Bloomberg Línea — Venture capital (VC) funds operating in Latin America had a complicated first half of the year, with a sharp drop in exits in the region, as the sales of stakes in startups or IPOs are classified.
According to data from PitchBook released on Thursday, Latin America recorded 23 exits of venture capital funds between January and June, a 57% reduction compared to the 54 operations of this type in the first six months of last year.
Analyzing the exits market on a global scale, the total value of transactions was $51 billion in the second quarter of 2023, the second lowest for a quarter since the first three months of 2018, according to PitchBook.
The drop is attributed to a dearth of opportunities on the capital markets and increased antitrust scrutiny, which has kept large acquisitions on the back burner.
Geopolitical tensions and global inflation have also negatively affected exits, according to PitchBook analysts Kyle Stanford and Nalin Patel.
Fundraising picks up
In terms of fundraising in Latin America, the data show a recovery after last year’s drop.
Companies in the region raised $1.3 billion between January and June this year, close to the amount raised in all of last year, when funds raised totaled $1.4 billion. In 2021, the fundraising volume was $2.2 billion for the full year.
To June of this year, 415 investments were made in Latin American startups.
For Hernán Kazah, co-founder and managing partner of Kaszek, one of Latin America’s leading venture capital firms, the market is facing a rationalization process, with companies focusing on key projects and reducing capital burn to seek sustainability.
“Many were doing things they shouldn’t have been doing,” he said in a recent interview with Bloomberg Linea. “What there was last year was a huge rationalization process where we saw companies focusing on two or three key projects each and reducing the capital they were burning month by month, year by year, to try to achieve, with the capital captured, sustainability.”
An unfavorable environment
While Latin America has experienced a recovery in fundraising, slowing fundraising in Europe and North America has put downward pressure on total global fundraising this year.
The global environment remains unfavorable for fund managers looking to raise money to invest in startups, as limited partners, such as pension funds, endowments and large institutions that hold funds managed by VCs have been receiving lower volumes of capital to reinvest in startups, according to the analysts at PitchBook.