Mike Packer, a partner at QED Investors, said that by mid-2024, funding for Latin American fintech startups had hit rock bottom and recovery was on the horizon
Even though progress hasn’t gone straight up and to the right since then, he was right.
More fintech companies in Latin America have already received venture capital dollars than in 2023; one month remains in the year. According to PitchBook data, 174 deals have received $2.6 billion in 2024. This is less than the $1.5 billion in 241 deals in 2023. Despite the modest numbers, 2024 has raised 73% more money than 2023.
So far this year, the amount invested is still less than what was spent in 2021 ($7.5 billion) and 2022 ($4.3 billion). However, the market is beginning to turn around, as these numbers show.
Packer told TechCrunch, “At a conference in May, I was talking to some of our seed founders and saying, ‘I’m going to call this the bottom of Latin American equity funding.'” “I knew there were a lot of deals coming up.” The situation appears to be improving.
You can see the change in momentum both in real life and in the fact that exciting fintech deals have been closing all year in Latin America.
To fund its software for managing expenses and business cards, Conta Simples, based in São Paulo, raised $41.5 million in Series B funding in January.
Base10 led the round. He raised $15.5 million in May to help Latino workers send money to families in Latin America. Lux Capital led a $4 million fundraising round for Mage, a Brazilian AI company that works with money. Lux invested its first money in Brazil through this deal.
According to Packer, there are two reasons why trade is expected to pick up again. One reason is that he said that Latin American fintech companies that raised money during the 2021 craze are only now returning to raise more money, for better or worse. But businesses are just some of the ones running out of space. He said that his company also includes fintech companies that have achieved significant milestones and are now prepared to advance to the next stage of growth.
“There were businesses that were beginning to make money and grow in interesting ways at the start of this year,” Packer said. “We hoped that the number and quality of deals would increase.”
Nicolas Szekasy, co-founder and managing partner at São Paulo-based Kaszek Ventures, said he hasn’t seen a big difference in Latin America’s fintech market this year compared to last. However, he agreed with Packer that there has been a change in the quality of startups looking to raise money.
Szekasy also noted that while the initial wave of fintech in the region concentrated on consumer needs, experienced business owners now focus on building infrastructure-related businesses. He also said the abundance of talented founders is beneficial, as the Latin American fintech market still requires many fresh ideas, in contrast to the U.S. and European markets.
He said, “Financial services common in the U.S. or other developed markets are still very young in this area.”
The market may continue to rise, but obstacles will hinder its progress. Some roads have opened up in the area, but only a few.
The most well-known was Nubank’s IPO in 2021, which raised $41 billion for the new bank. Since then, there have been few big get-outs. Packer also said that Mexico, which has one of the most developed ecosystems in the area, still doesn’t have a single large exit.
Packer and Szekasy also said that most of the money that fintech companies in Latin America still get comes from local funds or firms that focus on the area. Even though the amount of local funds is growing, this is still a problem for startups that want to raise money.
He stated, “I believe the region lacks sufficient funding following the [post] 2021 correction.” “We need more investors to see Latin America as a global change, and we need entrepreneurs to believe they can make a difference.”
