Latin American startup funding rebounds after sharp decline

Funding for Latin American startups increased in the second quarter, driven by a resurgence in late-stage deals.

In total, South and Central American companies raised $791 million in seed-to-growth funding in the second quarter of 2024, according to Crunchbase data. That’s a 25% increase from the previous quarter and a 17% increase from the previous year.

The recent gains follow an unusually weak first quarter, during which funding to the region hit a multi-year low. And while the latest numbers look stronger, we are still well below the highs reached during a string of records in 2021, as the chart below shows:

At the same time, the number of reported deals declined during the quarter, although we saw an encouraging recovery in volume early on. We also expect the number of seed funding rounds to increase somewhat over time and more previously unreported deals to be added to the database.

All about fintech

While overall investment increased in the second quarter, fintech was the driving force behind the recovery. The top four funding recipients in the quarter were all fintechs, including:

• Celcoina Brazilian provider of banking tools for businesses, closed a $120 million Series C funding round in June.
• Clipa Mexico City-based technology provider that enables merchants to accept digital payments, secured $100 million in a funding round in June, its first funding round since 2021.
• CRM Bonusa Brazilian provider of loyalty and promotional tools for retailers, raised $74 million in a May funding round led by Bind.
• AplazoA Mexico-based provider of tools that allow merchants to offer installment payment plans to customers, secured $70 million in equity funding in May, led by QED Investors.

Fintech’s strength is not entirely surprising. The sector has long been a prime area for regional investment. It was the first investment area last quarter too.

However, we saw companies from other sectors raise significant amounts of funding in the second quarter. For example, Incidiuma Brazilian data and AI consulting firm, has secured $40 million in funding backed by Capital of Columbia. And Akad Insurancean insurance platform, raised $22.5 million in Series A.

At the end of the ascending phase, stable at the beginning of the phase

Late-round funding saw the largest improvement in overall funding. Reported Series C and above investments totaled $291 million, roughly double first-quarter levels and a nearly 6x gain from a year ago.

While these gains may seem spectacular, they do not represent such a striking turnaround in the broader context. Both the first and second quarters of 2024 were abnormally weak quarters for late-stage deals.

In the early stages, investment levels have been more stable. In the second quarter, investments totaled $386 million, up slightly from the first quarter and down slightly from prior-year levels. Overall, we have seen less fluctuation in investment in the early stages than in the later stages, where one or two large transactions can have a significant impact on totals.

Become better

Overall, the data indicate an improvement in the venture capital investment climate in Latin America’s leading startup hubs. Funding at every stage increased in the second quarter compared to the previous quarter.

The rebound was particularly pronounced for Mexico, with around $230 million invested in known rounds, compared to less than $40 million in the previous quarter.

Yet funding in Latin America remains more than 80% below its Q2 2021 peak. Unicorn creation is still slow. And we haven’t seen many large exits from venture-backed companies. While we don’t expect to retrace these former highs, it appears there’s still plenty of room to rebound.

Illustration: Dom Guzman