Founders & C-Levels

Wenyi Cai is the Founder &amp; CEO of Polymath Ventures, a venture studio that builds digital platforms to empower the middle-class of Latin America. Prior to founding Polymath, Wenyi was an entrepreneur in Silicon Valley. As the COO of Milo.com, a consumer internet startup that sold to eBay in 2010, Wenyi led business development efforts with major technology companies like Microsoft and eBay and oversaw the product and engineering teams. Earlier in her career, Wenyi was a consultant with McKinsey &amp; Company in the Middle East, Africa, and South Asia. Preceding her business career, Wenyi helped build a quantitative trading hedge fund, and was a published researcher in applied physics. Wenyi graduated cum laude from Harvard College, and studied philosophy and physics. Wenyi was born in China and grew up between China and the United States.

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Co-Founder & CEO 

Wenyi Cai 

Polymath Ventures

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About Polymath Ventures

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A Venture Studio is basically a company that builds other companies repeatedly following a specific step-by-step methodology to create and scale successful businesses.&nbsp;The main idea of the business model is that comprehensive, diverse, and expert teams can achieve amazing results when building over and over again, rather than just dedicating themselves to one single company.&nbsp;Venture Studios have become increasingly popular over the last 10 to 15 years, but we are only now starting to see their success in different parts of the world, where they have been able to create transformative businesses in different sectors and industries.&nbsp;There are quite a few things that set us, venture studios, apart from other entrepreneurs dedicated to building a single company, but here are 6 of the main differences.&nbsp;In the meantime, we want to dedicate this blog to better understanding why some Venture Studios go on to become funds that invest in companies outside of the Studio, but that align with the studio’s thesis and are able to leverage some of the studio’s capabilities.&nbsp; As we stated before, <a href="https://polymathv.com/library/articles/6-reasons-venture-studio-mode" target="_blank" rel="noopener noreferrer">Venture Studios</a> are able to create and scale companies at a high success rate by employing a repeatable, relatively standardized methodology. However, there’s always a limit to how many companies you can build from scratch, even with a robust and talented team.<figure class="image"><img src="/uploads/blog_Why_Venture_Studios_make_great_funds_4047b21904.jpg"><figcaption>Venture Studios are able to create and scale companies</figcaption></figure>&nbsp;An increasingly common way for Studios to leverage their company-building expertise in a more scalable way is to look out for other like-minded entrepreneurs and fund them, while also giving them access to the expertise of the Studio’s team.&nbsp;According to research by Enhance Ventures, at least 21% of Studios in the world are now also investing in external companies, while 45% of them are considering starting a fund parallel to their building activities.<figure class="image"><img src="/uploads/blog_Why_Venture_Studios_make_great_funds2_80c6768c08.jpg"><figcaption>Do you have a Studio Fund?</figcaption></figure>&nbsp;As you can see in the graph, 80% of studios are now transitioning to a <a href="https://nextbigthing.ag/blog/venture-studio-business-model-explained" target="_blank" rel="noopener noreferrer">hybrid</a> business model, which helps them expand their reach and create even more impact as they work together with other entrepreneurs.&nbsp;With that in mind, here are 4 benefits of a combined Studio + Fund business model. &nbsp;<h3>4 reasons why Venture Studios make great funds.</h3><figure class="image"><img src="/uploads/blog_Why_Venture_Studios_make_great_funds3_3e6ae55f94.jpg"><figcaption>4 Reasons Venture Studios make great funds</figcaption></figure>&nbsp;<ol style="list-style-type:decimal;"><li>Robust operating platforms:</li></ol>&nbsp;Studios have large, multifunctional <a href="https://polymathv.com/team" target="_blank" rel="noopener noreferrer">teams</a> specialized in working with early-stage startups.&nbsp; Studios pay for these large teams with a variety of mechanisms, but in general, they are significantly larger than fund teams that are supported only with management fees (typically 2% of the fund size).&nbsp; When a studio launches a fund, it can make some of the studio team available to help the companies the fund invests in.&nbsp; This help isn’t free - it must be paid for through a combination of service fees and/or sweat equity - but it usually comes at a good value and can be a game-changer for early-stage startups.Startups face plenty of challenges, but three stand out when it comes to sourcing talent:<ul><li>Knowing how to find and attract top talent usually isn’t something entrepreneurs have a ton of experience in, and it always takes a lot of time and effort.&nbsp; Additionally, it’s tough for a small company to afford top talent in an increasingly competitive job market.&nbsp; The studio team can provide a roster of top talent ready to step in, and studio + fund combos are usually a lot more flexible when it comes to taking equity or other performance-based compensation.</li><li>Working for a startup is…kind of crazy.&nbsp; Priorities change quickly and often, resources are limited, the product is constantly in a state of half-finished, new ideas can get implemented over lunch meetings, and operating procedures need to be created from scratch.&nbsp; Some people love this sort of fast-paced, high-impact environment and it’s exactly what they need to thrive.&nbsp; For other people…not so much.&nbsp; Incredibly talented, top performers that leave large corporations to work for startups can struggle to adjust.&nbsp; Studio teams have extensive experience with the craziness of early-stage startups and have learned best practices from having been there and done that (several times).</li><li>Small companies often don’t need and/or can’t afford full-time help.&nbsp; When companies are growing so quickly, their talent needs change just as fast, and the labor market isn’t built to offer such agility.&nbsp; <a href="https://polymathv.com/library/articles/finding-common-ground-between-tech-and-product-teams" target="_blank" rel="noopener noreferrer">Tech development</a> needs could change from front-end to full-stack, to data expertise in a matter of months.&nbsp; Closing a single large deal could mean customer success needs to double in 4 weeks.&nbsp; The CEO could become too busy to lead sales efforts and finding a VP of business development becomes crucial.&nbsp; Studio teams are used to working on multiple priorities simultaneously and can be deployed for quick, high-impact projects.</li></ul> The challenges around talent can be especially acute in emerging markets, so the advantages provided by studios should be even more impactful.&nbsp;2. Entrepreneurial experienceA lot of investors come from financial backgrounds like private equity or investment banking and have no entrepreneurial experience.&nbsp;This is especially common in emerging markets (where the successful entrepreneur → VC route isn’t nearly as established as it is in places like Silicon Valley). While this background is great for later-stage investments in companies with multiple years of operating history and clear trends visible in their financial statements, it can be challenging with early-stage investments.&nbsp; Pre-seed and seed-stage companies have limited financial history, are typically changing rapidly, and often haven’t fully reached product-market-fit.&nbsp; Evaluating these types of companies can be extremely difficult for people that haven’t led or worked for an early-stage startup.&nbsp; Appreciating the challenges of rapid iterations, building the right team, balancing the need for standardization with the need for flexibility, etc., and then making accurate judgments of an entrepreneur’s ability to execute is hard.&nbsp; The studio’s intimate knowledge of the successes and failures of multiple early-stage companies can be a huge advantage.&nbsp;3. Funding Availability&nbsp;Despite venture studios’ rapid growth and demonstrated results, they are still a relatively unknown business model, especially in emerging markets.&nbsp; Raising funds for a <a href="https://polymathv.com/library/articles/what-is-the-role-of-venture-studios" target="_blank" rel="noopener noreferrer">Studio model</a> can be hard, very hard.&nbsp;When you raise through a more traditional fund structure, you are offering investors a vehicle that they already know and can handle more easily. This allows the Studio + Fund combination to raise and deploy more capital.&nbsp; Not only does this help the Studio + Fund scale, but it also helps portfolio companies by having better access to capital for potential follow-on investments.&nbsp;4. Access to more talent &amp; bigger networksWhen you are using your funds to invest in other companies and build your own, at the same time you are creating diversification for your portfolio, which means more investors can come around and be interested in your business model.&nbsp;On the other hand, as you partner with other entrepreneurs you also have the chance to work together with their networks to build a more robust pool of potential investors.Having a larger, and more diverse portfolio creates exponentially more opportunities to transfer knowledge from one company to another. Also, the larger portfolio should create more (and more predictable) demand for the studio’s services, which will allow the Studio + Fund to afford more team members and continue <a href="https://polymathv.com/library/articles/how-cultural-fit-can-change-the-game-of-company-building" target="_blank" rel="noopener noreferrer">concentrating talent</a> within the firm to support portfolio companies. An individual’s skills, growth, network, etc. tend to increase as she works with more team members with diverse perspectives and skill sets (so the output from 5 smart people working together should be better than the sum of the outputs of 5 smart people working individually).&nbsp; This, along with economies of scale and a better ability to predict demand and staffing needs, should make the Studio + Fund team more efficient, creative, and productive overall.&nbsp;

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Why Venture Studios make great funds

American entrepreneur selected as Endeavor Colombia entrepreneur of the year in 2017. Peter has ten years of operating experience in Latin America and is currently acting as Founder and CEO of Ofi. MBA candidate from the University of Pennsylvania Wharton with an undergraduate degree from the University of Chicago.&nbsp; &nbsp;

Venture Partner 

Peter Ostroske 

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How Venture Building can impact Latin America

We wanted to explore how VCs in Latin America invest in different countries, so we examined 34 of LatAm’s most active VCs that have made 1,524 investments in startups from 25 countries for $20B since 2018.&nbsp; As you can see, the trends are quite different from country to country.<div class="raw-html-embed"><iframe id="articleChart" src="https://polymathv.com/chart.html" style="width:100%;aspect-ratio:1.3" title="My pretty litle chart"></iframe></div> We compared the percentage of investments in foreign startups with the population and GDP of a VC’s home country.&nbsp; Naturally, VCs located in large countries invest more in local startups, while VCs in smaller countries need to look outward to foreign startups for sufficient deal flow, but there are a few interesting outliers.<figure class="image image_resized" style="width:91.48%;"><img src="/uploads/data_investment_LATAM_Mesa_de_trabajo_1_copia_6ec9ab5b49.jpg"><figcaption>% of deals in foreign startups VS population</figcaption></figure><figure class="image image_resized" style="width:92.35%;"><img src="/uploads/data_investment_LATAM_04_123793a161.jpg"><figcaption>% of capital invested in foreign startups VS population</figcaption></figure>Peruvian VCs invest more heavily in foreign startups than would be expected from its population and GDP.&nbsp; Peruvian VCs aren’t necessarily neglecting local startups in favor of foreign alternatives (37% of the investments in Peruvian startups were made by local VCs, which is roughly in line with the rest of the region).&nbsp; Rather, this is largely due to the fact that Peru produces relatively few startups.&nbsp; Since 2018, Peru has had 0.7 VC-backed startups per 1M people, which is only ahead of Ecuador (0.5 startups per 1M people) and Central America (0.2 startups per 1M people).&nbsp;&nbsp;Other indicators such as human capital indices, education attainment, GDP per capita, and inequality can’t explain this phenomenon as Peru is generally on pace with LatAm’s startup leaders Brazil, Mexico, and Colombia.&nbsp;&nbsp;The concentration of population in Lima should also help facilitate innovation and presents a massive first market for would-be startups.&nbsp; This warrants further investigation into factors such as tax and labor laws, cultural factors that affect the attractiveness of entrepreneurship and working for startups, technical training opportunities, and capital controls.&nbsp; It could also indicate that Peru is due for a startup boom in the near future.&nbsp; In the meantime, Peruvian VCs are finding deal flow by investing heavily in startups from the US and Colombia (Peruvian VCs made 44% of all investments in US startups and 21% in Colombian startups).Colombia is an interesting case that suggests there is a significant lack of local investors relative to the amount of Colombian startups.&nbsp;&nbsp;There is a strong trend showing VCs throughout the region invest a higher percentage of capital in startups from other countries compared to the percentage of the number of investments in startups from other countries.&nbsp; In other words, VCs are more likely to do relatively larger deals in foreign startups and relatively smaller deals in local startups.&nbsp;&nbsp;This makes sense as both sourcing and evaluation of early-stage startups tend to rely on personal networks more than later-stage deals.&nbsp; It’s much easier for a later-stage startup with multiple years of track record to catch the attention of investors, while companies just getting started have to rely much more on warm intros from their own networks.&nbsp; Naturally, these networks tend to be stronger within a startup’s local market.&nbsp;<figure class="image image_resized" style="width:89.46%;"><img src="/uploads/data_investment_LATAM_Mesa_de_trabajo_1_copia_2_ca7739cc3a.jpg"><figcaption>% of investment in local startups by local VCs</figcaption></figure> The only exception is Colombia, where VCs invest a higher percentage of capital in Colombian startups than the percentage of the number of investments they make in local startups.We next examined how many startups from specific countries raised capital from foreign VCs:<figure class="image image_resized" style="width:85.39%;"><img src="/uploads/data_investment_LATAM_06_33493832f2.jpg"><figcaption>% of investment in local Startups by foreign VCs</figcaption></figure>Again, Colombia is an outlier with 84% of investments in Colombian startups coming from VCs outside of the country.&nbsp; So while Colombian VCs are heavily focused on local deals (and even more focused on large local deals), there is still plenty of “room” for foreign investors.&nbsp;&nbsp;The difference is especially stark when compared to Brazil: Brazilian VCs make 73% of their investments in local startups, while only 3% of investments in Brazilian startups come from foreign VCs.&nbsp; This means that Brazilian VCs cover almost all local startups while still making a quarter of their investments in foreign startups.&nbsp; Colombian VCs are similarly focused on local startups, but it’s not near enough to meet local demand, so foreign investors fill the gap.The dominance of Brazilian VCs of their local market can at least partially be explained by the country's massive size (no need to look outside when there are plenty of local deals to be had) and the more pronounced differences between Brazil and other countries (language, culture, etc.) that make it more difficult for foreign VCs to enter the market.Colombia’s seeming lack of VCs is more difficult to explain.&nbsp; VC activity usually goes hand-in-hand with startup activity, and Colombia ranks 3rd in LatAm in the number of startups and amount of VC investment, 2nd in VC investment per GDP, and 5th in VC investment per population.&nbsp; Similar to Peru’s seeming lack of startups, Colombia’s seeming lack of VCs warrants further investigation into factors such as tax law, capital controls, a culture of risk aversion, etc.&nbsp; But based on Polymath’s decade of experience, none of these factors offers a satisfactory explanation, and Colombia appears ripe for more investors.&nbsp;There were also some interesting trends related to how startups from certain sectors are more or less appealing to foreign investors. &nbsp;<figure class="image image_resized" style="width:93.17%;"><img src="/uploads/data_investment_LATAM_Mesa_de_trabajo_1_copia_3_72348d382a.jpg"></figure> VCs are less likely to invest in startups from other countries that operate in heavily regulated sectors such as energy, insurance, healthcare.&nbsp; The lack of foreign investment for sectors such as proptech and eCommerce is less obvious.<h3> &nbsp;Conclusion</h3>Despite the proliferation of VC investment in LatAm over the past several years, the deployment of capital is far from uniform throughout the region.&nbsp; This highlights opportunities for investors to fill gaps in potentially overlooked markets.&nbsp; It also highlights the increased role local VCs can play in attracting foreign capital and getting foreign investors familiar with the nuances and opportunities in their home markets. &nbsp;

About Polymath Ventures

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