Why the decline in venture capital investment in Latin America isn’t necessarily bad news – TechCrunch

Global and local factors paint a mixed picture for LatAm startups in the first half of 2022

This global company the capital slowdown in the first quarter of 2022 may no longer be news to you. But global numbers can hide divergent realities around the world, and a closer look at regional data shows us that this is indeed the case.

According to the latest State of Venture report from CB Insights, the amount of funding disbursed to US and Asian startups has decreased, in line with the global trend. However, their European, Canadian and African counterparts attracted more dollars in the first quarter of 2022 than in the previous quarter. Finding out why will keep us busy all week – but today we’ll focus on Latin America.

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Latin America is an interesting place to delve into what might happen to startups. Why? Because venture capital investment in the region has not started to slow in recent weeks: dollar funding has now fallen for three consecutive quarters in the region. In other words, this change in mood precedes the war in Ukraine, the sell-off in tech stocks, and signs of a months-long global slowdown.

Subscribe to TechCrunch +Some of the questions raised by the deceleration of venture capital in Latin America are the same as elsewhere: how can private investment in startups maintain an accelerated pace when interest rates rise and public valuations fall? However, other questions are more specific to the region: have valuations become too high, too quickly compared to other regions? Did FOMO peak earlier in Latin America? Does the long-term uptrend still make sense?

To understand what’s happening south of the US border, we ran some numbers, because it wouldn’t be The Exchange otherwise. We also contacted two investors with interesting perspectives on the region: Amy Cheethampartner of Costanoa, and Belgian VC based in Mexico Jonathan Lewyco-founder and managing partner at Investo.

If you care about sausage making, you might be interested to know that our initial interpretation met with some pushback from our experts, which always makes things spicier. Make way for our figures and our analyses!

Beyond Data

The Latin America section of the CB Insights report begins with an overview of regional trends, followed by country-by-country breakdowns. It caught our attention, perhaps disproportionately. See for yourself the evolution of dollar volume, comparing Q1 2022 to Q4 2021:

Venture capital investment in the first quarter of 2022, in dollars:

  • Latin America as a whole: $3 billion, down 25% from Q4 2021
  • Mexico: $258 million, down 59% from Q4 2021
  • Brazil: $1.5 billion, down 32% from Q4 2021
  • Colombia: $457 million, up 56% from Q4 2021
  • Argentina: $47 million, down 46% from Q4 2021
  • Chile: $182 million, down 17% from Q4 2021

Our first instinct was to dive deeper into the differences between, say, Mexico and Colombia, but Lewy questioned that approach.

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