Why fund size alone won’t save you—and what actually drives venture returns in LatAm
Every now and then, I see people celebrating new venture funds based almost exclusively on size.
“We’ve raised $150M!”
“We’re now a $500M platform!”
But here’s a reality check—especially for anyone operating in Brazil and broader Latin America:
Size without strategy is just noise.
And size without discipline? That’s a recipe for disappointment.
The Local Reality Check
Let’s start with the cold, hard numbers.
Around 80% of tech M&A transactions in Brazil are under R$100 million (~US$20M). These are not unicorn exits. They’re solid, realistic outcomes in a still-maturing ecosystem.
Yet, many GPs (and LPs) continue to structure their funds as if they’re hunting for the next WhatsApp.
Spoiler: you’re not in Silicon Valley. You’re in São Paulo, Bogotá, or Buenos Aires.
And the pipeline here behaves differently.
The Math You Can’t Ignore
LPs expect total DPI or TVPI above 4x. That’s the magic number to be considered a top-tier fund—or even just “successful.”
But what does it take to get there?
Let’s run a few examples:
• A $50M early-stage fund owning 10% of a $100M exit makes $10M → that’s 0.2x DPI.
• A $500M multi-stage fund owning 15% of a $1B exit gets $150M → just 0.3x DPI.
Even with a huge exit, it’s hard to move the needle if your fund is massive.
And remember: most funds don’t hold their full ownership through follow-ons. Realistically, stakes end up 5 percentage points lower than initial targets. That 15% becomes 10%, or less.
Smaller Can Be Smarter
Unless you’re betting on rare, massive exits—and landing them consistently—your fund’s size will drag your returns down.
But a smaller, focused fund that buys in with discipline—avoiding inflated entry prices and chasing under-the-radar opportunities—can deliver outsize returns with “ordinary” exits.
Why? Because it’s the delta that matters:
The difference between your entry and your exit.
Not the headline valuation.
A lean fund can hit 4x DPI with a few $100M exits. That’s doable in LatAm. A massive fund, on the other hand, needs unicorn-level wins just to look… okay.
There’s Limited Room at the Top
There’s simply not enough mega outcomes in this market to support a crowd of $100M+ funds.
If everyone’s chasing the same massive exit targets, someone’s bound to be disappointed.
The best-performing funds in LatAm will be:
• Sharp on entry discipline
• Realistic about exits
• Built for this region—not for the Silicon Valley fantasy
TL;DR
Size might impress at first glance.
But in venture capital, it’s the technique—and the timing—that truly satisfies.
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