I’ve been tracking venture funding in Latin America since 2017. Overall, it has not only been increasing–it has exploded. And with a growing number of global investors putting money into the region, it seems to have turned yet another corner in terms of its maturity.
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Today, the Latin America Private Equity and Venture Capital Association (LAVCA) released its annual report on how much venture money went to the region, detailing which sectors and which countries got the most. The New York-based organization found that VC funding in the region more than doubled to a record $4.6 billion in 2019 compared to nearly $2 billion in 2018. Last year’s number was over 900 percent higher than the $500 million invested in 2016. Take a look below.
Some may say this surge was in large part thanks to SoftBank Group Corp. (SBG) last year unveiling plans for a $5 billion SoftBank Innovation Fund, or what it described as “the largest-ever technology fund focused exclusively on the fast-growing Latin American market.”
However, Julie Ruvolo, director of venture capital for LAVCA, told me that even if you exclude SoftBank-led rounds, the region still would have seen record funding last year.
In terms of fundraising, 2019 was also a record year in Latin America. About $1.8 billion was raised across 28 investment vehicles, compared to $670 million across 30 vehicles, in 2018. Kaszek Ventures raised $600 million across two new funds, including $375 million for its fourth flagship fund and $225 million for its first opportunities fund. Meanwhile, Canary raised $75 million for its second fund.
Buenos Aires, Argentina-based Kaszek Ventures was founded in 2011 and has been actively investing in Latin America since its inception. It’s backed dozens of companies in the region–QuintoAndar, Loggi and Nubank, among many others.
“We’ve seen how the [Latin American] startup scene has evolved over the years,” Nicolas Szekasy, co-founder and managing partner of Kaszek Ventures, told me last year. “Every year it’s one step ahead. In the last few years, in particular, we have seen the pace accelerating and an increase in quality of the founding teams. There’s more depth now.”
Meanwhile, co-investments between global and Latin American investors are on the rise. Of the total $4.6 billion VC dollars, 70 percent was deployed via a co-investment in which there was more than one investor involved—regardless of where they were based. Thirty-seven percent of the total $4.6 billion VC dollars were deployed via a co-investment involving at least one Latin American investor and one global investor.
In fact, Ruvolo told Crunchbase News that all but one transaction over $50 million involved a cross-border co-investment. “This signals global cooperation to support startups with significant traction with growth capital that was not historically available,” she said.
Transaction sizes are also growing. There were 11 disclosed deals amounting to over $100 million, and 18 over $50 million. We covered a number of those rounds including: Brazilian fintech startup Nubank’s $400 million raise (led by Silicon Valley-based TCV), Colombian on-demand delivery unicorn Rappi’s $1 billion haul, and Brazilian real estate tech startup QuintoAndar’s $250 million Series D that propelled it into unicorn territory.
Also unsurprising is the breakdown of where the majority of venture dollars have gone in Latin America. As you can see in the chart below, Brazil once again led the region across all stages of VC investment, capturing 54 percent of VC investment dollars in 2019 (222 startup investments totaling $2.49 billion). Mexico was the second most active market by number of deals and dollars raised (100 startup investments totaling $649 million).
“Mexico had a record year in terms of number of deals and dollars raised, despite complicated macro, economic and political situations,” Ruvolo said. “We’re really starting to see some big rounds there. It’s certainly a maturing ecosystem.”
Federico Antoni and Fernando Lelo de Larrea founded Mexico City-based venture firm ALLVP in 2012. The pair has since invested in 28 tech startups across Latin America and Spain focusing on fintech, healthtech, edtech and the future of commerce. They are currently investing out of a $100 million fund focused on early-stage investing from seed to B rounds.
“While 2019 seems far far behind us, the record-setting year shows an international VC industry finally recognizing the huge untapped tech opportunity in Latin America as well as the amazing entrepreneurial talent building world class startups,” Antoni told Crunchbase News.
Fintech leads the way
Fintech resumed its top spot as the sector receiving the largest amount of investment dollars in Latin America, after 2019 saw a shift with more money going into logistics and distribution startups. See below:
Here’s a short list of bigger deals that took place during the year (that weren’t already mentioned above):
- Brazil’s Gympass raised $300 million from SoftBank, General Atlantic, Valor Capital and Atomico.
- Brazilian fintech startup Creditas secured $231 million from SoftBank, Vostok Emerging Finance, Santander Innoventures and Amadeus Capital.
- Sao Paulo-based logistics platform Loggi raised $150 million from SoftBank, GGV Capital, Fifth Wall Ventures, Velt Partners and Microsoft.
- Argentinian fintech startup Ualá secured $150 million from SoftBank and Tencent.
New trend emerges
Another new phenomenon in Latin America is the rise of venture debt and alternative investments, Ruvolo points out. For example, Mexican digital bank Klar raised $57.5 million in debt and equity (which we exclusively reported on last September). Incidentally, the company told me yesterday that since COVID started, it has tripled its credit customer base.
“This piece of the pie hasn’t been as available for Latin American founders,” Ruvolo told Crunchbase News. “But it’s becoming an important piece, particularly for fintechs.”
Surely, all this momentum will be interrupted by the COVID-19 pandemic. But by how much remains to be seen.
For his part, ALLVP’s Antoni believes that despite uncertainty around the depth and length of this downturn, “we can only be sure the Latin American countries will come back to a new reality where technology will play a bigger, yet different, role. Habits will evolve and digital adoption will accelerate. The economic strains will cause companies and consumers to review their lifestyle, priorities and behaviors.”
Illustration: Li-Anne Dias