INSUBCONTINENT EXCLUSIVE:
Gonzalo Costa
Contributor
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Gonzalo Costa is co-founder and managing
partner at NXTP Labs, an early-stage fund for tech companies in Latin America.
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What startups are
saying about raising cash in Latin America
Latin America faces a unique opportunity to develop the next generation of tech startup
Market conditions such as Internet and mobile Internet user growth outpace the US
And a GDP of 9.5T is bigger than India and almost the same as China
Also, banks and industrial complexes still dominate the market, leaving plenty of space to conquer the future
We could argue that these are obvious assumptions and that not much has changed
But something has changed.
VC funding records in the region
We&re currently going through the maturity phase of the Internet technological
According toCarlota Perez& work,this is the moment when core markets become saturated and the set of technologies and financial capital
moves towards the periphery: towards the less advanced countries.
And recent changes in the regional investment landscape suggest this is
In 2017,VC tech investment in the region had an all time high of $1.1B
A major breakthrough when we compare it to the five previous years, which had remained steady at around $500M
This trend continues today, with over $600M invested only during the first quarter of 2018.
Mega rounds are real
The funding record can be
partially explained by the appearance of mega rounds in the region
For the first time, companies are raising rounds of $100M plus
99 (acquired by Didi Chuxing), Nubank and Rappi, have all raised mega rounds in the past two years
Others have raised large rounds, such as Selina and Movile, with plus $90M plus, or Auth0 (part of our portfolio), with plus$50M rounds in
2018.But the increase in dollar amounts is not only driven by mega rounds
More than 30 transactions of $3M or more happened in 2017, which is triple in amount of rounds of that figure when compared to 2016
This shows a market maturity not seen before]=
International VCs presence grows
Global VC firms have timidly invested in the region for the
But this is has also changed
There are several new players and old suspects looking for opportunities
Some of those are Andreessen Horowitz, Sequoia Capital, Accel Partners and Softbank, not to mention strategic investors such as Didi
Chuxing.In 2017 alone, more than 25 new global VC firms entered the region.
Ecosystem development
To make the most out of the maturity
phase of technological revolutions, VC dollars are not enough
Other complimentary conditions must be met
Conditions that can amplify the impact of a new flow of capital.As Perez& says: physical, social and technological infrastructure and the
existence of competent and demanding local clients must also be met
As mentioned before, conditions such as Internet usage and wealth are a reality
Also, amount of smartphone users and e-commerce buyers are reaching US levels
But one other condition has changed: institutional support.
Institutional Support
In the 2010 regional ecosystems were boosted by the
appearance of new VC firms and accelerators
Together they created a fertile ecosystem that gave birth to a new class of Latin American startups
As time passed, local Governments and institutional investors support also became a reality
Through different programs, funding lines and regulatory changes, they now support the development of local ecosystems
A few examples areStartup Chile,Mexico Fund of Funds,Brazil BNDES, and the recentEntrepreneurs Lawbill passed in Argentina
Also, Institutional Investors such asIADBorCAFare active in the region, both as LP&s, as direct investors and through different lines of
credits and grants.
Wrapping up
Maturity signs are observed in Latin America for the first time
Increased funding, liquidity events, a solid entrepreneurial base, and increased institutional support are a reality
Public tech companies are catching up old incumbents: Mercadolibre, Despegar, Globant and B2W doubled their combined market cap in 2017 to
And new rising tech startup stars such as 99 and Nubank are born
Latin America is poised for a new wave of tech companies to become market leaders
And this is just the beginning.
