Latin American VC investments triple record to pass $15bn in 2021

Private equity: the pie is bigger and so are the slices

Enterprise capital funding into Latin America has tripled from its earlier report to high $15bn final yr, as buyers piled into start-ups in areas together with monetary know-how, on-line procuring and property.

Like many rising markets the area is experiencing a boom in fast-growing tech businesses, from Brazilian digital lender Nubank to Mexican used-car platform Kavak.

There was a complete $15.3bn price of VC investments throughout greater than 650 offers all through 2021, in keeping with preliminary knowledge from the Affiliation for Non-public Capital Funding in Latin America, or Lavca.

The general sum was higher 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 know-how firms in Latin America, it’s wonderful for us to see what occurred in the course of the previous few years,” mentioned Francisco Alvarez-Demalde, co-founder and managing companion at US-based Riverwood Capital.

Lots of the start-ups having fun with success purpose 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 customers underserved.

Fintech remained buyers high choose in 2021, representing 39 per cent of all enterprise capital flowing into the area, adopted by ecommerce (25 per cent) and property know-how, 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,” mentioned 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 keeping with Lavca, together with cryptocurrency trade Bitso and Chilean plant-based meals producer NotCo.

Final yr’s single largest VC funding within the area was an prolonged $1.15bn spherical by Nubank, which included half a billion {dollars} price of funding from Warren Buffett’s Berkshire Hathaway.

The fintech went on to drift on the New York Inventory Change 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’s that international VC funds are more and more trying on the area, establishing places of work, hiring analysts and buyers,” mentioned Marcos Toledo, founder and managing companion of early-stage investor Canary, primarily based in São Paulo.

He highlighted insurance coverage, well being, training 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 whole dedication there to $8bn. 

However with rate of interest rises anticipated within the US, there are issues that new cash flows to creating economies might decelerate.

“It’s potential that funding {dollars} dedicated to tech within the area would possibly take a step again in 2022, however we would additionally see extra exercise in the best way of consolidation [and] M&A,” mentioned Alvarez-Demalde.

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