We are open to investments in any industry, with the possible exception of web-based ventures, that are usually one-wins-all propositions and in which there are competitors much smarter than us. Also, our capital limitations generally preclude us from competing in capital intensive industries, such as infrastructure or large energy generation projects. Finally, we avoid industries in which the State has an important role, either as client or regulator.
Apart from those caveats, we are open to pretty much everything. When deciding on new start-ups, we look for three factors:
a) The industry must be meaningful. Central America is comprised of small economies, if we invest in a niche industry, the potential upside would not justify our time. This of course would not apply to export-oriented industries, although unfortunately we have not found anything there yet. As a general rule, the venture should have the potential to reach $30M of value added per year in a 5-7 year time
b) There must exist some type of market failure in the industry under consideration. It is true that in general Central America is a relatively backwater environment with inefficient competitors and outdated business models. But there are exceptions, industries with very aggressive and efficient competitors, like textiles for export, fast-food or consumer credit. We look for easy victories, rather than glorious battles and possible defeats.
c) We must have a competitive advantage. This is usually the skills and knowledge of the people who will run the business, but it could also come from the platforms provided by other existing ventures. For example, the optics retail business leverages the 200.000 customers in the fidelity program of our pharmacies in Honduras.