Opinion
Latin American VC investments triple record to pass $15bn in 2021
Enterprise capital funding into Latin America has tripled from its earlier report to high $15bn final yr, as traders piled into start-ups in areas together with monetary expertise, on-line purchasing and property.
Like many rising markets the area is experiencing a growth in fast-growing tech companies, from Brazilian digital lender Nubank to Mexican used-car platform Kavak.
There was a complete $15.3bn value of VC investments throughout greater than 650 offers all through 2021, in line with preliminary information from the Affiliation for Personal Capital Funding in Latin America, or Lavca.
The general sum was larger than that of the previous seven years mixed and much outstripped the earlier report of $4.9bn set in 2019.
“After greater than 12 years investing in expertise firms in Latin America, it’s wonderful for us to see what occurred in the course of the previous few years,” stated Francisco Alvarez-Demalde, co-founder and managing companion at US-based Riverwood Capital.
Most of the start-ups having fun with success intention to chop by way of the inefficient paperwork that’s widespread in Latin American nations. Others are difficult industries which have historically had little competitors or left shoppers underserved.
Fintech remained traders high choose in 2021, representing 39 per cent of all enterprise capital flowing into the area, adopted by ecommerce (25 per cent) and property expertise, or proptech (9 per cent).
“We’re additionally seeing fintech getting built-in into different sectors, with proptechs launching financing arms and agtechs [agricultural technology companies] launching credit score amenities for agricultural producers,” stated Carlos Ramos de la Vega, director of enterprise capital for Lavca.
Sixteen new “unicorns” — a privately held start-up firm with a valuation above $1bn — had been minted in Latin America in 2021, in line with Lavca, together with cryptocurrency change Bitso and Chilean plant-based meals producer NotCo.
Final yr’s single greatest VC funding within the area was an prolonged $1.15bn spherical by Nubank, which included half a billion {dollars} value of funding from Warren Buffett’s Berkshire Hathaway.
The fintech went on to drift on the New York Inventory Alternate in December with a market capitalisation above $40bn, on the time making it Latin America’s most precious monetary establishment.
Professionals within the subject say {that a} flourishing community of start-ups, expertise and funding is making a virtuous cycle.
“What we’re seeing proper now could be that world VC funds are more and more wanting on the area, establishing workplaces, hiring analysts and traders,” stated Marcos Toledo, founder and managing companion of early-stage investor Canary, based mostly in São Paulo.
He highlighted insurance coverage, well being, schooling and business-to-business as sectors with “loads of good concepts”.
The area’s attractiveness as a vacation spot for worldwide capital was underlined in September when SoftBank, the Japanese tech conglomerate, launched a second funding fund of $3bn devoted to the area, taking its complete dedication there to $8bn.
However with rate of interest rises anticipated within the US, there are considerations that new cash flows to growing economies may decelerate.
“It’s doable that funding {dollars} dedicated to tech within the area may take a step again in 2022, however we’d additionally see extra exercise in the best way of consolidation [and] M&A,” stated Alvarez-Demalde.
