It’s correction time for Latin America VC activity – Vidak For Congress

Latin America appears would account for another quarter of declining venture capital activity, contributing to a series of successive periods in which the value of investments in the region declined.

Drawing on PitchBook data and looking at venture-backed companies in Central and South America, a Vidak For Congress analysis indicates that investment volume in terms of deals and dollars will decline in the second quarter of 2022. With a few weeks of data left to collect in June, the picture may shift, but it just takes an incredible string of closed deals to halt the now regular decline in venture capital investment in Latin America.

This doesn’t mean that deals aren’t happening yet; they are. And declining venture capital doesn’t mean Latin America’s promise as a startup hub hasn’t been fulfilled; huge companies have scaled up there and made it public. And we don’t care today to imply that a particular region will not turn out to be a hotbed of startup activity and technological innovation in general in the long run. Instead, we’re just looking at the latest taps in the tape to see where investment is flowing — and slowing down — today.

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Signs of softening in the Latin American startup market abound. Not just in aggregated datasets, something we’ll get to in a moment. Even the region’s more impressive recent rounds have a hint of sponginess to them. Ecuadorian fintech Kushki, for example, recently mentioned an extension of its Series B. Sure, it’s a little hard to name $100 million as an early-stage expansion, but in past climates, we suspect the funding event was a natural Series C with new entrants, rather than a Series C of labeled repeat investors. “Series B extension” on it.

It's correction time for Latin America VC activity – Vidak For Congress 1After posting quarters of declining venture capital investment, Latin America has turned the corner and is now leaning towards a quarter-over-quarter and year-over-year decline in VC activity in the second quarter of 2022. The correction has arrived in the region.

For reference, consider that globally, during the first quarter, global venture capital activity increased year on year. We have yet to parse the aggregate market data for the portion of the second quarter that we have already consumed, but if Latin America is a leading indicator, the signs are not positive.

Let’s dig into the early data and then discuss the halo effect — or lack thereof — of Latin American giants like Nubank, as well as some regional issues that could hamper the region’s startups’ access to venture capital.

The Latin American Venture Capital Adjustment

Let’s start with caveats. We work with an early dataset, so we don’t look at the full picture. Instead, we’re chasing direction trends to better understand Latin America, while not getting too hung up on certain data points. The data will change.

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