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Reprinted from Dow Jones VentureWire. See original article here (highlighted on WSJ.com).
By Deborah Gage
Endeavor Global Inc., a non-profit that supports entrepreneurs capable of building big businesses in developing countries, invested $2 million in Globant, a software development company headquartered in Buenos Aires that handles projects for customers including Southwest Airlines Co., the Coca-Cola Company and Dell Inc.
The investment was made through Endeavor Catalyst, a new organization operating as a 509(a)(3)–the same classification used by university endowment funds–that enables Endeavor to make venture-style investments in promising companies and reap returns without being regulated like a private foundation.
So far, Endeavor has raised nearly $10 million for Endeavor Catalyst from investors including True North Venture Partners Chairman Michael Ahearn, former Warner Music Group Chairman Edgar Bronfman Jr., Accretive LLC Managing Partner Michael Cline, Greylock Partner Reid Hoffman, Abraaj Capital founder Arif Naqvi and Omidyar Network founder Pierre Omidyar, according to Endeavor Chief Executive Linda Rottenberg. Each man has pledged $1 million.
The goal is to get the fund to $20 million this year and ultimately to $40 million, which should allow Endeavor to become financially self-supporting rather than relying on donations, Rottenberg said.
“For Endeavor, this is a huge step toward longevity, and for the Endeavor entrepreneurs it’s an additional feeling of confidence for them and allows them to get more of a leg into the investment community in the U.S.,” she said.
Rottenberg co-founded Endeavor 14 years ago as a way to support the development of businesses in emerging economies that could generate revenue and create jobs. It now operates in 15 countries in Latin America, Africa, Southeast Asia and the Middle East and has screened more than 29,000 entrepreneurs, selecting 656 of them to lead 413 companies.
All Endeavor entrepreneurs are mentored, often by volunteers, and are also required to donate time and money back to their communities, but Endeavor was torn over how to invest in some entrepreneurs without seeming to play favorites.
Hoffman and Matrix General Partner Nick Beim solved that problem by designing a fund that would allow Endeavor to participate passively in investments of at least $5 million led by professional investors, contributing no more than $2 million to a round in return for about 10% of the company. Negotiations on terms are handled by the lead investor.
For Globant, whose founders have been participating in Endeavor since 2005, Endeavor added on to a $15 million funding round that Globant raised last March from FTV Capital and Riverwood Capital so that Globant could be Endeavor Catalyst’s first investment, Rottenberg said.
Five more investments–two in Brazil, two in Mexico and one in Turkey–are likely to happen in the next three to four months, she said.
Globant Chief Executive Martin Migoya told VentureWire in March that the company had raised about $35 million and hoped to go public in the U.S. within the next few years. He said Globant’s participation in Endeavor has enabled the company to learn “from some of the most talented and experienced professionals in the world.” Globant now employs over 2,500 people.
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