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Where is alpha?
Jimena Pardo
April 2, 2024

Where in the world do you find alpha?

Short answer: AI in Mexico.

Our country has the biggest source of potential alpha for investors in Latin America. Here is why. 

The last four years have been a roller coaster ride, let's divide it into four stages. 

The first one happened during the zero-interest-rate period when an exorbitant amount of investment from global funds were deployed in our region. They marked our region on the VC map. 

Soon came a deep plunge, the second stage is a deep correction, not only for VC, nor Latin America, but any other market. 

The rapid decline in investment soon became a valley of scarcity. Good founders had to make tough decisions; cut expenses, close unprofitable lines of business, do layoffs, anything to expand their runway. The northstar changed, "the year of efficiency" became the mantra.

Today, after two years in this adjustment period, we believe we finally touched rock bottom as we foresee a rise in investments. This upturn is mostly led and accelerated by a new technology platform shift that in Hi Ventures we have been obsessed with: AI. 

Our tech scene in Latin America is still underinvested. 

On one hand, VC investment in Mexico has fallen almost 50% YoY. Even though today our region has the network infrastructure, the talent, and the needs for better services and products, investments have not grown at the same pace. There is a substantial amount of deployment in tech needed to catch up compared with similar markets.

On the other hand,  Mexico is now a credible VC player in the world. We did have "tourist investors" in the market, but serious top global firms stayed beyond this period. They work together with us, the top local funds, to support founders. For instance, Bitso is a co-investment with QED and COMETA, as Fintual is a co-investment between Hi and Sequoia.

AI is set to put  our nascent Venture Industry on steroids. 

Compared with other technological platform shifts, our region is adopting every new fundamental model at the same time as anybody else in the world. The CTO from Flat started thinking about how to use GenAI at the same time as the CTO from Zillow, not a minute later. We have never had such equal circumstances to build upon.

Additionally, there are some unique advantages for building in our region with AI

The first one is the untapped opportunity of data in our region. Unlike the US, where most data is often open through APIs, well organized, and structured, in our region, the huge pools of information are messy and unutilized. 

As Large Language Models (LLMs) and other fundamental models become a commodity, those who own the data will have the right to win.

The second local opportunity is that we are a conversational-first continent; half of our population joined the internet through WhatsApp. The unimaginable power of AI is literally at the fingertips of every Latin American, tech savvy or not. 

At Hi Ventures, we predict three megatrends for Mexico and our region.

The first one is the acceleration of commerce. 

  • For consumers shopping agents and personalization are revolutionizing complete industries such as Travel.
  • On the business side is a ratrace to automate and streamline every process, we see the creation of trade co-pilots, lean infrastructure, fast marketplaces maximizing margins in every stage of the consumer cycle. 

The second one is financial freedom. 

  • We expect a new wave of fintech adoption fueled by the search for financial independence from old infrastructure and legacy banking. 
  • Startups will help consumers and businesses in three ways: save money, lend money, and move money 100 times better then how we do it today.

The third one, the one that excites me the most; we will become SuperHumans

  • Our personal and work life will be transformed. We will integrate technology into our daily routines and tasks, enhancing human capabilities rather than replacing them. 
  • AI-driven interfaces will become central in managing, organizing, and navigating digital spaces, both in personal and professional contexts.

As you can see, we have never been more busy nor more excited. This is an invitation for you to partner with us, as we seize the huge AI wave. 

Let's go Hi!

Where is alpha?