![]() The fund hired two local early-stage partners and revealed that it is doubling down on its investments in the region with a second Latin America-focused vehicle that has an initial commitment of $3 billion. SoftBank has also begun to make early-stage investments. That's why his firm tries to identify opportunities as early as possible, taking advantage of its presence on the ground in Brazil. "But as soon as a company reaches critical mass, prices rise to perfection because it is then transparent to the global VC market," he said. "At the seed and Series A stage, valuations are still a little bit reasonable," said Mathias Schilling, a Redpoint e.ventures co-founder. "There is more competition for deals, but I don't think there is as much as in the US, for instance."Īs investors have gotten a taste for the region's potential, valuations have skyrocketed, pushing VCs to invest at earlier stages. However, I think it's still early innings," said Kemp, whose firm made its first investment in the region just last month when it backed Aplazo, a Mexico-based buy-now, pay-later startup. "I think there are more folks that have identified LatAm. ![]() These companies include Mexico-based Clip, which accepts payments, similar to Square NotCo, a Chilean producer of plant-based milk and meat alternatives and CargoX, a Brazilian startup connecting truck drivers with corporations. Out of the 17 total Latin America-based unicorns, nine were minted this year. And then earlier-stage investors, such as Andreessen Horowitz, Accel and Benchmark, also started pouring money into Latin American startups. Suddenly, growth firms like Tiger Global, D1, DST and Coatue all increased their focus on the region. "When investors saw the decks of the companies, their reaction was, ‘Why are you growing so fast?'" said Nyatta. While the whole world was going through an acceleration of digital adoption, the pace in Latin America exceeded other regions, said Patricia Kemp, a co-founder and managing partner at Oak HC/FT.īy the latter half of 2020, other investors realized how rapidly many Latin American startups were expanding. Over 40 million people in the region were added to the banking ecosystem in just five months during 2020, according to a study by Americas Market Intelligence in partnership with Mastercard. Large swaths of Latin America's population began transacting digitally for the first time in their lives. Going digital When the pandemic erupted in 2020, many people in the region were forced to start to do things, from shopping to banking, online. That's more than the total capital invested in the region in the previous six years combined. In 2021, venture-backed companies have raised $14.8 billion across 772 deals in Latin America, according to PitchBook data. What SoftBank and others couldn't foresee was that VC investment in Latin America was about to take off like a rocket. The timing could not have been better for the firm, which, as a late-stage investor, is not known for identifying opportunities ahead of other venture capitalists. In spring 2019, SoftBank launched its $5 billion Latin America Fund, an enormous bet on a region that had collected only $3.9 billion in venture capital in the two years prior, according to PitchBook data. "Our hypothesis was that all that was missing was real growth capital that would unlock founders' ambitions," Nyatta said. The region seemed to have all the ingredients of a flourishing tech ecosystem. ![]() SoftBank investors visited Brazil and Mexico and were impressed with the quality of entrepreneurs. But there were hardly any firms doing classic growth investing, Nyatta said. It's the same size, but twice the GDP of Southeast Asia, but the Southeast Asia venture ecosystem was light-years ahead then."Īt that time, Latin America had some local early-stage VC firms and a few international players active in the region. "Latin America has a population of 650 million people. "We were puzzled," said Shu Nyatta, a managing partner at SoftBank who now co-leads the Latin America Fund. The Vision Fund, SoftBank's nearly $100 billion vehicle, was making investments in China, Southeast Asia and India, but there were no Latin America-based companies in the Japanese conglomerate's portfolio. In 2018, Marcelo Claure, COO of SoftBank Group and a native of Bolivia, realized something peculiar.
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