Fintech, energy, and retail are LatAm's hottest investment areas for VCs, reports Wind Ventures

The survey also points out that VCs are more optimistic about the success of innovation in the region than last year

Latin American startups get bigger fatter checks in November: average round size jumps from $13M to $31.9M
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Venture capitalists’ sentiment toward Latin America as an attractive growth market for startups has dramatically increased last year, reports venture capital firm Wind Ventures. The annual survey of the venture capital community’s outlook on global markets also points out specific sectors that continue to show promise: 66% of VCs surveyed indicated that fintech will remain the most promising investment area, followed by energy (20%) and retail (11%).

In addition, optimism about Latin America’s innovation activities grew sharply, with 78% of respondents indicating they were more optimistic about the success of innovation in Latin America than last year.

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Large market size and high rate of tech adoption remain the most important factors when considering where to expand into a new geographic region, followed by supportive local partners. There was a significant increase in perception amongst venture capitalists that Latin America has these growth elements while markets such as China and Europe decreased.

“What we have seen over the past year is a sharpened awareness within the venture capital ecosystem about Latin America’s tech-enabled transformation,” said Brian Walsh, Head of Wind Ventures. “Venture capitalists have become more aware and more bullish about the opportunities in the region, as indicated by our research, and they are putting a lot more capital to work there as a result”.

Walsh also cites PitchBook’s data on VCs investment in the region: in 2021, more than $12 billion were injected across more than 500 deals in Latin America, which is more than what was invested in the previous three years combined.

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Wind Ventures is the corporate venture capital arm of chilean energy company Copec, one of the leading energy companies in Latin America and southeast United States. Based in San Francisco, Wind Ventures leverages Copec’s resources to accelerate growth, primarily within Latin America, for startups and scaleups across the world.

In September of 2021, Wind Ventures surveyed over 40 venture capitalists from a diverse cross-section of professionals including traditional venture capitalists and corporate venture capitalists. While the majority (68%) of those surveyed were early-stage investors, 20% were growth-stage investors, and 12% were seed investors.

Source: Wind Ventures anual VC’s Survey

Expansion challenges

When specifically asked about Latin America, more venture capitalists perceived it as having these considerations for an attractive growth market compared to last year: While last year’s survey showed that VCs generally did not perceive Latin America as having the important elements to support startup expansion, this year’s survey revealed a significant increase in positive perception for the region — 18% as favorable compared to 6% in 2020.

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The primary perceived challenge for startup expansion into Latin America is perceived to be political: investors surveyed ranked the political climate (95%) as the biggest challenge for scaling a startup in Latin America, followed by economic (51%), cultural (39%) hurdles, and the impact of COVID-19 (17%).

Source: Wind Ventures anual VC’s Survey

“Historically, we have seen underinvestment in technology in Latin America,” explains Walsh. “The region is poised for explosive growth given the digital transformation in a market of 600 million people. We believe there are opportunities for startups from around the globe to expand to the Latin American market; however, given the complexities of the region, making the right decisions about which markets within LatAm to target and navigating political elements and partnerships will be key.”

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