Venture capital transactions in Latin America continued to decrease in 2022 but that did not stop entrepreneurs and investment funds who still find optimism in a region avid of new business models.
These are Bloomberg Línea’s top stories in tech & funding of 2022:
The Cities Competing to Become Latin America’s Silicon Valley
- From Monterrey to Porto Alegre, remote working has created technology and innovation hubs across the region, and beyond countries’ capitals.
A country of continental dimensions, for a long time technological production in Brazil was restricted to the state of São Paulo. Now, several cities are vying for the label of the new Silicon Valley.
That decentralization mirrors what has happened in the U.S., as Silicon Valley now shares the status of the country’s technology hub with Miami, while the pandemic has also spurred new technology hubs in Texas, where, in Austin, Tesla now has its headquarters.
In Brazil, attempts to replicate Silicon Valley are even happening in name, from Vale do Pinhão, in Curitiba, to San Pedro Valley, in Minas Gerais. Closed hubs such as Cubo, of Itaú, in São Paulo, and Base 27, in Espírito Santo, also foster Brazilian innovation spaces, together with open hubs such as Porto Digital, in Recife, a technology cluster in the northeast of the country.
According to executives consulted by Bloomberg Línea, the pandemic has benefited this movement toward the decentralization of innovation hubs in major Latin American cities (such as Buenos Aires, Bogotá and Mexico City), as well as the digital transformation of companies, remote work and the expansion of e-commerce, with startups now based in many cities, from Córdoba in Argentina to Medellín in Colombia.
Even so, in Colombia, the capital Bogotá still concentrates most of the startups (62%), and most of the investment (90%), even as Medellín has been promoted as an entrepreneurial city, with the largest business base, but not so much for startups, although it is home to companies such as Pibox.
Job Losses at Kavak Point to a Bumpy Road Ahead
- According to testimonies compiled by Bloomberg Línea, at least 50 people have lost their jobs at the Mexican startup, but the company has declined to comment.
The onset of the ‘tech winter’ appears to be accelerating for Kavak, the Mexican used car sales platform, and a unicorn with a valuation of more than $8 billion, with layoffs reported from within its Brazil operations.
According to former employees’ testimonies compiled by Bloomberg Linea, at least 50 people are said to have left the company in a process that has been ongoing for several weeks.
The layoffs, both in the São Paulo offices and in the so-called ‘Kavak City’ in Rio de Janeiro, take place a few months after the company confirmed an investment commitment of $500 million in Latin America’s largest economy.
Bloomberg Línea approached Kavak executives in both Mexico and Brazil, but they declined to comment
Seed Capital Availability in LatAm Could Make 2023 a Good Year to Start a Business
- Bloomberg Línea looks at which sectors are the most attractive in which to launch a startup in Latin America next year.
This year has been a difficult one for mature startups, but not so for those recently created, which maintained a peak in investment. In Latin America there are still several problems that new companies seek to solve with innovative business models, and, given those opportunities, Bloomberg Línea has consulted specialists who advise on what you could be good businesses to launch in 2023.
For starters, 2023 will be a good year for entrepreneurship. According to Brian Requarth, co-founder of startup accelerator Latitud, seed capital is the least affected by the investment slowdown.
L’Attitude Ventures Wields $100M to Invest in Latino Entrepreneurs in the US
- The venture capital fund aims to invest from $250.000 up to several million dollars in high-potential startups founded by Latinos.
L’ATTITUDE Ventures recently closed its first institutional fund, raising over $100 million through a strategic anchor investment from JPMorgan Chase and initial investments from Trujillo Group and Bank of America, and which it plans to invest in start-ups with Latino founders with high growth potential.
Other key investors in the fund include UC Investments and MassMutual, Barclays, Royal Bank of Canada, Polaris Limited Partners (Oscar Muñoz), Cisco Investments through its Aspire Fund, Churchill, an affiliate of Nuveen, and Morgan Stanley.
Exclusive: Argentina’s Lemon Cash Received Investment From Failed Crypto Exchange FTX
- The crypto exchange that filed for bankruptcy in the US participated in an extension of the Argentine company’s Series A round, and Lemon Cash in turn invested in FTX, the fintech’s CEO Marcelo Cavazzoli has confirmed to Bloomberg Línea.
Months before going bankrupt and shaking the foundations of the global cryptocurrency ecosystem, the Sam Bankman-Fried-led crypto exchange FTX invested in Argentine fintech Lemon Cash at the beginning of 2022, as a minority investor in an extension of its Series A round, news that has only just come to light, despite Lemon’s denial last week of the possibility of a negative impact from FTX’s collapse.
And this is not the only revelation that Bloomberg Línea has been able to confirm in the last few hours. Lemon Cash still has its own funds held in the exchange, and although the fintech has explained that it is not a significant amount, there is no longer any expectation of recovering the funds.
The 10 Latin American Startups that Received the Most Capital in First Half of 2022
- In the first six months of the year, before the macroeconomic crisis kicked in, there were rounds totaling more than $90 million in the region.
Brazil continues to be Latin America’s favorite country for venture capitalists. According to Transactional Track Record (TTR), in the first half of 2022 there were 375 venture capital investment rounds, totaling $3.1 billion. This is a 15% increase in the number of transactions, despite the crisis that began to emerge in the first half of the year.
Mexico, the country that follows Brazil in terms of the largest number of venture capital investments, registered 84 operations valued at $1.69 billion, slightly more than half of Brazil’s total, and which is an increase of 9% in the number of operations and a decrease of 14.35% in the capital mobilized with respect to the same period last year.
In contrast to these countries that have seen an increase in he number of startup transactions, TTR states that Chile recorded fewer deals in the first half of the year compared to the same period of last year, with 55 venture capital transactions valued at $582 million, representing a 3.51% decrease in the number of transactions and a 35% decrease in capital raised.
NotCo Targets B2B Deals After Raising $70M In Series D Extension
- Jeff Bezos-backed Chilean startup NotCo raised a Series D extension that will help put the company in a comfortable cash position until its IPO in 2026.
Jeff Bezos-backed startup NotCo has raised $70 million in a Series D extension led by Princeville Capital, and the Chilean non-meat-and-dairy foods producer says the funds will be used toward building a new business unit focused on companies’ deals, as a continuation of the strategy that spawned the joint venture with Kraft Heinz announced in February.
Mercado Libre’s founder and CEO Marcos Galperin also participated in the extension that kept NotCo’s valuation flat at $1.5 billion.
In an interview with Bloomberg Línea, NotCo’s co-founder and CEO Matías Muchnick said the startup wasn’t fundraising, but decided to take the term sheet from Princeville Capital, which was looking to add a plant-based company to its portfolio.
In July 2021, NotCo raised $235 million, and Muchnick says a lot of that is still in the company’s bank account. The startup had “more than 18 months of runway,” he said, and it didn’t make sense for them to seek fundraising.
“But we started to announce things. We announced the Kraft Heinz deal, we announced the Shake Shack partnership, and we announced the Starbucks partnership. That allowed NotCo to grow a lot in terms of real economic value. Many investors wanted to invest in NotCo in Series B, C, and D, and they couldn’t get there in time or the size of the investment was too big,” Muchnick said.
LatAm Software, Payments Startups a Good Investment Option, dLocal’s Sergio Fogel Says
- The co-founder of Uruguayan fintech unicorn dLocal sees opportunities to invest in Latin American startups providing business software and payments services, even as capital becomes more scarce.
Sergio Fogel, a co-founder of Uruguayan fintech unicorn DLocal, says he sees opportunities to invest in Latin American startups offering business software and payments services, even as capital becomes scarcer and more demanding.
While there is a lot less capital available for Series B and pre-IPO funding rounds, investors are still providing early stage funding but want to see revenues within three years and a clear path to profits, Fogel said in an interview in Punta del Este.
“There’s no patience for things that have an uncertain revenue date,” he said.
One area of the startup landscape in the region that has particularly fallen out of favor is crypto, he said, as the price of crypto assets tumbled along with trading volumes.
A serial entrepreneur, Fogel has invested in some 15 tech startups with a focus on young, talented founders.
How a Quarter Bereft of Unicorns Bodes Badly for Latin American Startups
- There are 47 “soonicorns” in the region that are awaiting more funding rounds to reach unicorn status.
The party celebrating the emergence of new unicorns has taken a three-month hiatus in Latin America, with the most recent announcement of a startup reaching a valuation of more than $1 billion having been in early August, with the merger of fintechs Yaydoo and Paystand, creating a binational, US-Mexican unicorn.
However, since July, no wholly Latin American unicorn has emerged, since Mexican fintech Stori achieved a value of $1.2 billion after extending its Series C round, led by BAI Capital, GIC and GGV Capital.
Stori’s unicorn status came amid an adverse environment for late-stage startups, however.
Marlene Garayzar, co-founder of Stori, told Bloomberg Línea that “investment is not going to stop, but it’s going to go towards companies that really have a lot of clarity on when they are going to be profitable and have healthy unit economics”.
Despite the decrease in investment this 2022, unicorns still emerged in the first half of the year in the Latin America however, such as Chilean social insurtech Betterfly, Colombian proptech Habi, Mexican logistics startup Nowports, Ecuadorian paytech Kushki and Brazilian companies Dock, Unico and Solfácil.
SoftBank Appoints Committee to Oversee Its Vision Funds, Including Those in LatAm
- SoftBank laid off employees within its Vision Fund unit last month, after posting a record $23 billion loss driven by a plunge in the valuations of portfolio companies.
SoftBank Group Corp. appointed an executive committee to oversee its second Vision Fund, Latin America funds and future vehicles, its chairman Masayoshi Son said in a staff memo seen by Bloomberg News.
Alex Clavel will oversee investing teams in the US and Latin America while Greg Moon will run the teams in Europe and Asia, and Navneet Govil will lead “functional” or non-investment teams such as finance and compliance, Son said. A SoftBank spokesman confirmed the memo’s contents and declined to comment further.
“I’m more excited than ever about SoftBank’s future,” wrote Son, reiterating his company’s mission to “harness the power of AI to promote a more connected, empowered, and joyful world.” Some $160 billion has been committed to more than 400 companies via SoftBank’s first and second Vision Funds, as well as its Latin America funds. “There is so much upside. All eyes are on us, as the world’s leading tech investor,” Son added.
Why Are Latin American Unicorns Opting for Debt Over Venture Capital?
- Clara, Clip, Kavak and Konfio are some of the billion-dollar companies that have resorted to contracting debt to spur their growth.
Venture capital investment in late-stage startups is becoming more cautious in an environment of crisis in the technology sector., and which has prompted Latin American unicorns to resort to contracting debt with multinational banks in order to continue growing.
In Mexico there are eight startups that have become unicorns: Clara, Clip, Kavak, Konfio, Stori, Bitso, Merama and Nowports.
Clara, Clip, Kavak, Konfio and Stori have opted in recent months to contract debt, and Goldman Sachs and HSBC have been the common denominator as financiers, while Bitso, Merama and Nowports, in contrast, have not resorted to debt.
MercadoLibre and Brazilian neobank Nubank have also contracted debt, even after going public, while Chilean startup Xepelin, which is currently in a Series B, has done so twice.
Regardless of the stage they are in, Latin American startups are opting for this investment instrument to obtain liquidity.
Mexico-Born Jeeves Becomes a $2.1B Unicorn After a $180M Tencent-Led Series C Round
- From Y Combinator to a unicorn in a blink of an eye, fintech infrastructure startup Jeeves wants to beef up in Brazil.
Jeeves, the expense management and corporate card platform for global companies, announced on Tuesday that it has raised a $180 million Series C round, lifting its valuation to $2.1 billion, a 21-fold increase since its first fundraising.
The unicorn-making round was led by Tencent, but the list of investors is large. Participating in the round were GIC, Stanford University, Andreessen Horowitz, CRV, Silicon Valley Bank, FT Partners, Clocktower Ventures, Urban Innovation Fund, Haven Ventures, Gaingels, Spike Ventures, and family offices of the founders of Facebook, Apple, Amazon, Netflix, and Google, as well as Carlos Enrico, president of Mastercard for Latin America and the Caribbean.
The infrastructure fintech has four main products. The first one is the corporate card, which accounts for 45% of revenues. Its Mexican counterpart, Clara, also operates with corporate cards, and also quickly achieved unicorn status, only eight months after it started operating in Mexico. Like Jeeves, Clara followed the same path of launching in Mexico and, after the billion-dollar valuation, expanded to Brazil.
EXCLUSIVE INTERVIEW: Marcelo Claure’s New Act Is Back to Being an Entrepreneur
The former SoftBank COO shared what has been keeping him busy after leaving the fund, talks about his bullish view in LatAm, WeWork and his take on entrepreneurs from Adam Neumann to Larry Page.
For many, Bolivia-born Marcelo Claure (51), former SoftBank COO, was a kind of King Midas who created huge value for the companies invested by Masayoshi Son’s fund. After all, he was responsible for putting the Japanese conglomerate’s investments such as Sprint and WeWork (WE) in order. Claure joined the group in 2014 when SoftBank bought his company Brightstar. From Tokyo, he moved to Miami to start SoftBank’s presence in Latin America, and then to New York to work on the restructuring of WeWork.
In an exclusive interview with Bloomberg Línea, Claure details the first steps he will take as a born-again entrepreneur, now from his own outfit, the Claure Group, and delves into what separates founders like Adam Neumann (WeWork), and Larry Page (Google) in terms of scale and execution of their companies.
According to Claure, who took over the helm at WeWork as chairman after Neumann was deposed as CEO in 2019, SoftBank was able “to fix the company during the pandemic and get it ready for (its) IPO.” WeWork, which once had a value of $47 billion, eventually went public via a SPAC in 2021 at a $9 billion valuation. Today, the company has a market cap of $4.76 billion. “Now the company is on track to deliver profitability in the next few quarters,” Claure said.
Claure, who left SoftBank in late January over disagreements with Son over his compensation, says he’ll keep his relationship with SoftBank private and prefers to focus on his next steps investing with his multi-billion dollar Family Office Claure Group, which will announce new investments soon.
El Salvador Celebrates a Year With Bitcoin as Crypto Euphoria Wanes
- Adoption has moved slowly, and steep declines in Bitcoin’s price from those lofty levels last fall have dampened the early euphoria that swept across the nation.
El Salvador President Nayib Bukele took the stage last year to fireworks and AC/DC’s “You Shook Me All night Long,” announcing to a cheering crowd of crypto enthusiasts at a beachside confab that Bitcoin (BTC) would revolutionize his country. It was November, the digital token had just notched new all-time highs and El Salvador was at the very beginning of its experiment as the world’s first nation to use the cryptocurrency as legal tender.
Now, a year into the journey, there are far fewer fireworks. Adoption has moved slowly, and steep declines in Bitcoin’s price from those lofty levels last fall have dampened the early euphoria that swept across the nation. Bitcoin hasn’t replaced El Salvador’s hard currency, the U.S. dollar — it’s not even close — but it also hasn’t brought the financial ruin that some warned of either. Or not yet anyway.
“No one really talks about Bitcoin here anymore. It’s kind of been forgotten,” said former El Salvador central bank chief Carlos Acevedo. “I don’t know if you’d call that a failure, but it certainly hasn’t been a success.”
Bukele captivated the world last year when he made Bitcoin an official currency alongside the dollar, stirring a craze in the cryptocurrency community while also drawing criticism from skeptics, including bond traders and the International Monetary Fund. Bitcoin’s Sept. 7 debut was beset with technical glitches, making for an inauspicious beginning. Undaunted, Bukele — sporting “laser eyes” on his Twitter profile picture — barked back at detractors while welcoming Bitcoin backers and crypto executives to his presidential office, where he continues to host them to this day.
