The startup companies based in Latin America are addressing not just local problems but also global problems with creative solutions. The prospect of working with these companies may seem attractive to investors outside the region but also complicated. Investing in startups in Latin America in no piece of cake; it can be quite challenging.
Pioneer VC firms have made it easy for others to invest confidently in the region
In his report to TechCrunch, Nathan Lustig notes that when he first came to Santiago, Chile, there was hardly any talk about startups. He writes, “Most people didn’t even know what startups were. Within nine months of returning to the U.S., the company I co-founded was acquired. So I decided to go back to Chile to look for more opportunities in this emerging market.”
Some of the VC firms, like Vox Capital in Brazil and NXTP Labs in Argentina, which were established in the region had paved the way for other startups to find success. These pioneer VC companies faced many challenges as well. They had to educate and develop the expectations of local entrepreneurs so that they understood that Latin America was no Silicon Valley and hence, had no easy access to U.S.-style valuations and venture capital.
According to the Latin American Venture Capital Association (LAVCA), a look into five-year investment trends in Latin America disclosed that the investors had closed deals worth $2.3 billion in the region.
VC-backed startups have started to participate as investors as well
According to news site TechCrunch, the VC-backed startups have – in the past few years – started to give back to the community and participate as investors, either as limited partners or as angels in funds. Andrés Barreto, the Colombian-American entrepreneur-turned-investor, is one such example. He started the investment firm Socialatom Ventures in 2012 and launched many startups, including PulsoSocial and Grooveshark.
The Colombian firm, which is investing in early-stage companies and providing them with resources to grow their companies, recently raised a second fund called Firstrock Capital. There has never been a better time than now to be involved in the Latin American startups or to invest in them. The number of fintech startups in the region surpassed 1,000 recently, according to Finnovista.
According to a report by LAVCA, startups in the fintech sector got more investment in 2015 than any other startup sector in the Latin America region. The Fintech sector accounted for nearly 30% of the entire IT sector’s investment in 2015, and 40% in the first half of 2016.