Latin American Startup Funding Rebounds After Deep Slide

Funding to Latin American startups rose in the second quarter, led by a resurgence in late-stage dealmaking.

Altogether, companies in South and Central America raised $791 million in reported seed- through growth-stage financing in Q2 of 2024, per Crunchbase data. That’s a rise of 25% from the prior quarter and 17% from a year ago.

Recent gains follow an unusually weak Q1, in which funding to the region hit a multi-year low. And while the latest numbers look stronger, we’re still far below the heights reached during a record-breaking run in 2021, as charted below:

Meanwhile, reported deal counts were down for the quarter, although we did see an encouraging pickup in volume at the early stage. We’ll also expect the seed round counts to rise a bit over time as well as more previously unreported deals are added to the database.

All about fintech

As overall investment rose in Q2, fintech led the recovery. The four largest funding recipients of the quarter were all fintechs, including:

• Celcoin, a Brazilian provider of banking tools for businesses, closed on $120 million in Series C financing in June.
• Clip, a Mexico City-based provider of technology for merchants to accept digital payments, secured $100 million in a June financing, its first equity round since 2021.
• CRMBonus, a Brazil-based provider of loyalty and promotion tools for retailers, picked up $74 million in a May financing led by Bond.
• Aplazo, a Mexico City-based provider of tools for merchants to offer installment plans to customers, secured $70 million in equity funding in May led by QED Investors.

Fintech’s strength isn’t entirely surprising. The sector has long been a top area for regional investment. It was the top area for investment last quarter too.

However, we did see companies in other spaces raise good-sized rounds in Q2. For example, Incidium, a Brazilian data and AI consultancy, landed $40 million in financing backed by Columbia Capital. And Akad Seguros, an insurance platform, pulled in a $22.5 million Series A.

Late-stage up, early-stage stable

Late-stage saw the biggest improvement in overall funding. Reported investment at Series C and beyond  $291 million – roughly double Q1 levels and a nearly 6X gain from a year ago.

While these may look like eye-popping gains, it’s not quite such a striking turnaround in broader context. Both Q1 of 2024 and Q2 of 2023 were anomalously weak quarters for late-stage dealmaking.

At early-stage, investment levels have been more stable. In the second quarter, investment totaled $386 million – up a bit from Q1 and down a bit from year-ago levels. Overall, we’ve seen less fluctuation of investment at early-stage than late-stage, where one or two large deals can significantly impact the totals.

Getting better

Overall, data points to an improving climate for venture investment in Latin America’s leading startup hubs. Funding at every stage rose in Q2 from the prior quarter.

The rebound was particularly pronounced for Mexico, with roughly $230 million into known rounds, up from less than $40 million the prior quarter.

Still, funding to Latin America remains over 80% below its peak in Q2 of 2021. Unicorn creation is still sluggish. And we haven’t seen many big exits for venture-backed companies. Even if we don’t expect to retrace those former highs, it looks like there’s still plenty of room left to rebound.

Illustration: Dom Guzman