Franco Capurro
View from the Top

Democratizing Access to Capital

Tue, 11/01/2016 - 15:03

Q: What are the barriers to financing innovation in infrastructure?

A: Innovation can be characterized in a number of ways, such as how infrastructure is financed through webbased mechanisms and by innovating in the projects constructed. Our company is innovating by providing a platform that allows projects to be financed but other companies innovate by type of project. Those companies have very different barriers. Innovation is capital-intensive so many businesses face a financing barrier. Financing a US$50 million project generally consists of 30 percent equity and 70 percent debt but banks will not finance debt for companies that lack a credit history. Financing can mean the difference between providing 30 percent and 100 percent equity for a project.

Traditionally, real estate development in Latin America is done through investment by companies with specific mandates. Even wind power projects can become less profitable because wind power is still classified as a new technology and therefore assumes more risk according to bank policies. The innovative financing sector is enabling new technologies and CAAAPITAL falls into this bracket. We obtained financing in Boston because finding local financing would have taken much longer. In the US, there is a great number of venture-based startups and the financing rounds are much larger. Normally, innovation is driven by knowledgeable people like a managing partner in a fund but these individuals are expensive to recruit. There are few startups that can recruit the caliber of personnel CAAAPITAL has obtained because staffing costs alone can mount considerably. People also assume greater risk moving to a startup and therefore need greater financial incentives.

Q: What key factors shaped the development of CAAAPITAL’s business model?

A: We reached a crossroads at a certain point in our growth where we had to decide whether to become a people-intensive company like Deloitte or a more transparent, innovative firm. This has worked even more effectively in Mexico than in our initial base of Chile because transparency there is an issue. Building a platform that can make the industry transparent through screening of investors facilitates the industry’s growth.

We have over 150 funds globally, from Blackstone and Carlyle to smaller local funds. The average developers are engineers who are adept at developing projects but do not understand banks or investors. We understand the needs of these actors and the needs of the investors and we are the middle ground between them. We put all the information into a transparent platform, which has never been done before. Another problem we are solving is networking. Even the well-connected do not have the entire industry in their network. In this case, we monitor the industry and create dialogue between industry players and banks.

Q: What are the biggest benefits for investors using this platform?

A: We screen roughly 90-95 percent of the proposals we receive so that the number of projects an investor needs to assess goes from 20 to two. Even though these investors have a great deal to invest, they normally have no more than five staff and many are focused on Latin America. Chile, Peru, Mexico and Colombia have 12,000 new projects per year and each project is substantial. With our service, all the proposals sent to investors meet their investment profile because we have these on record and can match projects to the appropriate funding in terms of size, structure and phase.

We carry out this procedure once and 150 funds can potentially benefit whereas traditionally, each fund would have to go through this process individually. This also lowers the cost of the transaction substantially. Our team is made up of the foremost experts across a variety of fields, including the former Country Manager of Garrad Hassan, the former Country Manager of Barlovento and the former Head of the IDB for Infrastructure and Energy. For this million-dollar team, funds only need to pay on a variable basis, lowering the overall barriers for foreign players and providing substantial cost advantages for investors.