VC investment in Latin America has doubled every year since 2016, but COVID-19 will interrupt this cycle

LAVCA’s Annual Review shows that the region's startups received $4.6 billion last year. COVID-19 is changing 2020 scenario, but that doesn't mean that there is no capital available

Illustration by Felipe Mayerle

Since 2016, venture investments in Latin America have more than doubled every year. Last year, more than $4.6 billion was invested in startups in the region, against $1.98 billion in 2018. That’s one of the highlights of the new Annual Review by the Latin American Venture Capital Association (LAVCA). This year, however, this cycle will be interrupted by the COVID-19 pandemic.

READ ALSO: 2017 to 2019 – A chronology of Latin American Unicorns

Until the world returns to normal (or to a ‘new normal’ as many experts have emphasized), venture investors and firms will focus on their current portfolio and, as well as the companies of the old economy too, shift to a survival mode. But that doesn’t mean that there is no capital available. Or the contrary, segments such as healthcare, education, and logistics are in the spotlight as never before. Latin America’s new sweethearts, the fintechs, will continue to draw the world’s attention as well.

This is also going to happen because venture capital investment firms need to allocate the funds raised throughout 2019: $1.08 billion, almost two-thirds more than the $670 million registered a year before.

READ ALSO: For venture capital firms in Brazil, the market is capitalized but investment criteria are tighter amid the crisis

“We’re suffering, but there is an opportunity too, especially on digitalization. What the crisis is doing is basically accelerating things to companies. Some companies are seeing goals that were set to two or three years being achieved in one month. I’m realistic, but I’m also really amazed about what I’m seeing in Latin America in terms of resilience,” said Riverwood Capital‘s co-founder and managing partner Francisco Alvarez-Demalde, during a webinar promoted by LAVCA this Wednesday.

In 2019 there was a greater volume of investments, but a smaller number of deals (440, quite less than 463 ones from the previous year)–an expected movement as the ecosystem matures, and the same good entrepreneurs attract more investors.

Brazil is, by far, the largest VC market in the region.

Source: LAVCA’s Annual Review of
Tech Investment in Latin America 2020.

As the Association wrote in its new report “the resourcefulness of Latin America’s entrepreneurs will be tested in the year ahead as the need for cost-effective solutions to highly complex problems comes into sharper view”.

READ ALSO: The perfect storm to promote digitization in Latin America

Looking at the 2019 data on the segments that most attracted investments and listening to the founding partner of Canary and managing partner of AtlanticoJulio Vasconcellos, on the same webinar already mentioned, it is clear that what was already trending remains trending now with the pandemic, even in the world of venture capital.

Source: LAVCA’s Annual Review of
Tech Investment in Latin America 2020.

“A lot of these trends are happening for many years, such as e-commerce, food delivery, or the nationalization of the supply chain. The urgency sense tends to accelerate the adoption of these new ways of doing things. All that is highly regulated is already been disrupted,” stressed Vasconcellos.

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