Soaring venture capital funding in Latin American startups has financed international expansion throughout the region and past, as business models that don’t require large amounts of capital have assisted many corporations in avoiding cribs common in the area.
New venture capital investment in the area quadrupled over two years to a record $2 billion in 2018, in line with the Association for Private Capital Funding in Latin America. And that total has then been matched in the initial seven months of this year.
Analysts say fundraising rounds this year may double 2018’s sum, because of Japan’s SoftBank, which started its $5 billion Latin America fund in March, the region’s largest-ever enterprise capital deployment.
André Maciel, the managing associate at the SoftBank Latin America Fund, sees the potential for such firms to deal with regional limitations to productivity. China had an 8.8% annual productivity development since 1990 and India has had 5%, whereas Brazil has had a 1.3% rate in the same interval.
A duo of U.S. initial public offerings in 2018 valuing Brazilian fin-techs StoneCo and PagSeguro Digital at near $20 billion combined amplified how far the Latin American startup scene has come.
The added attention has brought a burst of investment from traders seeking synergies in their international portfolios, with China’s Tencent Holdings, for instance, having stakes in Brazilian financial startup Nubank.
Latin American startups rich with fresh capital are eager to tap further markets.
While Brazilian banks have strived to record strong returns from acquisitions overseas, local fin-techs are hoping their online programs will cross borders more seamlessly.