For over a decade, Argentina was the only Latin American country to breed a unicorn company: in 2007, Mercado Libre held the title, and in 2015, Decolar. Until 2017, the two companies were the only unicorns in the region. Skip to 2021: in less than four years, the number of Latin American startups valued at more than $1 billion jumped to 34. The picture changed in 2018 when 9 startups joined the club; 2019 produced 6 new unicorns and 2020, although it was hit by the pandemic, 4. In 2021, which so far has been a year of records, 13 LatAm companies have already become unicorns, and the year is not over yet…
Brazil currently has the most unicorns, 60% of them; Argentina is home to 17% and 11% are startups from Mexico. All this data are from the Sling Hub LATAM Report, produced by Brazilian intelligence platform Sling Hub, which looked at stats from 23,383 startups and 656 investors between 2017 and 2021.
According to João Ventura, CEO of Sling Hub, this rising number of unicorns is mainly linked to the increase in foreign capital pouring into Latin America.
“Five years ago, there were not so many foreign investors looking at Latin America. Now, it’s the opposite: it’s unusual, especially in Series C rounds onwards, not to have any foreign investor. If five years ago most of the investments were made by Brazilian capital, in smaller rounds, now larger rounds and the presence of foreign capital are increasingly common. The world is looking at Latin America and there is a lot of money being infused,” explains Ventura.
While the whole Latin America innovation ecosystem has accelerated since then – total venture capital injected in the region has gone from $2.2 billion in 2017 to $13.1 billion in 2021 –, Brazil has taken the lead on this front as well. The country now has 17,987 startups or 77% of the region’s total; next comes Mexico, with 1,869 (8%), and Chile, with 1,109 (5%).
Thus, it is also natural that startups from Brazil have the largest share of the investment rounds aimed at Latin America: only this year, Brazilian companies accounted for 70% of the investments; Mexico comes in second, with 13% of the volume invested, and Colombia in third place, with a share of 7%.
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Of the 10 startups that have received the most investments in the last five years – together, they have raised $14.1 billion, almost 40% of the total of $36 billion raised in the period –, seven are Brazilian: Nubank ($2.4 billion), C6 Bank ($2.2 billion), Stone ($1.5 billion), Loft ($900 million), Quinto Andar ($700 million), VTEX ($700 million) and Gympass ($700 million). The list is completed by Rappi, from Colombia, with $2.2 billion, Mercado Libre, from Argentina, with $2 billion, and Kavak, from Mexico, with $800 million.
For Ventura, Brazil‘s protagonism is the outcome of a series of factors. “Brazil is the largest economy and the largest population in Latin America; especially for B2C startups, this has a huge impact on product scalability. Despite the difficulties of doing business in Brazil, we have a strong economy and a huge potential consumer market”, he said.
Foreign investors: big rounds, not so many deals
When looking at who are the 15 greatest investors in Latin American unicorns, the presence of foreign capital becomes clearer: the Japanese group SoftBank tops the list, with 13 unicorns in its portfolio; then come the North American funds, there are eight of them. Three Brazilian funds are on the list, Kaszek, investor of 10 unicorns; Monashees, with 6 unicorns in its portfolio; and Redpoint Ventures, with 4. The other three major unicorn investors are from Singapore, South Africa, and Hong Kong.
According to Ventura, there is a difference between foreign investors and local investors. While local VCs contribute smaller volumes in a larger number of deals, focusing on early-stage startups – the largest investor in Latin American startups is a Chilean fund called Start-Up Chile, which has already done 205 deals – foreign funds usually lead bigger rounds.
“When we look at who invests in unicorns, there are few Brazilians or Latin Americans. Most are from the United States. The country has a lot of venture capital and funds have started to invest outside,” explains Ventura.
2021 is expected to be a record year for M&A
Brazil is also the most active country in mergers and acquisitions: 84% of all startups acquired in Latin America since 2018 are Brazilian. The number of acquisitions in the region will possibly break its record in 2021. There were 200 startups acquired in 2020, but as of August this year, 195 Latin American startups had already gone through this process.
Here there is a difference compared to investments: those who most acquire Latin American startups are companies or other Latin American startups. The serial startups acquirers, currently, are Magazine Luiza, with 25 startups acquired; Linx, with 17, and Locaweb, with 16. Eight of the ten biggest buyers of Latin American startups are Brazilian companies. According to Sling Hub’s findings for LABS, 24% of those acquired are retail techs, 15% are fintechs, and 13% are food techs.
The acquisition of a startup serves several fronts of an expansion strategy: the acquirer buys a technology that it would otherwise have to develop; it also brings in the team of professionals and, most importantly, it incorporates the customer base. It is increasingly common that the acquisition is not directly related to the company’s core, but has to do with the expansion plans of an ecosystem of services.
João Ventura, CEO of Sling Hub
