Bloomberg Línea — The first three months of the year were marked by a steep decline in venture capital investments worldwide. but in Latin America the situation is the most critical, with a 54% drop compared to the previous quarter.
Only $600 million were invested in technology companies in the region during the quarter, according to CB Insights data.
In comparison, Africa saw $700 million in funding in the first quarter, and which serves as a warning sign for the technology industry in Latin America, with investors being risk-averse amid an uncertain scenario of rising interest rates, inflation control, and banking crisis in the first three months of the year.
Data from the Sling Hub platform shows that investments of up to $10 million in Latin American startups dropped by 30% compared to the first quarter of 2022, while larger rounds, above $10 million, plummeted by 70%.
In contrast, the United States experienced a more stable funding environment in the first quarter of 2023, with the amount invested only declining by 1% compared to the previous quarter, to $32.5 billion, according to CB Insights data.
However, without the exceptional $6.5 billion round for fintech Stripe, the U. would have seen a 21% funding drop, indicating that no region is immune to the ongoing venture capital slowdown.
Globally, venture capital funding totaled $58.6 billion in Q1, a 13% decline compared to the previous quarter. Stripe’s round alone represented 11% of the total funding for the quarter.
March, the second worst month since May 2020
Latin American startups raised $245 million in March, a 78% decline compared to the same month of last year, and the lowest value since July 2020. There were only 62 rounds in March, a 47% drop compared to the same month last year, and which was the second worst result since May 2020, according to Sling Hub data.
The three countries with the highest investment volume in the region experienced declines of over 70% in March, compared to the same month last year, according to Sling Hub.
Brazil saw 34 rounds (55% of the total), followed by Chile (13% of the total) with eight investments, and Mexico with seven rounds (11% of the total).
The average round size was $4.8 million, a 56% decrease compared to the same period last year. In other words, investments were smaller, with seed stage being the most invested category, with 17 investments in the month of March.
Fintech was the sector that received the most investments in March, with $146 million, representing 59% of the total.
M&A as an option
When startups are unable to raise funding, merging or being acquired by a larger company becomes an option for founders, as was the case with Box Delivery, which was acquired by Rappi earlier this month.
Pismo is also in negotiations to be acquired by Visa and Mastercard, according to Bloomberg News.
According to Sling Hub, March saw 30 M&A deals among Latin American startups, the highest number of such transactions since July last year.
Fintechs were the most-acquired startups, with five deals. During the quarter there were 73 M&A transactions, a 21% decrease compared to the same period last year.
