A Venezuelan in Silicon Valley Finds a Niche in Finance
PALO ALTO, Calif. — Jonathan Gheller went from selling tequeños, a Venezuelan fried, cheese-filled appetizer, in Caracas to building a company that he sold to Facebook. Now, working at its placid Menlo Park, Calif., headquarters, he credits mostly one person for his change in fortune.
Likewise, Kenneth Lin struggled in the early days of Credit Karma, the online personal finance company he founded in 2007 in San Francisco. The field called fintech, financial technology, is now hotly pursued by investors. But through 2012, he raised only $2.5 million. The company's outlook changed in 2013 after he found a kindred spirit.
Both feel indebted to Meyer Malka, 41, a Venezuelan known as Micky. In 2012 he formed the venture capital firm Ribbit Capital here. Since then, he has become a rising force in Silicon Valley and one of the few Latin Americans to crack its upper echelon.
In March, Mr. Malka said, Ribbit raised its third fund, totaling $226 million, nearly twice the size of its second fund, which closed just one year earlier. In just over three years, Ribbit has secured $446 million, the fourth-largest amount raised among all United States-based venture capital firms started since 2012, according to the research firm Preqin.
Among Ribbit's investors are marquee Silicon Valley names: SVB Capital, Silicon Valley Bank's fund of funds group; Sequoia Heritage; and Iconiq Capital, the secretive personal wealth management group whose clients include Mark Zuckerberg of Facebook and Reid Hoffman, a LinkedIn founder. Ribbit's funds also count individual backers, including David Lawee of Google Capital and Sheryl Sandberg, Facebook's chief operating officer.
Mr. Malka's rise has benefited many Latin American entrepreneurs who have long struggled to gain a foothold here. The explanation for his own ascent is that the fintech sector is now in vogue. Mr. Malka bet on the field when few others did, and in an uncommon way, by dedicating an entire venture capital firm to it. That won him respect from start-up founders, no matter their nationality.
"He's the first person I call when I need feedback," said Mr. Lin of Credit Karma.
In the two years since receiving Ribbit's backing, Credit Karma has grown significantly and drawn several new investors, including Google Capital and Tiger Global Management, both introduced by Mr. Malka. In June the company attained a $3.5 billion valuation in a new financing round.
Growing up in Venezuela, Mr. Malka knew few people he could phone for advice. The country's economy and society, rich and poor, depend heavily on petrodollars. Yet he started thinking about finance and entrepreneurship as a boy, buying shares of Warren E. Buffett's Berkshire Hathaway with his bar mitzvah money.
At 18, he began attending Berkshire's annual shareholders meeting in Omaha. Around then, he founded Heptagon Grupo Financiero, a financial brokerage firm. Heptagon was acquired in 1999 by the Argentine start-up Patagon, founded by Wences Casares, who took Mr. Malka on board.
In 2000, just before the dot-com crash, Banco Santander acquired Patagon for $750 million and the two men then started other companies together. But Mr. Malka had not yet succeeded in Silicon Valley, so he moved there in 2007 to build another company with Mr. Casares: Bling Nation, a mobile payments company.
That would be a devastating time in his life. The day he obtained his visa from the United States Embassy in Caracas, his father was found to have brain cancer. His wife was pregnant at that time, and the couple wanted to leave Venezuela, concerned about the management of the country by Hugo Chávez, then the president.
After moving, Mr. Malka flew back to Caracas every other week until his father died in 2008. Meanwhile, in Palo Alto, Bling Nation struggled, and in 2011 the partners called it quits. "It was the first time I had failed," Mr. Malka recounted. He was emotionally spent.
He took a full year to decide what to do next, but becoming a full-time investor made sense. He had already invested in numerous companies over the years.
For example, Mr. Gheller started an Internet company, FashMatch, but it almost went bankrupt. That was until he sought advice from Mr. Malka at a Caracas cafe in 2007 and received a check on the spot. One condition was that Mr. Gheller move to Silicon Valley. FashMatch survived; in 2009 it was sold to Like.com, a company based in San Mateo, Calif., and Mr. Malka made money. Google acquired Like.com the following year.
When Mr. Gheller founded his next company, Storylane, the one Facebook would acquire in 2013, he had a much easier time, raising a seed round in four days. By then he lived in the Bay Area.
Silicon Valley often claims to be a meritocracy drawing the world's finest, and there is some truth to that. Immigrants from India and China have a rich five-decade-plus history there, having staffed Fairchild Semiconductor and Hewlett-Packard.
Latin America, however, has not had such a presence. Among the top 20 United States-based venture capital firms, based on total funds raised in the last 10 years, according to Preqin, not one has a founding partner from the region.
Some important people from Latin America have emerged over the decades in technology. One was Alejandro Zaffaroni, an Uruguayan who moved to the United States in the 1940s. In 1968, he founded Alza Corporation, a pioneering biotechnology company that Johnson & Johnson acquired in 2001 for about $12 billion. He also started several other influential Bay Area companies before his death last year.
Jean Paul Jacob, a Brazilian engineer and respected futurist, joined IBM's Research Laboratory in San Jose in 1962. More recently, Ariel Poler, born in Venezuela, has been an influential angel investor in San Francisco and was an early backer of Odeo, out of which grew Twitter.
They remain exceptions for several reasons, including Silicon Valley's own lack of interest in the region until 2011. "For a long time, Wences and Micky were really the only people in Silicon Valley that entrepreneurs from Latin America could get meetings with," said Allen Taylor, a vice president at Endeavor, a New York-based nonprofit that promotes entrepreneurship in developing countries.
That started to change a few years ago, he said. Still, even today, Latin American professionals have not immigrated here in large numbers.
Mr. Malka certainly had reasons to pack his bags after Bling Nation failed. "He became very anxious whether he was doing the right thing," said Mr. Casares, who remains close to him. Forming a sector-specific fund was risky — they remain rare in Silicon Valley. But one in fintech made sense to him.
Today, his instinct seems to be paying off. Ribbit's first fund, based on current valuations, would return six and a half times multiples on cash, according to a person with direct knowledge of the firm.
The firm has now backed 27 companies, largely in the United States, including Coinbase and LendingHome. But it continues to be bullish on large emerging markets including Brazil, where last month it backed a São Paulo-based start-up, GuiaBolso.
Still, it may still be premature to evaluate Ribbit. None of its companies have had exits. The firm is young. It has missed deals, such as one on TransferWise, based in London, which aims to provide a cheaper alternative to transfer money overseas.
That was embarrassing, Mr. Malka admitted. He had cited the company as an example of the kind of investments Ribbit would make when he pitched its first fund to investors. But when the financing round happened, "I was too much of a rookie," he said.
Uncertainty also remains about Bitcoin, the virtual currency on which Ribbit has made several bets. Still, even during the peak Bitcoin hype, Mr. Malka showed restraint, which won respect from his backers.
"If he was not disciplined," said Greg Waldorf, former chief executive of eHarmony and an individual investor in all three Ribbit funds, the first Ribbit fund "would have become solely the Bitcoin fund, which it was not."
Just four of the 12 companies from that fund are Bitcoin companies. Ribbit has not backed a new Bitcoin company in about 12 months, yet Mr. Malka remains optimistic, citing Bitcoin's evolution outside the United States, which he believes is more crucial.
"From a business perspective, I am more encouraged by what has happened over the last 12 months," he said.
Ribbit's investors over all seem pleased with Mr. Malka. Irwin Gross, chief operating officer of Sequoia Heritage, said that while "it is still early, he has done exactly or pretty close to what he said he would do."