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THE SCOOP

Newsletter #5 - November 2022
On behalf of the entire H20 family, we welcome you to our November 2022 monthly newsletter! In this month's edition we will update you on our insights regarding ESG in the the LatAm tech industry, updates from some of our portfolio companies, an official introduction to our newest onboarded advisors and finally a snapshot of main events we've been attending across Latin America. We hope you enjoy!
The "ABCs" of "ESG" in Latin American Tech
 
We're halfway through November, and the last month of the year is just around the corner. While some of us are excited for holiday gatherings, it's also a great time to start planning goals and milestones for next year. Our last newsletter talked about an important question regarding gender inclusion and the quest for diversity in the Latin American startup/VC ecosystem. So, while we prepare for the excitement of the end of year holidays, we want to pose another important question that will form a key goal for our year to come: “how can VC funds and startups benefit from an ESG strategy?”
 
For those who don't know what ESG stands for, or why this should even be on your radar, don't fret. ESG is an acronym standing for three simple (yet compelling) concepts: Environmental, Social and Governance. This concept has actually been around for decades, but not until recently has it begun to reshape how corporate leaders view the “bottom line” of business and is now becoming a compliance and statutory issue in some developed countries. Hence, an ESG strategy is the blueprint that will shape how a VC fund or startup (in this context) will continue to make its operational decisions while also giving the environment, society, and corporate governance the high importance it well deserves.
 
Now, the “E”, the “S” and the “G” are very large buckets representing a whole range of different things depending on the nature of each business. For instance:
  • Environment, can represent anything from recycling policies and waste management to carbon emissions and footprints.
  • Social, can cover subjects both inside and outside of the workplace. Such as, worker gender diversity, code of ethics and conduct as well as how to manage customer relationships and overall workplace culture.
  • Corporate Governance, can range from compensation tactics, stock option/carry compensation, and how to manage board diversity & independent members.
So now that we´ve covered what ESG stands for and the different flavors it offers, let's talk about why you would benefit from strategizing around it. The good thing about ESG being such a broad concept is that there´s no “one size fits all”, but rather a “different size fits all”. What we're trying to say with this badly versed reverse analogy is that you can have your own personalized ESG strategy regardless of being a VC fund or a startup, or even if you’re asset light or asset heavy. Each concept within ESG is so broad because it gives everyone the opportunity to work towards these concepts whatever their business model, team size or operational vertical may be.
 
If you´re a founder or startup employee, you might be surprised to know that ESG strategies have multiple present and future benefits for your company. For starters, startups with a formal ESG strategy in place have proven an increase in competitive advantages from client and board standpoints; have larger appeal to top next-gen talent; enjoy decreased employee turnover; and report strong improvements in their bottom line. Addressing ESG concerns early on in your business development and planning can help increase your chances of getting funded and operating a successful business. And in case you´re a “glass half empty” kind of person, in some cases it can help prevent you from experiencing civil litigation, fines, and social backlash.
 
If you´re an investor like us, you'd be surprised to know that you can have an impactful ESG strategy even if your fund is not impact-thesis focused. Similar benefits that startups have are also shared with funds, such as boost in employee retention, increased diversity across portfolios and employee base, increased competitive advantage vis-à-vis other funds, added value to community platforms and increased access to new sources of LP capital.
 
But just like when operating a startup, putting words into actions can be harder than it seems. In our research, we've come across several helpful tips that can guide us all when thinking about putting together and ESG strategy:
  • Measure: measuring the current impact that you´re having is a great place to start. You might not know it, but you´re already creating some sort of impact. Measuring it can help you better understand where you stand now, and where you need to improve.
  • IRIS+: IRIS is an impact measurement system created by the Global Impact Investing Network (GIIN). They provide a simple to use platform that guides you towards impact metrics you should track depending on the UN Sustainable Development Goals you´re looking to work towards.
  • The Impact Management Project: Their mission is to literally “mainstream the practice of impact management”. Their platform seamlessly breaks down impact measurement into 5 main dimensions: What, Who, How Much, Enterprise Contribution and Impact Risk.
There are many helpful platforms and guides online to formalize impact measurement and ESG strategies. You'd be surprised to know how many companies (big and small) or funds (VC, PE, Hedge, international and from Latin America) or even banks are already speaking and working towards building their own ESG strategy. If you´re currently working towards building your own, or already have one in place, we'd love to hear from you and share best practices and key learnings. On the other hand, if you had never previously heard of an ESG strategy, we hope that this newsletter has helped you learn about a new subject and encouraged you to start working on your own. We look forward to learning from and sharing our learned insights with all of you.
H20 PORTFOLIO UPDATES
Bacu, the next-generation restaurant solution in LatAm, successfully opened its first two live sites in Bogota. The company expects to open two new additional sites in the upcoming months.
Felix Pago, a new-aged remittance company helping improve how money is sent across teh US-Mexico border, has surpassed the threshold of US$2M in total remittances sent to-date throughout the company's platform. Congratulations!
H20 OPS UPDATES

Advisory Committee
At H20 we are pleased to welcome Juan Andres Mendoza and Warren Gutensohn as our newest onboarded advisors, who will play a key role in supporting our portfolio companies in the fintech and B2B marketplace verticals.

Partnerships

During the last couple of months, we closed partnerships with key players with deep expertise in the most relevant business verticals. We are thrilled to officially welcome them all!

EVENTS
Natalia Rico, H20's Head of Portfolio Ops, was invited to participate as a speaker in 4Founders' 2022 Forum in Mexico City alongside top-tier speakers of the VC ecosystem from LatAm. The panel was structured to discuss the evolution of VC in the region.

Key Takeaways:
- There has to be more attention towards climate and educational investments
- Break bias and generate inclusion regarding next-generation founders to back
- Long-term changes: better prepared talent, infrastructure for digital charges/payments, and more visibility on problematics to solve

 
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During November 2022, H20's Chief Investment Officer, Stevon Darling, was invited to participate as speaker in Open Finance 2020 in Mexico City alongside ecosystem players such as Unicorn founders of Stori and Clara. More information regarding the event here

THE SCOOP

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