Latin America’s startup funding bounces back after deep decline

Latin America’s startup funding bounces back after deep decline

Startup funding in Latin America increased in the second quarter, mainly resulting from a renewed increase in late-stage deals.

In total, firms in South and Central America raised $791 million in seed-to-growth funding in the second quarter of 2024, in keeping with Crunchbase data. That’s an increase of 25% from the previous quarter and 17% from a yr ago.

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The latest gains follow an unusually weak Q1 that saw the region’s financing hit a multi-year low. And while the latest numbers look higher, we’re still a good distance from the peaks reached during 2021’s record run, as shown below:

Meanwhile, the variety of reported deals declined this quarter, although we saw encouraging growth in early-stage volume. We also expect the variety of seed rounds to extend somewhat over time, with more previously unreported deals added to the database.

All about fintech

As overall investment rose in Q2, fintech led the recovery. The top 4 funding recipients in the quarter were fintech firms, including:

  • CelcoinThe Brazilian provider of banking tools for businesses raised $120 million in Series C funding in June.
  • ClipThe Mexico City-based provider of technology that permits merchants to just accept digital payments raised $100 million in funding in June, its first round of equity funding of 2021.
  • CRMBonusBrazilian provider of loyalty and promotional tools for retailers, raised $74 million in funding in May, led by Bond.
  • PostponementMexico City-based provider of tools that enable merchants to supply customers installment plans, raised $70 million in equity funding in May, led by QED Investors.

The strength of Fintech is not entirely surprising. The sector has long been the area with the highest value of regional investment. It was also the area with the highest value of investment in the last quarter.

However, we saw firms from other sectors raising large funding rounds in Q2. For example, RangeBrazilian data and AI consulting firm raises $40 million in funding, backed by The capital of Colombia.and Academic Insuranceinsurance platform, raised $22.5 million in Series A funding round.

Late growth stage, early stability stage

Late stage saw the biggest improvement in overall funding, with reported Series C and above investments of $291 million – roughly double what was raised in Q1 and almost 6x year-over-year.

While these may seem to be eye-popping gains, in the greater picture it’s not all that striking. Both Q1 2024 and Q2 2023 were anomalously weak quarters for late-stage deals.

Early-stage investment levels were more stable. Total investments in Q2 totaled $386 million, barely greater than in Q1 and barely lower than a yr ago. Overall, we saw less volatility in early-stage investment than in late-stage, where one or two large deals can significantly impact totals.

Getting higher

Overall, the data points to an improving climate for enterprise investment in Latin America’s leading startup hubs, with funding at every stage up in Q2 in comparison with the previous quarter.

A very marked rebound occurred in Mexico, where around USD 230 million was allocated in known financing rounds, while in the previous quarter this amount was lower than USD 40 million.

Still, Latin America funding stays greater than 80% below its Q2 2021 peak. Unicorn creation stays sluggish. And we haven’t seen many big exits for venture-backed firms. Even if we don’t expect a return to previous peaks, it looks like there’s still loads of room to rebound.

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