Interaction model of private equity and venture capital developing factors in Chile and Latin America

[摘要] Private equity and venture capital (PE/VC) are efficient resource allocation systems that provide equity capital to selected entrepreneurs, industries or firms that contribute to advance the economic welfare of society. Private equity and venture capital firms act as a catalyst for initiating, consolidating, professionalizing, growing and globalizing their portfolio companies, and in doing so, they increase their competitiveness and expand their operations in regional and global markets. They create an invaluable ecosystem based on innovation, entrepreneurship and the detection of business opportunities, building local talent and setting up the pillars of new growing industries diversifying countries;; economies. From 1999 to 2005 the internet bubble and several economic crises impacted Latin America, collapsing private equity and venture capital activity. Moreover, the confidence of limited partners (LPs) in the fund managers (GPs, general partners) sank. Thanks to the fast growing internal demand of Brazil and the low economy cycle in developed countries, the appetite for private equity assets in emerging markets and in Latin America raised, creating the opportunity for successful exits. However, few success cases have been seen outside Brazil. Why the number of exits in Chile has been limited? What are the drivers of success? How is it possible to accelerate the development of PE/VC given the benefits they provide to the economy and the society? This document answers these questions identifying the most important factors affecting the development of private equity and venture capital. All the factors are linked together and form part of an ecosystem; they are not independent parts that can be studied separately. This ecosystem is modeled be mean of a framework, where the interactions among these factors are defined and their impact is explained in detail. Through the analysis of the model of private equity and venture capital developing factors two main conclusions are extracted: first, the development of PE/VC is a continuous learning process; positive actions implemented now will have a visible impact in the medium or long term. Second, success is the main driver of the PE/VC development as it has a positive amplifying effect in the whole ecosystem. However, success is one of many other factors, and all of them must be considered since all are interconnected. The more positive actions are put into action from all the different factors, the more success cases will be created and as a consequence, the development will be accelerated, creating a synergic reinforcing loop.

[发布机构] Massachusetts Institute of Technology