From entrepreneur to investor: An introduction to the dark side

By Luis Enriquez

I co-founded and was CEO of Cultura Colectiva, one of the biggest digital media companies in Latin America with more than 30M unique visitors and 50M followers on social media. I got one of the first Series A investments from a venture capital firm in Mexico. After a decade of being in the entrepreneur side I co-founded Bridge Latam, one of the first venture capital founders fund of the region. In the middle of 2023, I joined the other side of the table and became a full time investor. This essay aims to share my experience joining the dark side and what both sides have to learn from each other to foster a better ecosystem in Latin America.

I would divide this essay into 3 main learning points: First, reasons why it is not easy to be an investor; Second, there is a great opportunity in the gap between all the information that an investor has and the energy and power an entrepreneur has; Third, why the dark side is brighter than it seems.

First, grass is always greener on the other side. When I was in the entrepreneur side I thought that being an investor was super easy compared to creating your own business. There are some really though things about investing:

Learn to be patient and deal with frustration. As an entrepreneur I'm biased towards thinking positively, being an entrepreneur means you think you can do things that most of the other people think are not possible. When I became an investor dealing with the frustration of looking at different ventures and realizing they are great ideas and business but not fit for the firm is hard. In Bridge we receive more than 1200 investment proposals per year and on average we say no to more than 99%. This means that most of my time will go into analyzing a venture or an industry and then not acting on anything.

You don't know if you are a good investor in no less than 7 years. As an entrepreneur you have a constant feedback loop of your product, pitch deck and many other factors. As an investor you take a decision today and will only know if it was a good one much longer on the road, so it's difficult to learn super fast, and when the feedback loop comes in 7 years and you learn from your mistake it's probably too late and you are out of business.

You have to learn to build castles in the sky. I used to think that investors had a lot of money, but when I realized that the 2% of management fee has to include: deal flow, research of opportunities, support for portfolio companies, reports and events for investors, office and operational expenses then it seems like a tight budget. And don't forget that you always have to be pitching investors your new fund so you don't get out of business.

You have to have an independent analysis of the opportunities. This seems obvious but I think almost all of the VCs in Latam lack this part. Group biases come along when a firm with a brand name is investing. I mean even A16Z invested in FTX without doing their strong due diligence and we have seen this many times repeated all over the financial system. You have to go against normal human behavior that is so attached to our species.

Now to be fair, daily operations are easier for investors than for entrepreneurs nevertheless it is as hard being a great entrepreneur than a great investor.

Second, I used to think I knew a lot about analyzing a business, understanding and industry and creating a successful startup. When you analyze 100 deals per month as an investor you start to understand some patterns and what potentially could be a great scalable venture.

It has been crazy to see so many great entrepreneurs with great energy pitch ideas that are great but not good enough to be a super scalable business and without them even realizing it. Entrepreneurs, in general, underappreciate the experience and information that the investor has. 

On the other side it's also frustrating to see investors just analyzing the ideal idea and the size of a market without giving the right amount of weight to the experience and energy of the entrepreneur. Investors, in general, underappreciate the ability an experienced entrepreneur has to create new products and create bigger markets.

I truly believe that the intersection between these two gaps is a great opportunity, that is why I'm more bullish than ever in our founder to founder approach in Bridge Latam.

Third, I always joke about the investor side being the dark side. As an entrepreneur I used to think that all the creative energy was in the entrepreneurial side and the investors were just financial intermediaries sucking all the creative energy of the entrepreneurs and transforming it into money for the already wealthy limited partners, like a blackhole getting all the light from the Universe.

And Although I still believe this is the case, I don't think just because it's dark it means it's bad. On the contrary you need a dark place before it can get illuminated. The venture capital investors markets in Latin America are the creators of the new business narratives in the region. Without investors there would not be a Rappi, a Nu, a Kavak or a Mercado Libre. Today a new generation of young students don't want to be Carlos Slim, they want to be Simon Borrero, David Velez, Carlos Garcia, or Marcos Galperin.

And yes they are the man in the arena as Roosvelt famously put it in one of their famous speeches, but there is no man in the arena without someone watching it, without a promoter, without an investor. This doesn't mean that the investor has a more important role, I'm just saying that is as important a leader as the first one that believes in that leader.

Welcome to the dark side.