How a Quarter Bereft of Unicorns Bodes Badly for Latin American Startups

There are 47 “soonicorns” in the region that are awaiting more funding rounds to reach unicorn status

The venture capital crisis has put on hold the 'graduation' of 47 soonicorns in Latin America to unicorn status.
November 02, 2022 | 01:41 PM

Read this story in


Mexico City — The party celebrating the emergence of new unicorns has taken a three-month hiatus in Latin America, with the most recent announcement of a startup reaching a valuation of more than $1 billion having been in early August, with the merger of fintechs Yaydoo and Paystand, creating a binational, US-Mexican unicorn.

However, since July, no wholly Latin American unicorn has emerged, since Mexican fintech Stori achieved a value of $1.2 billion after extending its Series C round, led by BAI Capital, GIC and GGV Capital.

Stori’s unicorn status came amid an adverse environment for late-stage startups, however.

Marlene Garayzar, co-founder of Stori, told Bloomberg Línea that “investment is not going to stop, but it’s going to go towards companies that really have a lot of clarity on when they are going to be profitable and have healthy unit economics”.


Despite the decrease in investment this 2022, unicorns still emerged in the first half of the year in the Latin America however, such as Chilean social insurtech Betterfly, Colombian proptech Habi, Mexican logistics startup Nowports, Ecuadorian paytech Kushki and Brazilian companies Dock, Unico and Solfácil.

However, this second half of the year has not been the best for the emergence of unicorns. This is despite the fact that, according to Endeavor, last year’s mega-rounds boosted the emergence of 47 soonicorns, i.e. startups valued at US$100 million. These startups are waiting for more rounds to reach unicorn status.

Why are we not seeing any new Latin American unicorns?

Daniel Bronsoiler, a senior venture capital analyst at DILA Capital fund, told Bloomberg Línea that there are several factors that explain the absence of new unicorns during the last three months in Latin America.


“More than anything else, the slowdown in investment has been due to a return to a fundamentals-focused investment environment, as well as declines in public markets and hence a reduction in comparative multiples,” Bronsoiler said.

While acknowledging that there has been a slowdown in venture capital investment, Bronsoiler said this particularly affects late-stage startups.

Vincent Speranza, director general of Endeavor Mexico, said in June during the presentation of the study Panorama del Venture Capital en Latinoamérica by Endeavor and Glisco Partners that “it is clear that the scenario of access to private capital will change in the coming months, and it’s not restricted to 2022″.

Speranza assured that after three years of constant growth, a new scenario can now be seen to be emerging.


In the coming months, “we are going to see this correction and a purging of companies between those that are profitable and sustainable and those that cannot cope with all these business models without financing,” Olaf Cárdenas, an academic at the Universidad Panamericana Business School, told Bloomberg Línea.

Cárdenas, who is also a senior associate at private equity fund Besant, which is dedicated to venture capital investments, believes that we will see fewer and fewer new unicorns in Latin America.

As a region, Latin America only has 3% of the total number of unicorns globally, according to the Endeavor and Glisco Partners study. And of the total number of unicorns in Latin America, 58% are in Brazil, 20% in Mexico, 13% in Argentina, 6% in Chile and 3% of the total are in Colombia.


Bronsoiler, of DILA Capital, explains that the trend in recent months amid later-stage startups is a shift in focus toward profitability, as well as a strategy of raising extensions from previous rounds with existing investors, with the goal of extending their runway, or the amount of time they have before exhausting their cash, and improving numbers before going out in search of capital the following year.

“For these reasons, it is likely that a new unicorn will not emerge in the last quarter of this year, and we believe that we will stop seeing those cases where valuations did not match public multiples,” Bronsoiler adds.

However, a large number of unicorns could continue to appear in the region in the future, he says, pointing out that 2022 has been the year of the second-largest investments in the region, according to data from the Association for Private Equity Investment in Latin America (LAVCA).

A decrease in venture capital investment

In the second quarter of 2022, venture capital investment began to slow down due to the global macroeconomic crisis caused by interest rate hikes by the Federal Reserve and the fall of large technology companies’ shares in the stock market, many of which are comparable to the incipient models of Latin American startups.


In addition, large international funds such as SoftBank, Tiger Global and a16z reported losses, and as a result, venture capital funds in Latin America are being much more selective and cautious in their investments.

According to data from Transactional Track Record, in the second quarter of 2022 venture capital investment in Latin America fell 54% compared to the same period in 2021, with $2.42 billion invested in the region, compared to $5.35 billion in the same period of 2021.

Last year was a record year for investment, during which Latin American startups captured $15.7 billion in investment, more than triple the $4 billion invested in 2020, according to LAVCA data.

However, the million-dollar rounds have been overshadowed in recent months by the mass layoffs by startups, many of them valued as unicorns, which are having to adjust to survive the crisis.