Securing startup funding in Latin America is not quite the same as it is in the United States. However, that is beginning to change and we’re starting to see more similarities between venture capital in the United States and venture capital in LATAM. In the early 2000s, the state of startup funding in Latin America was a far cry from what we’re seeing now. Venture capital firms in the region are now connecting more and more startups with opportunities to take the market to new heights.
Startup Funding in Latin America
In the past, there were many more hurdles to finding startup funding in Latin America than there are today. For example, in the past, investors felt that entrepreneurs in LATAM were inexperienced by global standards. Additionally, there was no track record of established VC firms in the region and the Latin American startup ecosystem was in its infancy. For Latin American startups, this made it very difficult to find and secure capital investment.
Today, the startup ecosystem has evolved drastically since then and securing startup funding in Latin America has become much easier. This is all thanks to the early VC firms that took a chance on a region that presents a lot of challenges. Their efforts provided knowledge and initiatives that opened venture capital in LATAM to a much more broad base of entrepreneurs and founders thanin the past. The work of these pioneers encouraged more early-stage deals and investments in the region. Today, there are even VC-funded startups in the region who are starting make their own investments in Latin American startups.
Latin American Startups: Who is Growing the Fastest?
Across all industries, the fintech sector is seeing the largest increase in the number of startups launching in Latin America. This is partly due to new discoveries of ways to take advantage of the region’s huge unbanked population. In 2015–looking at who secured venture capital–the fintech sector received the most startup funding in Latin America when compared to other sectors. The Latin American Venture Capital Association (LAVCA) also reported that 40% of information technology (IT) investments went to fintech startups. Today, more VCs and other types of investors continue to focus on the fintech sector and overall, capital investment in Latin America is on the rise.
The Startup Ecosystem in Latin America
Previously, entrepreneurs in Latin America were hindered by lack of networks, role models, expertise, and capital–commonly referred to as the startup ecosystem. But today, we see the LATAM startup ecosystem showing steady growth. Many of those in the startup world point to the 2010 launch of Start-Up Chile as the defining moment of change for startups in Latin America. Some of the other programs that followed include Startup Peru, Parallel 18, IncuBAte, Startup Mexico, Ruta N and 21212, among others. Over the last few years, we’ve also seen startup accelerators such as Founder Institute growing the startup ecosystem in Latin America. Today, the Founder Institute–which is billed as the world’s premier idea-stage accelerator–operates chapters in more than a dozen cities through Latin America. Thanks to these and other programs that provide easier access to funding and networks, more founders than ever before are launching startups throughout Latin America. And as the number of startups launches grows, startup funding in Latin America will become accessible to more and more founders.
2016 Investment Data Highlights
In looking at the data, Mexico tops the other Latin American countries when it comes to the number of startup funding deals made in 2016 across all investment stages. There were 73 recorded investments that year, with Brazil’s 64 deals coming in second. However, although it won out in terms of the number of deals made, the investments in Mexico only amounted to $130 million compared to Brazil’s $279 million in deals. This makes Brazil the largest VC market in the region, accounting for 56% of the total investments. The biggest highlight of the year is the record-breaking total number of VC deals in Latin America. There were 197 investments, 15 more from 2015’s 182 deals.
Future of Startup Funding in Latin America
As the Latin American venture capital landscape continues to grow and evolve, we can expect to see more interest from global players. For example, Google is now venturing into the region and has already selected more than 12 LATAM-based startups for its new program. Microsoft has also started making startup funding investments in Latin America, having made more than 70 startup investments to date in Brazil. Overall, an increasing number of giant global companies are now looking for investment opportunities in Latin America when they wouldn’t have paid it attention just a few years ago. This is indicative of the start of a flourishing startup ecosystem, and that it’s a good time for Latin American startups to launch and grow.
Interested in learning more about startup funding in Latin America or do you want to talk about venture capital in LATAM? Contact me today and let’s talk!