The wave of venture capital that has flooded late-stage Latin American tech companies in recent years has dried up, forcing some of the region's most promising startups to lay off employees, rethink growth plans and turn to bank loans to obtain financing.
Final funding fell by 92% in the third quarter. According to the Latin American Direct Investment Association (LAVCA).
Eric Reiner, founder and CEO of Vine Ventures LP, said: As capital dries up, investors are becoming more sophisticated and selective. Many of these companies will have to prove that they are real companies.”
Overall, venture financing in the region fell by more than three-quarters in the latest quarter from a year earlier, to 1TP4Q1.15 billion, according to LAVCA data.
Rather than invest based on growth forecasts, venture capitalists say they want companies to show a clear path to profit.
“I think it still makes sense to be optimistic about the region. But we have reforms. "It's logical and normal, and it shows that investors are asking companies to show profitability," said Karen Tenenboim, investment director at Newtopia VC, an Argentine company specializing in the region.
Companies in Mexico Argentina will freeze expansion plans and lay off employees to preserve cash flow and improve margins.
In recent weeks, Kavak, the largest startup in Latin America, has reduced its headcount and workforce as growth slows after its tentative global expansion in 2021.
After the Mexican unicorn braced for an "intermediate supergrowth scenario" in 2021, the company was forced to lay off employees and managers.
A round of financing completed in September 2021 valued Poplar at $8.7 billion, making it one of Mexico's so-called 'unicorns'. Just two months ago, it secured $ 810 million in debt financing from HSBC Holdings, Goldman Sachs and Banco Santander.
Kavak announced earlier this year that, in addition to its operations in Mexico, Brazil and Argentina, it will also expand its operations in Colombia, Chile, Peru and the United Arab Emirates, Oman and Saudi Arabia.
Sobrado, a Brazilian real estate technology company valued at $2.9 billion last year, cut 12 percent of its staff this month, the third time it has cut staff this year. A spokesman said the company's categorizations were not affected.
In Colombia, Muni, the commercial platform that expanded to Mexico and Pau-Brasil and raised $20 million in September, announced that it had closed.
Mexican cryptocurrency exchange Bitso, which was valued at $ 2.2 billion last year after raising $ 250 million in a round led by Tiger Global, has declined after the FTX collapse.
Jokr, a fast-delivery startup valued at $1.2 trillion a year ago, left Santiago, Chile, and Medellin, Colombia, a company spokesperson said. In June The company leaves the United States to focus on Latin America.
debt agreement
Héctor Jirau, director of operations and investments at Parallel 18, a tech accelerator in Porto Opulento, says the recession has led founders and investors to structure companies differently.
Goldman Sachs Group and Citigroup walked into this room. Despite rising interest rates, 1TP4Q startups have secured 1.3 billion in credit lines from traditional banks, according to LAVCA.
Martin Pustilnik, co-founder and CEO of startup Mundi that works with Mexican exporters, said:
Mundi has taken out $100 million in loans to fuel its growth, giving it more flexibility as lenders are less concerned about short-term profitability, he said. "There will be tremendous lending opportunities as equity funds leave the market in the coming years."