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A Turning Point in Peru’s Entrepreneurship Ecosystem

The fund-of-funds (FoF) initiative from the Peruvian government presents a major opportunity for the ecosystem. As it approaches the launch stage, following a long journey, read more about why the FoF was the way to go.

“Why should Peru’s government foster venture capital (VC)?” It was a simple question but a burning one, and the officer from the Ministry of Economy (MEF) was looking for a clear answer.

Back in 2017, COFIDE, Peru’s Development Bank, presented to its Board the first version of Peru’s Fund of Funds (FoF) project. The FoF sought to invest in VC funds that would then invest in startups.

In 2019, the project reached its legal status when it was included in Peru’s Competitiveness and Productivity Plan, an initiative backed by SECO, whose support was critical in later helping to obtain the FoF’s approval.

A moment of silence followed the question. In this meeting co-presented with Swiss EP and SECO, Luis Narro, Executive Director of PECAP, had just finished a one-hour-long exploration of the topic. He took the lead in answering:

Supply Gap. First, PECAP calculated a USD 145 million difference between the demand and supply of venture capital in the period of 2019-2022 in the absence of the FoF. Meaning more capital would be needed by startups to scale their business than there was capital available to support them.

Secondly, the market’s fragmentation meant only a few entrepreneurs with access to important international networks were able to raise capital to continue growing their companies. This fact was later reinforced by the pandemic.

The 2020-I PECAP report reflected that, although investment grew 30.6% compared to 2019-I reaching USD 9.93M, 3 operations represented 84% of the amount invested (USD 8.4M) in the first semester of 2020. Overall, 67% of the amount invested came from foreign investors.

Impact. According to a 2016 report by the Interamerican Development Bank (IDB) on the impact of venture capital in Latin America, for every dollar invested in venture capital, USD 6.25 came back in the form of salaries, payments to suppliers, and taxes. The report also stated that startups that raised venture capital had increased their labor force by 65% in 4 years. Applying these numbers to Peru, the FoF had the potential to create USD 967M in economic activity, create 50,000 jobs, and impact 12.8M Peruvians in the next 10 years. In the pandemic, the need for this impact has intensified.

Collaboration. Having a meeting with a diverse group of stakeholders—with PECAP representing the private sector and Swiss EP/SECO supporting—was a strong message for the Ministry of Economy. It proved that behind this initiative is a network that truly believed the FoF can become a turning point in Peru’s entrepreneurship ecosystem. Though this was mostly an implicit message of the meeting, it became explicit when SECO shared that, if the FoF moved forward, technical assistance funds to support COFIDE in its implementation could be provided through a partnership with another SECO Program. This final message was the deciding factor the MEF was looking for to dispel any lingering doubts regarding the absence of public sector know-how to manage an FoF.

Update: In early 2020, Peru’s government approved USD 20 million as an anchor investment to the FoF. With the publication of its guidelines in December 2020, the implementation phase has begun. In Q3 of 2021, COFIDE will consolidate an investment committee and soon thereafter launch the call for fund managers to apply. Capital is not the answer to every need in entrepreneurial ecosystems; but in Peru’s case, it is one of its most pressing pain points. This instrument is the first step to increase and democratize access to venture capital for more entrepreneurs.

For more information about the FoF and VC in Peru, please reach out to