Alejandro Mendez is the CEO of Royal Eagle Capital Partners, and a baMa member. We talk with him about cross-boarder investment, portfolio management, minority founders and what is like to be a baMa member.
IN: One of your focus areas is cross-border investing, what do you specifically?
My experience with cross-border investing started in 2005 owning a business in Mexico with clients in USA. Then in 2008, I joined JP Morgan Chase and then Citibank here in Houston to serve Latin American clients under their Wealth Management Division.
While working for these major banks, I saw the opportunity to create a solution to link Latin America opportunities with international investors and capital markets. Regarding cross-boarding investments, I found out that middle market companies in Latin America need to access to capital since their local capital markets and banks are not as liquid and dynamic as what we have here in USA.
I believe there are great opportunities to find good operators, sponsors and companies that are looking partners and capital to expand their companies and markets. We are always open for good returns and opportunities to create partnerships with good operators internationally.
IN: What are the trends for 2021 in cross-border investing?
It is a remarkably interesting year. Because the pandemic, in my point of view, there are going to be industries that will be struggling. They will need to adapt to survive. As dramatic as it sounds, some of companies and industries will need to change their entire business model to serve their clients through the use of virtual tools, digital solutions and technology.
We see opportunities in renewal energy, digital banking and cryptocurrencies, logistics and distribution centers, infrastructure and interconnection services, data centers, with a sustainability and ESG (Environmental/Social & Governance) approach. M&A activities will increase for second semester of 2021.
IN: baMa still is not doing cross boarding investing, what advices could you give us, when it comes to first start cross boarding investment?
It depends on what type of investor you are. baMa is a seed/venture capital investment approach, which look for early-stage companies, where risk is acceptable if you have a high-reward yield.
In this particular case, if you are a venture capital or early-stage investor you must have a very strong due diligence team and dedicated process; you need to do your homework analysing the market in terms of size and potential upside; you need evaluate how to add value not only with your investment but with your experience in operations, process, corporate governance, and technology.
Also, is particularly important to perform a pre-money and post-money valuation, to understand the cash flow of the company and the IRR (internal rate of return) of your investment.
IN: Can you give us some tips on how to do a right portfolio diversification?
A right portfolio diversification would comprise anything digital and technology oriented that make things easier for the user. We believe investments should be linked to data mining and managing, clean green and renewable energy, fintech and logistics.
Today, we have three vertical companies related to green energy, fintech and wealth management. In addition, we are launching a crypto and data mining company here in Texas. In Royal Eagle these are the sectors where we are focusing since we believe they have positive trends for growth in the next 5 to 7 years.
IN: How can you make social impact with your portfolio management?
Nowadays, investors and companies are looking for deals that are good business but also are good for the people. Sustainability, green economy and ESG are the name of the game. Investors and smart money are looking for companies that knows what to do, with a strong operation team and solid corporate governance policies. It is very important to create policies to serve your employees internally and also, at the same time, create programs to serve the communities you are in.
In general, here in USA and Latin America there is huge room of improvement to include more Women in key positions, have more Women performing Board positions, and create an inclusive environment with equal salaries and opportunities for all.
To make a real social impact, we believe that you need to go with an open mentality to serve the communities and add value. Is more about them and less about you.
In Royal Eagle, we have a professional team in charge of our social impact efforts to design programs and strategies based on what the community needs and not what we think they might need. You need to analyse what it is necessary for that community specifically. The needs from one community might be completely different to another community. In order to create a real impact, you need to address what are top need of each community and execute accordingly.
IN: What would you say to anybody that wants to start a company? And, specifically, what would you say to any minority that may doubt on whether to create a start-up or not.
No is a powerful word. If you have the dream, the desire and drive, do not get discourage when you get a NO from an Investor, a potential customer, or an important Stakeholder. Use the NO in your favour. When somebody says No to me, it happens two things: it makes me eager to show them wrong and/or I learn from the no, then pivot, and become better. In fact, you are going to get more no’s that yes’s especially when you are trying to raise capital, so don’t get discouraged, dig deep, pivot and win.
Secondly, you need investors that understands your business, the industry, and their cycles you are in and support you in the long run. The first two years are the toughest. Thirdly, you need to have a team that believes in your vision and share your values. Your Team is key, look for people that are smarter than you, get talented people in key positions. Share the vision and the wealth with them. Build a team to complement you and your weaknesses.
IN: What do you expect from baMa this year?
BaMa is facing a consolidating year. baMa had a challenging start in 2020 since it was launched before the pandemic. I am expecting baMa to grow with more members and investors from our community. I always think the due diligence process and the quality of the deals can be improved but baMa is getting the job done.
Maria with baMa is creating an amazing outlet for the minority communities, especially for us the Hispanics which we are behind compared to others as Investors and to get funding for our companies. I anticipate baMa to grow and become a real force in our community.
IN: Would you recommend other people to join baMa as members? Why?
I think that if you are a start-up or a venture capital investor, baMa represents an easy way of getting deals. baMa has a team in place to get access to quality companies and deals for you. Is always good not to waste valuable resources doing due diligence and finding deals. With baMA you will get pre-vetted deals and at the same time you will interact with Investors like you to learn, co-invest and exchange ideas.
You get a lot of value from your baMa membership. The membership cost is very affordable compared to the amount opportunities and knowledge you can get access for being a member.
Catherine Carey, Communications Manager at baMa