Venture Capital Investment in Latin America Continues to Decline

Transactional Track Record’s latest report points to a 5% drop in the number of transactions to November in comparison with last year

Transactional Track Record’s latest report points to a 5% drop in the number of transactions to November in comparison with last year
December 15, 2022 | 02:57 PM

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Mexico City — Venture capital transactions in Latin America continue to decrease in number and amount as the end of the year nears, according to the latest monthly report from Transactional Track Record (TTR).

According to TTR, a total of 977 venture capital transactions with an aggregate amount of $7.69 billion took place to November, a 5% drop in the number of transactions and a 56% decrease in their amount year on year.

The drop in November was 2% higher than in October in terms of the amount of deals, which contrasts with what happened in 2021, as several unicorns were announced in the last quarter of that year in the region.

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After a 2021 of mega investment rounds for startups in Latin America, totaling more than $50 million, this year capital raising has become complicated due to rising interest rates and the fall of technology stocks.

Last year, in the first half of December, four new unicorns with Latino DNA were announced: business expenses startup, Clara; e-commerce store accelerator Merama; digital supermarket Jokr, and biometrics platform Incode.

This year has already gone four months without the emergence of a new unicorn in Latin America, and without the addition of a ‘soonicorn’, i.e. a startup valued at least $100 million.

At the end of the year there was a drop in the venture capital market, but at the beginning of 2022 the trend seemed positive, and in line with what had been seen in 2021.

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TTR data shows that 253 transactions took place in the first quarter of the year, of which 208 deals had a non-confidential amount totaling around $3.06 billion, representing a 6% increase in the number of transactions and a 9% increase in capital mobilized compared to 2021.

For April 2022, at the beginning of the second quarter, TTR recorded a total of 343 transactions with an aggregate amount of $3.77 billion, a positive variation of 12% in the number of transactions. However, this is where the decline began, representing an amount that totaled 17% less than the same period in 2021.

In second quarter there were 528 transactions, of which 425 deals have an aggregate non-confidential amount totaling around $5.61 billion, a 9% increase in the number of transactions and a 34% decrease in capital mobilized compared to 2021.

In the third quarter of the year, Latin America saw 791 venture capital transactions, of which 617 have an aggregate non-confidential amount of $6.93 billion, a 3% decrease in the number of transactions and a 54% decrease in capital mobilized, compared to the same period in 2021.

The largest quarterly drop in invested capital occurred from July to September, but the trend continues into the last quarter, with 882 transactions totaling $7.30 billion for the full year to October, a drop of 4% in the number of transactions and a 54% decrease in the total capital invested in year-on-year terms.

The trend at the end of the year indicates that investors remained cautious in December, especially in late-stage startup investments, which are the most affected, as seed-stage investments, although they have slowed down, continue to flow into the region.