The Ledger
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Escobari: No startup team or business model can outgrow its market size
“The three more statistically significant things, size of the market, defensibility of the business model, The quality and the capabilities of the team. The three things. Equally significant, but the most significant size of the market. Because no matter how go…”
Escobari: Paying 20x ARR on two weeks' notice is irresponsible LP management
“It's a lot more fun than competing for deals on, you know, two weeks notice and paying 20 times a year. I find that irresponsible with the capital of our capital partners.”
Escobari: Competitors deployed funds in 12–18 months, 3x faster than General Atlantic
“Every one of our competitors was running their funds in 12 to 18 months. Deploying capital three times the rate we were”
Escobari: Many Startups Raised in Abundant Liquidity Will Cease to Exist
“The hangover of a period of excessive abundant capital globally, not just in Latin America, is that you have a large percentage of the companies Who got lost in this abundance of liquidity and today don't have viable business models and will unfortunately ceas…”
Escobari: Market Followers Often Beat Early Leaders Who Spend Recklessly
“And in most situations, it is often the follower that does even better because they learn from the mistakes of the leader who spent all that money recklessly without listening to the signals. And you're listening to the signals and you're being wise. These guy…”
General Atlantic priced investments 20-30% lower than competitors during market boom
“We looked like tough negotiators because we were pricing things, 20, 30% below the tourists.”
Escobari: General Atlantic passed on Nubank's Series A, B, and C rounds
“I should have backed David Vélez at Nubank. David had worked at GA. I had tried to, and he left for Sequoia, and I tried to bring him back when I got hired into GA. He called us in our Series A, Series B, Series C, then he stopped calling because he kept sayin…”
Escobari: Emerging markets will automatically create $5B-$10B+ global companies
“Just watch us create five, ten billion dollar plus companies, global companies out of the emerging markets. It's going to happen automatically. You know, FOMO. FOMO will take care of it.”
Escobari: Investors hold information superiority in founder pricing negotiations
“In negotiating price with an entrepreneur, it is often that the investor has a lot more information than the entrepreneur, and it is often that the investor has a lot more experience negotiating in terms of an entrepreneur.”
Escobari: Deals are underwritten to a minimum 25% five-year return
“The fair price is the price that allows me to get at least a 25% return in five years based on a P multiple exit by the time I exit.”
Escobari: General Atlantic suffers capital losses on only 3% of invested capital
“We have 42 years of data at General Atlanta, and we've done over 400 transactions. We know we've very experienced, and across the entire world in six sectors. Over the 40 years, 10% of the transactions lead to 50% of the gains. And that's been consistent throu…”
Escobari: General Atlantic passed on Uber's $2B round over market size limits
“So, one of my mistakes as an investor is Anton, my friend Anton Levy, co-president of the farm, invited me to look at Uber, the two billion dollar round, because of the international opportunity, and we went, and we met Travis, The entire black market industry…”
Escobari: Venture Capital and Growth Investors Lose Discipline at Market Peaks
“One of the problems of the venture capital community and the growth community is we're extremely pro cyclical. We drink our own Kool-Aid, we over invest in the peak of the bull market, and we lose all discipline.”
Escobari: Three warning signals that mark the end of a bull market
“You know, things are really, really silly, and it's beginning to be the end of the bull market when three things happen. First, everyone's making money, even the least talented people in the market. That's a clear warning signal when everyone's making money. S…”
Escobari: The two main ways venture capital funds get destroyed in downturns
“What we did learn, and we learned this in, in, in 2000 is the two ways you get hurt is you spend too much of your LP's money at the peak of the market. And then you have too many unfunded business plans who need to raise money when everyone's frozen.”
Escobari: General Atlantic will never deploy fund commitments faster than 3 years
“So the two things we said is we're never going to run our commitments faster than three years. And we want to make sure the vast majority of our companies have fully funded plans.”
Escobari: General Atlantic Lost Great Deals to Fast, High-Paying Tourist Capital
“And we lost to them. You know, I, you know, here's a sort of wise, seasoned manager that adds lots of value, but requires three months of due diligence and pays 40% less than a guy that gives you a check in three days. Hard to compete. So it was humbling and w…”
Escobari: General Atlantic targets a 25% annual return over five years
“It's the price that allows me to get at least a 25% return in five years based on a P multiple exit by the time I exit. And I backtrack into what I can afford to pay today on a base case.”
Escobari: General Atlantic partners are paid on global, not deal, results
“We all get paid out of the same pot. So no one gets paid of their individual performance. We get paid out of global performance”
Escobari: 30% of LATAM investment came from committed regional capital
“This time around, at least 30% of the capital came from people who were permanently committed to the region.”
Escobari almost spent $500M on an Argentine acquisition before pulling out
“I almost spent five hundred million dollars on buying a company in Argentina, and then the day bids were due, I woke up and said, what the hell am I doing? And I'm glad we didn't buy it because the country went where it went.”
Martin Escobari: GA Portfolio Raised $20B Primary Capital in 2021
“So in twenty-twenty-one, our portfolio raised twenty billion dollars of primary capital, 19 of which from other parties.”
Martin Escobari: 97% of General Atlantic's 200 Portfolio Companies Are Fully Funded
“Today, we have 200 companies, 97% of them, fully funded plants.”
Escobari: Submarino raised $200M and was weeks from IPO before 2000 crash
“We had raised two hundred million dollars. We were three weeks away from IPO in 2000. The market crashed.”
General Atlantic meets 10,000 companies annually and invests in 50
“At GA, we meet 10,000 companies a year. We invest in 50.”
Escobari: General Atlantic requires 3 of 4 votes on investment committee
“We have a four person investment committee. You need three, three people to vote yes out of the four. And it's the co-president, the co-president and the CEO.”
Escobari: XP market cap grew from $300M to $20B in Brazil
“The same theme in Brazil 12 years ago, a company you should meet, XP, Market cap went up from three hundred million to twenty billion, doing the exact same thing E-Trade did, except in a market where the banks were at 99% and now are at 82 and dropping.”
Escobari: General Atlantic made little money on 2013-2015 traditional PE deals
“There was a period of time where I drifted away from technology led disruption. And tried my hand at traditional private equity. I discovered it's not my cup of tea, and we didn't make a lot of money in those two transactions, and I went back to my roots.”
Escobari: Latin American anti-fraud companies can build global solutions
“And if there's one thing where world-class in Latin America is fraud. So if you can solve this issue in Latin America, you got, you probably have a mousetrap that can solve this issue globally.”
Escobari: Submarino was the first Brazilian tech company to go public
“I was co-founder of the number one e-commerce company in Brazil in the nineties, the late nineties, company called Submarino.com, which became the first Brazilian company, tech Brazilian company to go public. It's the first big home run IPO in, in, in, in post…”
Escobari: Latin America accounts for 15% of General Atlantic's investments
“Latin America is now about 15% of what we do.”