The latest edition of G5 Talks was held with Paulo Passoni, Managing Partner of the SoftBank fund dedicated to Latin America. The fund focuses on investing in companies in Latin American that offer high growth potential and are aimed at impacting the economic and social reality of their markets through innovative technologies.
The investor spoke with Levindo Santos and Renan Rego, Partners at G5, and with portfolio manager Fernando Donnay about his career, high impact entrepreneurship and the venture capital market in Brazil.
G5 Talks is a project through which business leaders exchange experiences and lessons learned with the G5 team.
Mr. Passoni holds a bachelor’s degree in Business Management from FGV and began his career in investment banking at Morgan Stanley. Following, he had the opportunity to jointly pursue an MBA and master’s degree in Public Policy at Harvard University, and then continued his career in the investment industry, as a manager at Eaton Park in New York.
A few years later, he joined Third Point being responsible for investments in emerging markets, focusing on Latin America.
“At Third Point I felt at home. I made few investments, from 7 to 10 per year, always following the “long only” strategy. I only bought what I thought would be worth more in the future, either through debt or equity. In my portfolio, the highest returns came from anchoring IPOs and holding these shares with two types of IPOs being more profitable: privatizations, or assets sold by governments, and growth equity.”
Paulo Passoni grew up in the Jardim Angela neighborhood, a poor region in the city of São Paulo, and attended a local public school until entering high school. He spoke about the challenges and opportunities that helped shape his career and emphasized the encouragement he always received from his family who valued education and sports.
“My parents worked very hard, I witnessed that. And they invested in my education. I believe it is life’s challenges that makes you special and not the easy way out. The harder your path is, the higher the chances of you becoming extraordinary.”
Mr. Passoni also said that sport was essential for his training, both in personal and professional life. At a young age, he played professional volleyball for the Banespa team, in São Paulo.
“The extremely competitive environment, in which you need to constantly rise up to the challenge, is an excellent way of preparing you for life. It is a type of job in which either you are good at it, or you are out. Banespa gave me that strive for winning and this had an essential impact on my life”, he recalled.
After ending his career in volleyball, Mr. Passoni, still a young man, moved to Ohio, USA, where he lived for one year to learn English. Upon returning to Brazil, he began college at FGV. “I really wanted to study Marketing and not Finance.”
However, life guided him to the financial market, especially after an internship at a company in Berkeley, California, where he worked while still at FGV.
Brazilian entrepreneurs and new businesses
Mr. Passoni commented on high impact entrepreneurship in Brazil. According to him, a disruptive entrepreneur “is still an outsider here: it is typically a foreigner who lives in Brazil or a Brazilian who lived abroad and returned to undertake on a new business. A person certainly has to have some “loose bolts” to believe that hard work and dedication will disrupt a relevant market in Brazil [laughing]”.
He added: “Six years ago everything was harder. What impresses me is the resilience of this type of entrepreneur and their ability to attract capital and keep up their hard work with talent and perseverance”.
He also believes that “we are already on the 2.0 wave of high impact entrepreneurship”. Within this context, many college graduates are already interested in becoming entrepreneurs and this is very positive. It is a great career option and there is enough capital available to support good initiatives.
Paulo Passoni helped build a portfolio for Softbank with more than 20 investee companies, such as Banco Inter, Rappi, QuintoAndar, VTEX, PetLove, MadeiraMadeira and Creditas, and explained that two thirds of investees are expected to multiply their invested capital by five to ten times. According to him, the pandemic helped many investees grow, especially those who were able to offer digital alternatives during a time when adapting to social isolation was needed.
“Many of these innovations are here to stay and will cause ongoing disruptions. But we are going to make mistakes, too. You don’t get it right all the time.”
For anyone looking at this market, he explained the importance of understanding how to apply technologies within the contextual dynamics of the local market and the need to structure a business model that makes sense. It is preferable to analyze opportunities that are scalable and have the potential to grow beyond local boundaries.
He finalized the conversation stating, “We have examples of business models that were created in Brazil and had not been thought of anywhere else in the world, such as Gympass and Hotmart”. According to him, this is the right way to go.