Mexico City — Caution among venture capital investors in Latin America has left dozens of startups one step away from reaching a valuation of $1 billion or more, a milestone that raises them to the status of unicorns.
These startups, or ‘soonicorns’, will have to demonstrate positive unit economics, i.e. that the cost of selling a unit of product is profitable in order to raise mega-rounds, i.e. investments of over $50 million.
From 2020 until the first months of 2022, mega rounds drove the emergence of ‘soonicorns’.
In 2021, the year with the highest venture capital invested in Latin America to date, 47 startups in the region reached ‘soonicorn’ value of $100 million, a 3.5-fold growth compared to 2020.
‘Soonicorns’ are startups that have a track record of 4.5 years in business, have received an average investment of $73 million and are seeking a Series C or later, according to the study Panorama of Venture Capital in Latin America, published by Endeavor and Glisco Partners in 2022.
However, of the total capital raised in Latin America last year, only 13% went to late-stage startups, representing a historic low and a contraction of 88%, according to the study Insights: Venture Capital and Growth Equity Ecosystem in Latin America, also by Endeavor and Glisco, published this year.
The drop in the number of mega rounds in Latin America was 76% in 2022. Still, in the first two quarters of last year, 22 mega rounds were closed, some of which pushed ‘sooninorns’ to unicorn status, as was the case of Betterfly in Chile, Habi in Colombia, Nowports in Mexico, Dock in Brazil, Kushki in Ecuador, and Stori in Mexico.
But no Latin American unicorn has emerged since July 2022, and the ‘soonicorns’ waiting for a next round of funds to reach that status are the following, according to Endeavor and Glisco.
This Colombian financial technology startup has not received a round that would elevate its status to unicorn. In search of efficiency in June 2022, it made mass staff cuts, sources told Bloomberg Línea.
Covalto (formerly known as Credijusto)
Venture capital experts pointed to this neobank as the next unicorn after it acquired Finterra in 2020 and changed its name to Covalto, while increasing its acquisitions in the banking business.
Interviewed in June 2022, David Poritz, Covalto’s co-founder and co-CEO told Bloomberg Line, “Obviously being a unicorn is an interesting goal, but we are much, much more focused on profitability, credit quality and growth.”
Covalto reported in August 2022 that it plans to go public on Nasdaq through a special-purpose acquisition vehicle (SPAC) in the United States.
In December 2021, when several unicorns emerged in Latin America, Mexican fintech Kueski, which uses algorithms to approve loans, raised $202 million in equity and debt.
The Series C round was led by StepStone Group Inc and Victory Park Capital and also included new investors OnePrime Capital and Glisco Partners. Since then it has not received a round in over a year, but could become the next Mexican unicorn.
The payments and business financial services platform for small and medium-sized companies in Latin America obtained a Series B financing round just nine months after its Series A, for $111 million, in which investors such as Private Shareholders I, Kaszek Ventures, Endeavor Catalyst, Cathay Capital, DST Global Partners, FJ Labs, Avenir, Picus Capital, Manutara Ventures, Chile Ventures and PayPal Ventures participated.
It then followed the trend of acquiring debt to avoid dilution or a decline in valuation and continue to grow its business, raising $140 million from Goldman Sachs.
Amid the investment boom in 2021, the Colombian startup that began as a digital marketplace connecting farm products with restaurant demand in the city raised $65 million in a Series B led by Hans Tung, a partner at venture capital firm GGV Capital and one of the founders of Southeast Asian super app Grab.
The round included participation from previous investors Tiger Global Management, Softbank and Monashees, and a new investor, Lightspeed Venture Capital. In 2019 it raised $25 million in a Series A. In 2022, it was one of several companies that had to cut staff to stay afloat.
Almost 10 years ago, before the term fintech had been coined, Kubo Financiero was born, with a team led by Vicente Fenoll, and focused on offering online financial solutions.
This pioneering fintech in Mexico received a $27.5 million investment in 2021 from IDB Invest, Blue like an Orange, Mexico Ventures and previous investors such as Bamboo Finance, Dalus Capital and KuE Capital.
Colombia / Mexico, proptech
In an interview with Bloomberg Línea, La Haus’ co-founder Rodrigo Sánchez-Ríos said the company had been enjoying exponential growth. “So that makes it clear that 2021 was the year of growth, what we are looking at now, where we are going, is to maintain that growth with a lot of focus on profitability,” he said in May 2022.
For the proptech, unicorn status is not a priority, but rather to become a public company. It is on a path toward public markets, which is why the focus is on growth with a solid focus on being profitable, Sánchez-Ríos, who is Mexican, said.
Kovi, a platform that offers vehicle rental with mobility and messaging applications, closed a $100 million investment round in August 2021 led by Valor Capital and Prosus Ventures (formerly Naspers).
The round also included the participation of Quona, GFC, Monashees, Ultra Venture Capital, Globo Ventures, Maya Capital and ONEVC.
The startup launched in 2018 raised that capital two years after it received a $30 million investment in a Series A round. Kovi currently has users in Brazil and Mexico.
Brazilian individual health insurance provider Alice received a $127 million Series C round from SoftBank in December 2021, but fell short of the unicorn valuation.
Amid the ‘venture capital winter’, it confirmed in July 2022 that it laid off 63 employees from its sales department, and overhauled teams and reassigned 20 professionals to other areas.
The layoffs were a result of the need to resize the sales team according to Alice’s expansion plans to be more efficient and sustainable in the long term, the company said.
In August 2022, this tech-enabled healthcare startup achieved one of the latest mega-rounds of the year by raising $170 million from investors such as Madrone Capital Partners, Lightrock and Kamarropin.