Last quarter, financing for Latin American startups reached its lowest level in years on account of a decline in stage-specific investment and deal volume.
According to estimates, investors in the first quarter of 2024 committed $579 million to growth-stage to growth-stage rounds. Crunch Base data. This represents a decline of 17% in comparison with the year-ago level and a decline of 39% in comparison with the previous quarter.
The last quarter was a particularly sharp decline from the region’s funding peak nearly three years ago. At its peak, investors poured greater than $7 billion into Latin American firms in a single quarter of 2021.
To get an idea of how far things have come, we have outlined investments, color-coded by stage, for the last 13 quarters.
Contents
Fintech is the favorite
Even after the pullback, we saw some big deals being made. Notably, all 4 have found their way into the fintech industry, including:
- Based in Bogota Symmetricalprovider of tools for automating financial and accounting tasks, raised $55 million in a February Series B round led by Goldman Sachs;
- Boldone other Bogota-based company secured $50 million in a February Series C round with support General of the Atlantic. The company provides a platform for small and medium-sized enterprises to simply accept electronic payments;
- Simple accounta São Paulo-based startup offering corporate cards and an expense management platform raised $40 million in Series B financing in January, led by: Base10 Partners; some
- Based in Buenos Aires Grapefruitprovider of payment technologies for firms offering prepaid, debit and bank cards to their customers, raised $40 million in a Series B round led by Kashek.
Fintech measures come as digital payments in Latin America proceed to displace money as a technique to make purchases. Currently, over 90% of small businesses in the region accept some type of digital payment per $1,000 MasterCard questionnaire. At the same time, dependence on money payments continues to say no.
Colombia is rising while Brazil and Mexico are falling
While overall funding for Latin America declined, there have been wide disparities among countries.
If we had to choose a first quarter winner as things stand now, it might probably be Colombia. Investments in Colombian startups greater than tripled in comparison with the previous quarter, reaching $188 million, mainly due to large rounds for the previously mentioned Bogotá fintechs Simetrik and Bold.
Meanwhile, Latin America’s two largest startup investment markets – Brazil and Mexico – have seen sharp declines.
Brazilian startups raised just $223 million in known funding in the first quarter, down 63% from the previous quarter and 35% from year-ago levels. There were no rounds above $50 million in the first quarter, in comparison with a dozen in all of 2023.
Mexican startups raised just $33 million in known funding in the first quarter, in response to Crunchbase data. This number is so low that we assume there are more deals in the pipeline that simply did not close before the end of the quarter.
Overall, reported funding for Mexican startups dropped 82% quarter-over-quarter and 57% year-over-year. This number is more likely to increase in the coming quarters, especially as firms that financed in higher times a few years ago look for further investments.
The variety of rounds has also decreased
In addition to putting less money into the first quarter, investors also backed fewer deals in Latin America.
According to Crunchbase data, just 111 seed-to-surge rounds were reported in the first three months of 2024. We expect this number to extend barely over time as additional first quarter seed rounds are added to the database. However, this can still likely be well below the previous quarter’s 187 rounds and the previous quarter’s 252 rounds.
Is this the bottom?
When it involves something as cyclical as startup investing, it’s generally unwise to call a market top or bottom. Investments have a history of reaching higher highs and lower lows than forecasters thought possible.
However, I’m willing to take that risk and say that the first quarter looks a bit like a cyclical trough. This is very true for Brazil and Mexico, two growing and dynamic economies that ought to support much more startup investment than what we have seen in the last few months.
Stay tuned to our Q2 report in three months to see if the data supports this prediction.
Methodology
The data in this report comes directly from Crunchbase and is based on reported data. Data provided is accurate as of April 3, 2024 and will probably be updated again before the final report is published.
Please note that data transfer delays are most noticeable in the earliest stages of a enterprise, with seed funding amounts increasing significantly after quarter/12 months end.
Please note that every one financing amounts are in US dollars unless otherwise noted.
Crunchbase converts foreign currency echange to U.S. dollars at the spot rate in effect on the date financing rounds, acquisitions, IPOs and other financial events are reported. Even if these events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historical spot price.
Glossary of financing terms
Effective January 2023, we have modified the way we include corporate financing rounds in our reporting. Corporate rounds are only included if the company has raised seed financing as a part of a series financing round.
Seeds and Angels consist of seed, pre-seed and angel rounds. Crunchbase also covers enterprise rounds of unknown series, equity crowdfunding, and convertible notes valued at $3 million (USD or converted USD equivalent) or less.
The early stage consists of Series A and Series B rounds, in addition to other kinds of rounds. Crunchbase includes enterprise rounds of unknown series, corporate ventures and other rounds above $3 million and those valued at lower than or equal to $15 million.
The Late Stage consists of Series C, Series D, Series E, and later lettered expedition rounds following the “Series [Letter]” Naming convention. Also included are enterprise rounds of unknown series, corporate ventures, and other rounds valued over $15 million.
A technology development is a private equity round led by a company that has previously raised a “venture” round. (Basically any round from the pre-defined stages.)