Venture Capital in LATAM in 2023: Trends and Opportunities
Mexico City, January 31, 2024. The Venture Capital industry in Latin America faced a particularly austere year in 2023. According to the latest “Latin America Venture Capital Report 2023” by Cuantico VP, total investment fell to USD 3.9 billion, spread across 966 funding rounds. These figures represent a 50% drop compared to 2022, marking the lowest funding level in five years.
Several factors contributed to these results, which are not exclusive to Latin America. In fact, this decline has been experienced globally.
Latin America Venture Capital Report 2023
Over the past five years since 2019, the Venture Capital industry in Latin America had been experiencing steady growth. The industry reached its peak in 2021 with more than USD 16 billion invested in startups, particularly in the markets of Brazil and Mexico.
However, a combination of three factors negatively impacted the industry, turning the trend downward starting in 2022, and leading to a collapse in investment levels in 2023.
Interest rates, inflation, and geopolitical uncertainty
In an increasingly globalized world, the ripple effects of any crisis impact all sectors. For Latin America, a region highly dependent on the U.S. market, the industry was especially affected by the Federal Reserve’s interest rate hikes throughout last year, the geopolitical uncertainty caused by the Russia-Ukraine conflict, and the ongoing economic tensions between China and the United States.
On top of this, rising inflation in several regional markets heightened investor caution.
A sector in need of more players
“Strengthening the industry in the region not only requires increasing funds and support institutions. It is essential to foster an entrepreneurial spirit that drives innovative and scalable solutions, satisfying the economic and financial metrics that investors seek and, in turn, attracting more capital to Latin America” said Jose Kont, Executive Director of Cuantico VP.
In the region, the need for more venture capital funds and a stronger support ecosystem for entrepreneurs is clear. The gap between Latin America and the United States is striking: while the U.S. has one venture capital fund for every 26,800 people, in Latin America there is only one for every 1.1 million people.
Last updated: April 5, 2024.
