Bloomberg Línea — Experts in the entrepreneurial ecosystem say that early-stage startups are the most countercyclical and will not suffer the effects of the current venture capital crisis. That is why they are the ones that will receive the most capital in the coming months.
Since the first quarter of 2022, the initial trend of VCs allocating more funding for Series B and later rounds reversed to financing more ventures in terms of seed capital, according to data from the Latin American Private Equity Investment Association (LAVCA). And as the second quarter just ended, early-stage rounds continued to proliferate.
As a result, the percentage of transactions in almost all Latin American countries has increased, but the cumulative amount has decreased.
According to the semi-annual Transactional Track Record (TTR) report, Colombia and Peru are the winners in terms of the number of venture capital transactions and total amount. Colombia increased 63% in transactions and 29% in capital raised: $1.03 billion. Peru had a 57% increase in the number of operations and a 32.74% increase in their amount.
In contrast, Chile saw a 35% decrease in capital raised, Argentina a 23% decrease and Mexico saw a 14.35% decrease in the amount of money raised compared to the same period last year.
This shows that early-stage rounds are the ones that are mobilizing the most in these months. Investment continues, but with smaller tickets.
This week these were the early stage rounds that were announced in Latin America:
Educbank, a Brazilian fintech for schools, raised R$ 200 million ($36 million) in a round led by Vasta and Marrakech Capital to expand its operation.
The fintech wants to support private schools financially in Brazil. “Schools don’t have access to capital. Schools have the problem of default because they cannot discontinue the service of the student who does not pay the tuition throughout the school year. So a good part of the families leverages themselves at school. So throughout the school year, a good part of the families purposely do not pay. Monthly payments are delayed. And the school maintainer, for not having access to capital to pay for this working capital, not having access to credit, nor capital to pay for this working capital throughout the year, he despairs,” said Danilo Costa, founder at Educbank, in an interview with Bloomberg Línea.
So the company provides the financing to schools through an algorithm to better know schools that can afford to pay back. Educbank’s service charges a fee for student tuition.
Brazilian Combate à Fraude (CAF), a fraud prevention startup, raised R$ 80 million ($14.70 million) in a Series A round led by Green and André Edelbrock, and Trevor Clarke, co-founders at Ehoca.
The authentication startup has big e-commerce clients in Brazil such as iFood and Magazine Luiza.
Defying small ticket forecasts amid the crisis, this week Mexican startup Arrenda received $26.5 million in seed capital in a combination of equity and debt financing. This is one of the largest early-stage rounds raised recently.
The round was led by the English fintech fund, Fasanara Capital, with the participation of Kube Ventures, ODX, Toehold Ventures, Wharton Fintech, and Lightspeed Venture Partners Scout Fund, PRMM Inmobiliaria, and counted the participation of angel investors from the fintech and proptech industry.
Atrevi, Reiro and DEFYCAP
Mexican retailer Coppel and startup accelerator Unreasonable Mexico organized the CoCrea Lab contest aimed at financial projects of generation Z in areas such as saving habits, smart investments, and personal finance management, among others.
Atrevi is an app that motivates users to invest constantly so they can go on a trip, buy a car, start a business or save for retirement. It was the first place winner and obtained seed capital of MXN$60.000 Mexican pesos.
Reiro facilitates retirement savings through a free and accessible debit card. With each purchase, a minimum percentage is earmarked for retirement, which is kept in a capitalizable investment fund. It won second place and a seed capital of MXN$25.000.
DEFYCAP is a DAO (Decentralized Autonomous Organization) for saving and investing without commissions. Complemented by an APP with a Wallet where you can manage your digital money and make payments securely. It won third place and MXN$15.000.
Regarding this second contest organized by Coppel and Unreasonable Mexico, Oscar Meza, divisional manager of strategic planning and retail innovation at Grupo Coppel, said they are committed to innovation and new generations. Raul de Anda, CEO of Unreasonable, said that “investing in the new generation is investing in the future of our country”.