29 Jul 2021
Today we are packing our multi-week exploration of the performance of the global venture capital market in the second quarter. We’ve been around the world, working to better understand the cash flow geyser that is pouring into startups today. But we saved the best for last: Latin America.
At a glance, the venture capital and startup market in Latin America looks similar to what we’ve seen in other growing ecosystems. Like the hubs of American, Canadian, European, Indian and African startups, Latin America is seeing venture capital activity breaking records.
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But inside the big numbers is a startling picture of a maturing startup market as outside money seeks breakthrough opportunities.
To aid us in our exploration of the epic second quarter of Latin America, we’ve gathered notes and observations from Gonzalo Costa of NXTP, Nathan Lustig of Magma Partners, and Federico Antoni of ALLVP. We also have data from Dealroom, CB Insights, the Global Private Capital Association (GPCA) and ALLVP.
Today, we are digging into the data, yes, but also the human potential behind the rush for startups. According to Antoni, today’s Latin American startup market “is about talent, not capital”. Echoing the point in a recent article on “The Latin America Startup Opportunity,” US venture capital firm Sequoia wrote that it was “blown away by the quality of the founders of the current wave.” So we’ll have to do more than just read graphics.
The union of talent and money is what startup markets need to thrive. But there are other reasons Latin American startups are so frequently in the news today, including structural factors, such as high digital penetration and rapid growth in e-commerce.
These trends could have a long lifespan. NXTP’s Costa made a bullish argument: the share of “market capitalization of tech companies in Latin America is only 2.5% today, compared to over 40% in the United States,” and his company s ‘expects the two numbers to’ converge in the long run. ‘”Our reading of this set of data points is that there are a host of future Latin American public tech companies being created and funded today. .
Let’s talk about Latin American venture capital data, find out which countries are the region’s rising stars, learn how quickly Latin American startups need to cross borders, and explore how quickly capital is recycled in the ecosystem – always a key test for start-up – the longevity of the market.
A wave of venture capital
Latin America is set to break all-time records for venture capital raised and venture capital rounds in 2021. According to data from CB Insights, startups in the region have already raised 9.3 billion dollars in the first six months of 2021 from 414 transactions. The same data set indicates that in 2020, startups in the region raised $ 5.3 billion out of 526 deals. And in case you’re concerned we’re comparing it to a year unfairly hit by COVID, in 2019 the numbers were $ 5.3 billion (again) for 614 individual transactions.
This year is different, and the second quarter of 2021 was simply an outlier. With some $ 7.2 billion invested in Latin American startups, the closest rival to the second quarter of 2021 in terms of quarterly venture capital totals was the second quarter of 2017, when $ 2.6 billion was invested. .