• The focus is on wise investment rather than just providing capital.
• Claure and Shu Nyatta are personally investing a significant amount of their own money into Bicycle Capital.
• They believe in being builders in the evolving landscape of Latin America.

"We don't want to be the biggest. The biggest doesn't necessarily mean you're the best. We're bringing more than $200 million of our own money." "Tourist capital is gone, Latin America is under construction, and we're builders."

• Claure stresses the importance of careful investment and involvement in the projects they choose, differentiating from the past trend of dumping capital.
• The quote indicates a shift from passive investment to active building and involvement in Latin America's growth.

• Marcelo Claure and Shu Nyatta have significant experience with SoftBank's Latin America funds.
• Claure built Brightstar into a leading global wireless distribution and services company.
• Nyatta has managed multiple investment funds and brings a diverse perspective to investing in Latin America.

"Marcelo was the CEO of SoftBank Group International, where he launched SoftBank's $8 billion Latin America funds and had direct oversight for SoftBank's operating companies." "As for Shu, Shu was most recently a managing partner at SoftBank Group International, where he launched and managed two separate funds, the SoftBank Latin America Fund and the Opportunity Fund."

• The summary highlights the professional background of Claure and Nyatta, setting the stage for their expertise in the investment field, particularly in Latin America.

• The formation of Bicycle Capital was a result of a strong personal and professional bond between Claure and Nyatta.
• They share a common vision of aiding in the development of Latin America.

"I met shu a few years back who was referred to me as I was dividing softbank into two." "We decided to open the SoftBank Latin America fund together, and we just had a know finding founders helping make Latin America better."

• Claure's recount of meeting Nyatta and their shared birthdays of their daughters shows the personal connection that led to their professional collaboration.
• The shared goal of improving Latin America was a driving force behind their decision to open the SoftBank Latin America fund together.

• Marcelo Claure is described as the "master of momentum," adept at initiating projects and bringing people together.
• Shu Nyatta is praised for his diverse knowledge and conservative investment approach, which complements Claure's operational strengths.

"Nobody else generates momentum like marcelo does." "Shu brings an incredible, diverse knowledge. He's a great investor."

• Nyatta describes Claure's ability to create momentum in any venture, highlighting his exceptional talent in bringing various elements together for project success.
• Claure acknowledges Nyatta's unique background and investment expertise, suggesting a balanced partnership where each partner's strengths are leveraged.

• Claure and Nyatta discuss the importance of pacing in investment and operations.
• They emphasize the need to accelerate once a company has established its strengths.

"Now is the time to go slow. Now is the time to be wise." "Once you have something good going, you have to go fast."

• Claure differentiates between the need for speed and caution in different phases of business development, indicating that wisdom is key in the current climate.
• The importance of accelerating growth once a company has found its footing is emphasized, suggesting a strategic approach to scaling businesses.

• The name "Bicycle" reflects the technology's empowering nature and its timelessness.
• It symbolizes the democratization of technology and aligns with the firm's focus on broad-reaching impact.

"It's a magnificent technology. It's one of the most empowering things we've ever invented." "A bicycle has looked the way it's looked, a triangle in two circles for a hundred years."

• Nyatta explains the inspiration behind the name "Bicycle," emphasizing the technology's empowering nature and its relevance to the firm's mission.
• The timelessness and democratic nature of bicycles are highlighted, drawing parallels to the firm's investment philosophy.

• Claure believes that all founders need some form of support, regardless of their level of success.
• Nyatta adds that great founders seek the truth and value constructive feedback, even if they are highly competent.

"Every founder will always need something." "Great founders want to hear the truth."

• Claure argues that founders can benefit from the diverse experiences and insights that seasoned investors can provide.
• Nyatta contends that while founders may be independent, they still value truth and constructive feedback, which can be transformative for their businesses.

• The personal investment by Claure and Nyatta in Bicycle Capital signifies a deeper commitment and alignment with the founders they support.
• They believe that investing their own capital changes the nature of their relationships with founders, making it more personal and partnership-oriented.

"When you bring your own capital, it's a different game, right? Because we're putting a significant amount of our wealth behind every single one of those investments." "Each relationship is a real partnership. It really matters to you because those returns matter to you personally."

• Claure emphasizes the personal stake they have in each investment, which fosters a true partnership with founders.
• Nyatta explains that when investing personal capital, the approach to investment becomes more personal and deeply connected to the success of the venture.

• There can be misalignments between founders and VCs, particularly in early-stage investments where VCs are focused on markups.
• In growth-stage investments, the goals tend to align more around building a durable, successful company.

"vcs want to mark up the company... that's a very different goal from the founders goal, which is to build a lasting company." "At the growth stage, it tends to be less the case because the markups are not fast and furious the way they are at the early stage."

• Nyatta acknowledges that VCs and founders can have different objectives, with VCs often seeking to increase their investment's value quickly, while founders aim to build sustainable businesses.
• The alignment of interests between VCs and founders becomes more harmonious at later stages, focusing on long-term business viability rather than rapid valuation increases.

• Claure advises founders to trust their instincts and learn from their own and others' mistakes.
• Nyatta emphasizes the importance of listening and asking questions that provoke thoughtful reflection in founders.

"Trust your gut. You know the answer." "It's much more about listening."

• Claure encourages founders to rely on their intuition, suggesting that it often leads to the right decisions.
• Nyatta's approach is to listen actively and help founders think critically, rather than imposing his own views.

• Latin America has a solid base of early-stage funding and crossover funds for D or pre-IPO rounds.
• There is a funding gap in the middle stages, particularly at Series B.
• Venture capital investment in Latin America surged in 2021 but has since decreased.
• The fund aims to fill the gap in Series B and later-stage funding, offering growth exposure in Latin America.

"The gap is in the middle. So starting at the series B, it's a bit of a desert in Latin America for a few years there." "That's the gap that we want to fill with the fund."

• The quote highlights the funding gap at the Series B stage in Latin America, which the fund intends to address.

• The fund size is considered a good start at $500 million.
• The fund has not yet begun extensive fundraising; initial capital comes from a select few LPs.
• The focus is on quality investments and providing high returns, not merely on being the largest fund.
• The fund aims for a small, personal portfolio of companies and mutual enthusiasm between investor and investee.

"I think 500 million, maybe a little more, is a good start." "This time it's all about quality and nor quantity, because we have a different amount of capital available to us."

• Marcelo Claure emphasizes the initial fund size and the strategic focus on quality over quantity in investments.

• The mandate at SoftBank was to invest in the most successful technology companies with a significant amount of capital.
• The current approach is more cautious, emphasizing selectivity and backing the right companies and founders.

"At that point in time in Softbank, the mandate was to build a portfolio play." "We're a lot more cautious in terms of which companies we're going to invest and which founders we're going to back."

• Marcelo Claure contrasts the previous strategy at SoftBank with the current cautious approach to investment due to different capital availability.

• The firm's foundation is based on a small, experienced team.
• The team's goal is to build capability over time without compromising the core principles.
• The long-term vision is for the current team to run the fund and establish it as the first of many.

"We're lucky because we have three people who joined bicycle day one who we've worked with for four years." "My dream is for this fund, for them to run this fund alone and let this be fund one of many more to come."

• The quotes reflect the firm's strategy to maintain a small, effective team and Marcelo Claure's aspiration for the team to lead the fund into the future.

• Latin America is perceived as a land of opportunity with more opportunities than capital.
• Nearshoring and commodities, especially lithium, are seen as drivers for economic growth in the region.
• Brazil and Mexico are expected to be among the top ten global economies.

"It's the only place there are more opportunities than capital available." "Between Bolivia, Argentina and Chile, that's 60% of the world's lithium."

• Marcelo Claure discusses the unique economic opportunities in Latin America, highlighting the potential for nearshoring and the region's wealth in commodities.

• There is a misconception that Latin America is fraught with issues like drug trafficking and political turmoil.
• The region is seen as ripe for digital disruption and has a large, underserved population.
• The challenge is to overcome regional skepticism and prove the viability of a multifund growth equity firm in Latin America.

"It's a misconception about the region." "Latin America is the land of opportunity."

• The quotes reveal Marcelo Claure's perspective on the false perceptions of Latin America and his belief in the region's potential for growth and opportunity.

• Opinions differ on whether Latin America should be viewed as a homogenous market or as a collection of individual, fragmented markets.
• Brazil and Mexico are the largest markets within Latin America, with well-run central banks and economic tailwinds.
• Other markets like Argentina and Colombia have their challenges but also opportunities.

"For sure there's Brazil and everything else in Mexico, but even language is different in Brazil." "If you really had to focus, it's Brazil and Mexico."

• The discussion points out the diversity within Latin America, with Brazil and Mexico being the primary focus due to their size and economic stability.

• The withdrawal of foreign capital has both positive and negative effects on Latin American markets.
• Companies with overvalued rounds from 2021 face challenges due to preference stacks and valuation adjustments.
• The exit of "tourist capital" is welcomed as it leaves room for informed investors who understand the region.

"Tourist capital is gone. This is left for people who understand the market." "It's a balance sheet. There are pluses and minuses."

• These quotes address the impact of foreign capital withdrawal, suggesting that while there are challenges, it ultimately benefits those with in-depth knowledge of the market.

• Having a local presence in Latin America is crucial for identifying and building relationships with companies.
• Founders in less accessible regions are unlikely to seek capital abroad, necessitating on-the-ground engagement from investors.

"You have to go and find them and build a relationship, and you have." "To understand what Latin America is all about. Right. You have to have lived in Latin America."

• The speakers stress the importance of being physically present in Latin America to fully comprehend the market and connect with local entrepreneurs.

• Latin Americans face unique challenges such as poor education and health systems, which create opportunities for technology solutions.
• There is a high level of financial sophistication in certain Latin American markets, particularly in fintech.

"Our education is way worse. Our health systems are broken." "Latin America has something like 25% of the world's fintechs."

• The quotes illustrate the distinct cultural and economic conditions in Latin America, which influence investment opportunities and the adoption of technology.

• Liquidity is a concern in Latin American investments, with few examples of successful exits.
• The speakers discuss the importance of proving liquidity potential through successful public offerings of Latin American companies.

"You want the next new bank to go public in New York. That'll kind of quiet the critics."

• The quote underscores the need for successful public offerings to demonstrate liquidity and validate investment strategies in the region.

• Brazil has a deep and liquid capital market, favorable for tech company IPOs.
• Companies can list comfortably in Brazil with valuations from 500 million to a few billion.
• Liquidity can also come from local listings and M&A, not just large NYSE listings.

"Brazil has a very deep liquid capital market. There are a lot of tech companies public in Brazil, and they've made investors a lot of money." "But from I don't know, 500 million, up to a few billion you can list very comfortably in Brazil." "So liquidity doesn't have to be a big listing on the New York Stock Exchange. It could also be local listings and it could be M&A."

These quotes emphasize the depth of Brazil's capital market and how it supports various scales of public listings and mergers and acquisitions, offering liquidity options beyond the major exchanges like NYSE.

• Successful fund returns may depend on entry price and the scale of exits.
• Not every company needs to list on the NYSE to provide scaled returns.
• A mix of large-scale and modest exits can be sufficient for fund success.

"Do you know what I think it does have to be if you want to fund returner, if you want to have scaled returns, well, it depends on your entry price." "And you need some exits that are big on the scale of a New York stock exchange, but you don't need all of them to be that."

These quotes discuss the dynamics of achieving fund returns and the notion that not all exits need to be of the scale of the NYSE, suggesting a balanced approach can still yield significant returns.

• Local markets in Brazil can provide liquidity for companies.
• The Nasdaq remains open to Latin American companies with proven scale.
• Building an entrepreneurial landscape in Latin America is a key goal.
• There's a focus on generating sufficient exits to inspire future entrepreneurs.

"I think it's a marketing evolution. I mean, it's nice to have a local market in Brazil, so that's going to create some liquidity for some of those companies." "Latin America is under construction, right? If it was already built, there'll be other people there. And we're builders, we love that."

These quotes highlight the evolving nature of the Latin American market and the strategic importance of creating liquidity and building an entrepreneurial ecosystem that encourages growth and future investment.

• Growth investment strategies differ from early-stage strategies in terms of expected returns and risk.
• Growth investments aim for modest returns with less risk, while early-stage investments have higher risk and potential returns.
• Loss ratios are an important consideration, with the goal of minimizing complete losses.

"Growth is different from early stage. Not every investment has to have the potential to be a fund returner." "My tolerance for loss ratios is very high. Plus, in some cases, as we said, this is going to. As you said, actually it's going to be a ten to 15 company portfolio. Ideally, none of those go to zero."

These quotes outline the different approaches to growth and early-stage investments, emphasizing a more conservative approach to growth-stage investing with a focus on achieving stable returns and managing the risk of total investment loss.

• Latin America has good coverage in early-stage funding but lacks pre-IPO and IPO rounds.
• Success in Series B and C rounds is necessary to build an IPO market.
• Talent development and attraction are crucial for market growth.

"We have a great series A seed, amazing funds, very well covered. Series B, series C, GA or self QED, and a few others. And now we need the pre-IPO and the IPO rounds." "The other thing that's needed is talent, and that's changing."

These quotes discuss the current state of the Latin American investment landscape, identifying the need for more advanced funding rounds and the importance of nurturing and attracting talent to support the ecosystem's growth.

• There's a mission to equalize venture investing in Latin America.
• Softbank's departure from the region left a gap that needs to be filled.
• There's a commitment to continue building the venture investing landscape in Latin America.

"I've made a commitment to the next few years so we can equalize Latin America, and that's our mission." "Latin America had the lowest percentage of venture investing as a percentage of GDP of whatever, than any other region in the world."

These quotes express a strong commitment to increasing venture investment in Latin America, highlighting the region's potential and the speaker's personal mission to address the investment gap left by Softbank's strategic shift.

• Work and personal life should be integrated, not seen as separate spheres.
• Happiness in work leads to integrating family and personal life naturally.
• Success in both personal and professional life comes from doing what you love.

"Work and play are not different things. They are the same thing, which is life." "If you're truly happy and content with what you're doing, you will bring your family into it, and your family loves that you're happy, so therefore, they're happy, and you make them happy at the same."

These quotes reflect the philosophy of integrating work and personal life as a single, fulfilling journey. They suggest that when one is passionate about their work, it naturally blends with their personal life, benefiting both aspects.

• Partnerships require compromise and mutual respect for opinions.
• Difficult discussions are necessary for the health of a partnership.
• Being selective and avoiding significant losses is key in investment strategy.

"We were only two partners and we were three. And it was those hard discussions that made us be two." "You got to bring your opinion, you got to bring your boldness, you got to bring. And at the end, compromise works in a marriage, compromise works in a partnership."

These quotes address the challenges and dynamics within partnerships, emphasizing the importance of open communication, compromise, and the ability to have difficult discussions to ensure alignment and success in decision-making.

• Sovereignty is considered overrated in the context of global relations.
• The emphasis should be on collaboration between countries rather than individual sovereignty.
• Peace is implied to be a more significant goal than sovereignty.

"I think that's way more important than this idea of sovereignty that everyone's obsessed about." "Sovereignty is overrated."

These quotes suggest a viewpoint that prioritizes global cooperation and peace over the traditional concept of national sovereignty, indicating that the latter may be less relevant in an interconnected world.

• Marcelo Claure has learned to be more calm and thoughtful from working with Shu Nyatta.
• Shu has taught Marcelo the importance of strong opinions and thoughtful decision-making.

"He's more calm. He's more thoughtful. I'm learning to think a lot. I'm a lot more thoughtful working with Shu than other people because he has a strong opinion on things."

Marcelo acknowledges Shu's influence on his work style, particularly in being more reflective and valuing strong opinions in business operations.

• Winners in venture capital will be those who can positively alter the course of a company's business.
• Losers will be those relying on passive investment strategies, like betting on trends without selective stock picking.

"Those that can help companies alter the course of their business in a positive manner. Not those that can have access to deals." "People that are just trying to place a range of bets, I don't think that works."

These insights reflect the belief that active engagement and strategic influence in companies are key to success in venture capital, as opposed to passive investment approaches.

• Marcelo Claure would choose Steve Jobs as a board member because of his intensity and perfectionism.
• Shu Nyatta would choose Neil Shen for his comprehensive experience and impact on the Chinese ecosystem.

"Steve Jobs." "I'm going to pick Neil Shen."

Marcelo admires Steve Jobs for his intense pursuit of perfection, while Shu respects Neil Shen for his multifaceted success in banking, founding, and investing.

• Marcelo's biggest miss was Newbank, teaching him not to be stubborn in investment decisions.
• Shu Nyatta reflects on missing out on OpenAI, emphasizing the need to invest in companies that build necessary infrastructure in thin protocol markets.
• Marcelo also discusses a regrettable investment in FTX, learning to never invest in what he doesn't fully understand.

"Probably newbank." "Missing the good ones is as bad as investing in the bad ones." "I'm never going to invest in something that I don't truly understand."

Marcelo openly discusses his investment mistakes, highlighting the importance of flexibility and understanding in venture capital decisions.

• Marcelo is dedicated to lifelong learning, exemplified by his involvement with Harvard's AI lab.
• He emphasizes the importance of understanding industries before investing.
• Successful individuals often share their knowledge, which can be valuable for learning and decision-making.

"We are lifelong learners." "Isn't it amazing how highly successful people love to share?"

These quotes show Marcelo's commitment to education and learning from others as a crucial aspect of his investment strategy.

• The venture capital industry is moving away from rapid investment decisions fueled by fear of missing out (FOMO).
• There is a shift towards more thoughtful and deliberate investment strategies.
• The market is becoming more discerning, and only funds that create real value will thrive.

"I think we've fetishized moving quickly." "The venture world is starting to shape up where all these people who thought, hey, let me just mark up a term sheet, because I am betting that somebody's going to come and six months later put a higher valuation, and that's how we made our money."

These observations critique the previous trend of hasty investment decisions and predict a more strategic and value-driven future for venture capital.

• Marcelo aspires for Bicycle to be as influential and supportive to Latin American entrepreneurs as Sequoia China is in China.
• The aim is to be involved in the success of every major company in Latin America.
• The venture ecosystem is evolving, with direct funding becoming more prevalent.

"I want to be what Sequoia China is to the chinese entrepreneurs." "I want to make sure that in every single great company that is built in Latin America, we have had a role to play."

Marcelo's vision for Bicycle is to become a cornerstone of the Latin American entrepreneurial community, mirroring the success and influence of Sequoia China.