:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/MA3YZXDZN5BAZNEVOKWCV7MXR4.jpeg "Paola García Barreneche, executive director of Colombia's private equity association Colcapital.")
Bogotá — Nearly 50 unicorns are driving innovation in Latin America, in areas ranging from fintech to home deliveries, consolidating the region as an attractive market for venture capital investment, according to sources consulted by Bloomberg Linea.
With a total of 929 venture capital deals through November 2021 for an aggregate amount of $16.88 billion in Latin America, investment activity in regional startups has remained active, and in 2022 the outlook remains promising.
And given the level of development of the region’s startups, there is a high probability that in 2022 “the number of unicorns seen in Latin America will continue the growing trend that has been occurring in recent years”, Paola García Barreneche, executive director of the Colombian Private Equity Association (Colcapital), told Bloomberg Línea.
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“Latin America is consolidating as an attractive market for investments in venture capital. Likewise, the consolidation of new quality ventures covering different verticals are two important components for the consolidation of a robust space where startups that become unicorns are generated,” Barreneche said.
According to Colcapital figures, as of December 31, 2021 there were a total of 47 Latin American unicorns, highlighting the fintech and e-commerce sectors as leaders.
“In terms of the creation of unicorns, countries such as Brazil, Argentina, Mexico and Colombia stand out”, whose first unicorn is the home delivery giant Rappi, Barreneche said.
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How Many Unicorns Might Appear in 2022?
Hernán Haro, founding partner and CEO of the fund specialized in seed round MrPink, said in an interview with Bloomberg Línea that he would not be surprised if 2022 closes with around 10 new unicorns in Latin America.
And “leaving aside the current unicorns, at this moment there are about 100 startups that have raised capital at valuations of more than $100 million,” Haro said.
He added that MrPink plans to make 10 additional investments for a total amount of US$2.5 million in 2022.
“It is very difficult to predict exactly” which companies will become unicorns this year, Haro said, as there are specific cases such as Mexican fintech Clara, which reached a valuation of $1 billion during its first year of operations.
“In Colombia I think it could be the year of Platzi (an edtech startup), if it achieves the objectives set out in the Series B that closed last December,” Haro said. “Maybe they will be able to hold a new round this year. I would love to see a unicorn emerge in Peru, since it doesn’t have any yet. Both Crehana and Favo are good candidates in that country,” he said.
:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/CHFBRJC7Z5GQXHW6UZAEVWM4AU.jpeg "Hernán Haro, founding partner and CEO of MrPink.")
In Chile, he said he is impressed by the trajectory of fintech Xepelin, which in July last year closed what until then was considered the highest Series A investment for a startup in that country, for $230 million.
In addition, Haro pointed to Argentine fintech Pomelo, which at the end of last year closed a $35 million investment round with a view to expanding its presence in Latin America.
And there is also Colombian company Tul, an e-commerce platform focused on construction materials, which is approaching unicorn status, valued at $800 million after closing its latest $181 million round.
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‘High Growth Perspective’
Colcapital’s Barreneche said “the investment outlook for venture capital in 2022 has a high growth perspective. According to data revealed at the VC Latam Summit, Latin America is the second region, after China, with the highest number of transactions, surpassing India, even though Latin America only has close to 60% of India’s population”.
“If we take into account the high volume of startups that are currently being launched in Latin America, all investment rounds are important for the proper development of the startup space. Add to that the development of the middle class and the adoption and penetration of the internet and smart mobile devices that has been occurring in the region,” she said.
Barreneche added that, according to investment behavior in startups, “Series A stand out as the predominant round of investment by venture capital funds, with $32 million of capital commitments invested by December 2021 in Colombia, and therefore it is expected that this series will continue to be significant”.
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Haro said that, if we compare “the market capitalization of startups that have gone public against the regional GDP, the level is only 3.4%. Five years ago it was less than 1%, but it is still far below the US (48%), China (25%) and even India (10%)”.
“Ultimately, early stage activity needs to accelerate further to generate a hotbed of startups with the ability to achieve liquidity. In parallel, we will start to see much more Series A, B, and C activity to continue to accelerate the existing seed startup base.”
Unicorns Should Be Green
:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/A7LZ5SQGWFD7ZJT5M26TJ2546I.jpg "The executive director of BlackRock Inc. gestures while speaking at a Bloomberg event on the opening day of the World Economic Forum in Davos, Switzerland, on Tuesday, January 21, 2020.")
Larry Fink, CEO of BlackRock, said at the most recent Middle East Green Initiative Summit, held in Saudi Arabia, that “the next 1,000 unicorns will be companies that develop green hydrogen, green agriculture, green steel and green cement”.
“It is necessary to invest in technology entrepreneurs who have founded startups and who develop technology with a high impact on climate change, since due to the high demand they could become unicorns and, consequently, must-have companies,” Fink said.
“Asset owners are looking for investment opportunities that will come from this historic transition to net zero. Investments in low-carbon projects in emerging markets should be more than $1 trillion a year, more than six times the current rate of investment,” he added.
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