Endeavor Predicts Startups in LatAm Will Receive Fewer Rounds Above $50M in 2022

In the last year, 79% of venture capital committed in Latin America was part of rounds of more than US$50 million; four times more than in 2020. However, with the current crisis, capital might flow more cautiously

A sheet of uncut U.S. $1 bills is arranged for a photograph.
June 20, 2022 | 11:04 AM

Bloomberg Línea — In recent times, large international funds such as SoftBank, Tiger Global and a16z have reported losses, so venture capital funds in Latin America brace for new times to be much more selective and cautious in their investments.

Coupled with the new market conditions: a significant drop in the share price of technology sector companies, rising inflation, an increase in interest rates and the Ukraine-Russia war, the industry gives for granted that new investors’ tickets will be smaller than in 2021.

In 2021, 79% of venture capital invested in Latin America was part of rounds above $50 million. That is four times more than in 2020, however, in 2022 these rounds will be less frequent, said Enrico Del Río, director of Intelligence at Endeavor Mexico, at the presentation of an outlook of venture capital in Latin America, conducted by Endeavor and Glisco Partners.

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The mega-rounds drove the emergence of soonunicorns, startups valued at at least $100 million. Last year 47 startups in the region reached this value, a 3.5-fold growth over 2020.

The record 2021 investment in mega-rounds represents an increase of about four times what was received by growing startups in Latin America in 2020.

Brazil and Mexico together accounted for almost 80% of investments in the region, due to the size of their markets.

Of the 70 mega-rounds raised in Latin America, 32 were in Brazil, 18 in Mexico, 11 in Colombia, 6 in Argentina and 3 in Chile.

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The VC boom in the last two years was so strong that the number of mega rounds increased 38 times compared to 2017, when the Latin American entrepreneurial ecosystem was incipient.

It’s a marathon and we’re just beginning

“it is clear that the scenario of access to private capital will change in the coming months and it is not only 2022″, said Vincent Speranza, CEO of Endeavor Mexico at the presentation of the study.

Speranza said that after three years of steady growth, a new scenario is now emerging. But it does not end here, “we have been building an ecosystem for two decades, this is a marathon and we have to learn to be patient, it is still a long race, we are at kilometer 5 or 10″.

So far in 2022 there have been 22 mega rounds, some of which led sooninorns to become unicorns this year, such as Betterfly in Chile, Habi in Colombia, Nowports in Mexico, Dock in Brazil and Kushki in Ecuador.

However, despite the growth of mega-rounds last year, the Endeavor study reveals that only 5% of Latin American entrepreneurs reach a Series C.

Alfredo Castellanos, Managing Partner of Glisco Partners added that “companies that are well armed and have a clear path to profitability, those that have very good teams and clear business plans will continue to flourish and will be able to raise capital.”

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Startups that meet the above requirements will continue to capture large tickets of venture capital investment.

For Castellanos, focusing on profitability does not mean forgetting about growth.

He noted that the crisis may play in favor of startups due to their innovative solutions. “Startups are not only growing because the economy is growing but fundamentally they are growing because they are gaining market share from traditional companies and this phenomenon is not going to stop because of an economic slowdown, on the contrary, it may even increase,” he said.