Investors have been reducing valuations of Latin American startups during the global stock market rout and in an environment of higher interest rates, said Sergio Furio, founder of unicorn fintech Creditas.
“Startups that raised cash at peak valuation, for example, last July last year, will have to accept a reduction if they need more money this year”, said Furio. Following the public markets, multiples attributed to private companies fell. Shares of Latam’s largest fintech, digital bank Nubank, sank 60.6% this year.
So startups are trying to conserve cash, Furio added. Creditas’ latest funding was in January, a $260 million round in which the valuation reached $4.8 billion. The fintech will not raise capital this year, Furio said in an interview with Reuters before meeting with investors in New York.
The startup expects to moderate credit growth, as its consumers deal with higher inflation and lower disposable income. It also intends to present progress in the operation of Voltz, an electric motorbike maker in which Creditas invested BRL 100 million.
The investment banking unit of Latin America’s largest bank, Itau BBA, is hosting its first conference in New York with Latin American CEOs since the start of the pandemic, with around 150 companies headquartered in Brazil, Mexico, Colombia and Argentina.
Emerging market investors have been more interested in Latin America since the Ukraine war, as the region is relatively insulated from the higher geopolitical risks. They also have become more demanding.
Alex Ibrahim, head of international markets at the New York Stock Exchange (NYSE), expects markets to reopen for new equity offerings from Latin America by September.
“Investors are more selective, demanding a clear path to profitability from startups”, Ibrahim said. Investors are more cautious about companies that burn cash. While the market is closed, the NYSE has been working to prepare candidates, including tech and industrial companies, to come to markets when there is a window.