Boardroom Governance with Evan Epstein

Daniel Green: "2021 was an Absolutely Buoyant Year for Latin American Venture-Backed Startups."

Episode Summary

Welcome to the Boardroom Governance Podcast. I’m your host, Evan Epstein. I’m happy to launch the 2022 Boardroom Governance podcast season with this episode featuring Dan Green, the Co-Head of the Latin America Practice Group at Gunderson Dettmer, a prominent international law firm headquartered in Silicon Valley. Dan works with emerging growth technology companies and VC funds that invest in them. His practice encompasses all areas of corporate and securities law, including company formation and financing, public offerings, debt transactions, corporate governance and investor-side financings. Recent transactions handled by Dan are some of the most prominent VC financing rounds in Latin America, including those by Kavak, Bitso, NotCo, Konfio, Kueski, Buk, Xepelin and many others, as well as M&A activity by Cornershop, Kavak and other clients. Dan also represents VC firms on their investments from time to time, including Andreessen Horowitz, Founders Fund and ForgePoint Capital. In this podcast, we talk about the current state of entrepreneurship and VC in Latin America, the evolution of funding and exit strategies, in addition to other corporate governance matters relevant to startup founders, investors and directors generally. If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media. You can find all the show notes on the website boardroom-governance.com and please feel free to subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com

Episode Notes

  1. Intro.
  2. (1:40) - Start of interview.
  3. (2:34) - Dan's "origin story". He grew up in southern California, did his undergrad at Stanford where he studied international relations. This prompted his quest to do something "cross-border." He did an exchange program in his junior year to Santiago, Chile, where he met his now wife and that planted a seed to do something related to Latin America. After law school he went to London where he practiced with Allen & Overy for 4.5 years. In 2004 he came back to Silicon Valley to practice as a corporate associate at WSGR, where he spent 6 years. At that time, there was not much cross-border work with Latin America, although there were partners focused on China, Israel and India, so the international blueprint was there to start building bridges between Silicon Valley and Latin America. Since then, he has developed his practice (passing through Goodwin Procter and Greenberg Traurig) and now at Gunderson Dettmer where about 80% of his practice is focused on Latin America.
  4. (5:53) - Dan's description of Gunderson's Latin America practice: "Fundamentally, we're transactional lawyers that do international cross-border work." Their focus is on venture-backed technology-driven, high growth companies.
  5. (10:21) - Why he advises his clients to incorporate in the Cayman Islands. "When we advise clients on a choice of a holding company, it comes down to a mix of investor preferences, tax considerations and administrative aspects." For Latin American companies, there are now three preferred choices: Delaware C-corp, a Cayman Islands company or a UK company. Kaszek Ventures was an early advocate for using a Cayman holding company. "I think we're going to see those 3 structures prevail in the market." Three prominent examples with Cayman holding structures: Nubank (the Brazilian neobank that recently IPOed in the US), Cornershop (a Chilean grocery delivery company that was acquired by Uber) and Kavak (a Mexican used-car online marketplace).
  6. (17:26) - On the geopolitical tensions between the US and China, and its implications for the startup ecosystem in Latin America. On the rising investments from China in Latin America and the increasing role and scope of the Committee of Foreign Investment in the US (CFIUS) impacting transactions in the US.
  7. (20:39) - On the increasing antitrust pressure from local regulators in Latin America. The example of Cornershop in Mexico and Chile.
  8. (23:19) - Dan's overview of entrepreneurship in Latin America. "Brazil is by far the most important market, followed by quite a distant second place from Mexico. Those two markets by themselves dominate the region in terms of capital deployed, number of deals, exits activity, etc." 2021 was a record year for venture activity in the region [$15bn in venture investments]. What's driving this growth? A combination of factors, per Dan: "The pandemic accelerated many changes, all of it boosted by widespread broadband adoption, digitally native people, younger generations, generational shifts in family businesses with decision-makers in their 40s or 30s and a vast under-banked and under-served population." There is also a virtuous cycle with big investors such as Softbank investing in the region ($8bn in two funds focused in Latin America) and other late-stage investors that have increased the cadence and velocity of investments such as Tiger Global. On the corporate governance implications of these investments.
  9. (30:22) - On the changing landscape of venture funding  in Latin America: "There is a much richer ecosystem of investors in Latin America, with stronger local investors." The rounds are getting bigger and investments are done at a faster pace. "But the markets will always be cyclical." His take on dual-class shares and other governance structures. "There will be down-rounds or re-caps if we go on down cycles, and these questions may play out in the next decade. We are still in an incipient stage of corporate governance in the region."
  10. (39:13) - On SPACs, and how they can impact exit strategies for Latin American companies. "I'm somewhat cautionary and skeptical of this structure, generally." "It doesn't really save that much time, nor much cost." [See Prof. Klausner's latest research on SPACs.]
  11. (44:20) - On the role of directors, and diversity on boards. What's the status in Latin America? "It's slowly percolating down in Latin America." "Some of the investors are pushing some ESG standards in their investments, but not so much on gender diversity."
  12. (48:28) - On the positive impact in the increase of equity compensation and stock options in Latin American startups ("from top to bottom"). This is a sort of "democracy within the cap table." This is a trend that is starting to become more prevalent in the region.
  13. (52:15) - Dan favorite books:
    1. Outliers, by Malcolm Gladwell (2008)
    2. Historical novels and intrigue, such as Red Notice by Bill Browder (2015)
  14. (53:27) - Who were your mentors, and what did you learn from them?
    1. Steve Bochner (WSGR)
  15. (54:36) - Quotes that he thinks of often, or lives his life by:
    1. "You have brains in your head. You have feet in your shoes. You can steer yourself any direction you choose." Dr. Seuss.
  16. (55:41) - An unusual habit that he loves: He likes to collect scorecards from golf courses, he's been doing it since childhood.
  17. (57:56) - The living person he most admires: Barack Obama.

Dan Green is a Partner and Co-Chair of the Latin America Practice for Gunderson Dettmer, a prominent international law firm headquartered in Silicon Valley. 

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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License