Progresa Capital: Pioneering Venture Capital in Colombia

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Founded in 2009 by Promotora, the investment banking affiliate of the Colombian conglomerate Grupo Sura, Progresa Capital was the first full-fledged Colombian venture capital fund managed by a local team. 

Progresa Capital seeks to provide financial returns to its investors along with support for innovative portfolio companies and sustainable development in the region. In order to do so, it targets promising  start-ups operating in Colombia’s burgeoning life sciences, information and communications technology (ICT) and applied engineering sectors, looking for companies with scalable business models that could potentially compete in the global marketplace. 

The fund raised $21.3 million, with a target deal size of $500,000 to $3 million for minority equity stages of 30-49% in its invested companies. As of late 2015 it had made seven investments, completing two full exits and one partial exit out of its seven total portfolio companies, for a multiple of invested capital (MOIC) of 2.44x on exited investments and an average gross IRR close to 40%.

In 2009 only a handful of small, government-backed institutions such as Bancóldex provided some sort of financing to small-scale startups. However, based on its experience providing project finance and strategic consulting to Colombian start-up companies, Promotora believed that the Colombian private equity and venture capital (PEVC) ecosystem had matured enough to support a dedicated VC fund.

Set up with the support of the MIF, Promotora’s Progresa Capital was thus the first full-fledged VC fund managed by a local team to emerge in Colombia. Through its two full exits and one partial divestiture, it proved that the larger Colombian entrepreneurial and VC ecosystem could function across the investment cycle of fundraising, investing, and exiting, demonstrating the viability of VC investment in Colombia.

Therefore, when in early 2015 the MIF’s Market Innovation Lab and its Early Stage Equity Team partnered with Prof. Josh Lerner and Bella Research to carry out a detailed study of early stage VC funds in which the MIF had invested, Progresa Capital was one of the three funds selected to be included in the analysis. The study explored how the MIF financial and non-financial support of Progresa Capital ultimately impacted socioeconomic development in LAC:

• As of late 2015 companies in Progresa Capital’s portfolio had experienced a 63% increase in revenue, with 35% employment growth and a 61% increase in wages. Payments to suppliers had increased by 241%, and portfolio companies generated 93% more tax revenue.
• The research team found that the capital provided by the fund had a high impact on its portfolio, reflecting the scarcity of other sources of risk capital for early stage companies in Colombia.
• The fund also helped its portfolio companies to form relationship with key partners and customers, particularly through its close relationship with Grupo Sura and Grupo Argos, two large Colombian conglomerates with wide and deep networks across the region.
• Progresa Capital also encouraged its entrepreneurs to take classes in several business topics. These were partially funded by the MIF through its technical assistance program, and were highly regarded by the portfolio company attendees.

Additionally, several portfolio companies had very innovative business models with the potential to improve the lives of vulnerable populations, such as for example:

• Ecoflora was founded in 1998 as a cut flowers supplier to Colombia’s large export market, but it subsequently moved into the naturally-derived biopesticide business. In 2011 Ecoflora spun off its biopesticide division, Ecoflora Agro, to Arizona-based Gowan Company, obtaining a 3.14 multiple of invested capital in the fund’s first successful exit. The remaining company, Ecoflora Cares, focused on naturally-derived cleaning and home care products and natural food and cosmetic ingredients, including food colorants. As of late 2015 a natural blue colorant called Jagua Blue, derived from a plant indigenous to the jungles of Colombia, was awaiting FDA approval, and the company envisioned a growth strategy based on sustainable harvested and fairly traded biodiversity resources. 
  
  
• Ubiquo Telemedicina is a software firm headquartered in Medellin. It offers custom telemedicine and medical imaging solutions (e.g. CT scans, MRIs, or radiographs) to connect patients in remote areas with doctors located in Colombia’s larger towns and cities, and its suite of products and services also includes cloud storage of medical records. Combined, these services aim to improve the quality and availability of healthcare to traditionally underserved populations.