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$14.8B In VC Poured into LatAm in 2021. Here’s Why

Some investors say it was spewed by the pandemic, others say it was a matter of time, but either way you look at it, 2021 was a record breaking year for VC money in the region

2021 brought in more VC money than several of the previous years combined.
By Marcella McCarthy (EN)
December 23, 2021 | 11:01 am

Miami — As the pandemic pushed people in Latin America - and around the world - to adopt tech for learning, conducting business, ordering food and household goods, accessing their bank accounts, and a plethora of other things, VC’s threw money into the space like never before.

In 2021, venture-backed companies raised $14.8 billion across 772 deals in Latin America, according to PitchBook data. That’s more than the total capital invested in the region in the previous six years combined.

Not a lot of attention was paid to the region by foreign investors until around 2019 when SoftBank launched its $5 billion Latin American Fund – a huge bet, as the region had only raised a total of $3.9 billion in VC the year before. But their attention to the region caught other investors’ eyes. The combination of tech adoption due to the pandemic and the maturity of the region’s startup ecosystem, seem to have collided and created an explosion in entrepreneurship.

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While many tech companies flourished during the pandemic and grew at never before seen speed, Nico Berman, a partner at Kaszek, sees the boom as a matter of time and the result of a few factors.

“It’s a combination of things, with the most important one being, the explosion of amazing entrepreneurs in the region,” he said.

The ecosystem has matured and “we’re starting to see second time entrepreneurs, people are realizing that there’s a huge opportunity and people are going after it,” Berman added.

“You have a larger cohort of brilliant and experienced entrepreneurs going after disruption. And the VC world is also realizing that there’s a huge opportunity in LatAm, mostly because we live in a world with inefficient infrastructure and with technology that can be changed,” he said.

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Of the 17 total Latin American unicorns, nine were minted this year.

This year many deals included foreign growth firms such as Tiger Global, D1, DST, and Coatue who have all been increasing their focus on the region. We also saw more action from early stage investors such as Andreessen Horowitz, Accel and Benchmark. Among them is also SoftBank who told Pitchbook that they’ve found they need to get in earlier on deals.

“We’ve moved to early-stage because it’s getting competitive on all fronts, and it’s the only way to avoid competing only on the deals that get visibility in the US,” Shu Nyatta, who co-leads the Latin America Fund at Softbank, told Pitchbook.

While Brazil’s economy may experience some potentially trying times, it hasn’t slowed down any of the giants. Just a few weeks ago we saw Nubank go public on the NYSE with a market cap of $52 billion.

Now with Nubank public, we’ll start to see people leave the company to start their own ventures. They’ll be well-connected, experienced, and if they are not financially backed by David Velez, they will at least have his seal of approval - which means something. After all, look at all the companies already funded by Velez and/or founded by former Nubank employees. It’s called the multiplier effect and here it is as depicted by Endeavor.

David Velez multiplier effect. Credit: Endeavordfd