Mike Packer, a partner at fintech-focused QED Investors, predicted that funding for Latin American fintech startups has already bottomed and a rebound is coming by mid-2024. It looks like he may have been right, although the momentum didn’t soar to the right right away after that.
The amount of venture capital invested in fintech companies based in Latin America has already exceeded 2023, with one month left in this year. So far in 2024, $2.6 billion has been invested in 174 deals, according to PitchBook data. This compares to $1.5 billion invested in 241 deals in 2023. Although this is not a large sum, 2024 has already seen a 73% increase in funding compared to 2023.
The total so far this year is still small compared to 2021, when $7.5 billion was invested, and 2022, when $4.3 billion was invested. However, these numbers show that the market is starting to bounce back.
“At the May conference, I was talking to some of the seed founders and said, ‘We’re going to call this the bottom of Latin American equity financing,’” Packer told TechCrunch. “I knew there were a lot of deals in the pipeline, and we “It seems like it’s off the bottom.”
Momentum swings can be seen anecdotally, with some interesting fintech deals being struck in Latin America throughout the year.
Sao Paulo-based Conta Simples raised $41.5 million in a Series B led by Base10 in January for its expense management and enterprise card software. In May, Félix Pago raised $15.5 million to help Latino workers send money to their families in Latin America. Brazilian AI fintech Magie has raised $4 million in a round led by Lux Capital. This was Lux’s first investment in Brazil.
Packer said the deal was likely to be revived again for two reasons. One of them is that Latin American fintech companies that have grown into the hype of 2021 are now resurfacing to raise their next round, for better or worse. But it’s not just companies that lack runway. He added that he also sees fintech companies across his portfolio of companies hitting milestones and ready to hit the ground running again to achieve the next level of growth.
“Earlier this year, we had a company that started to become profitable and reached an interesting size,” Packer said. “We thought we would see an increase in volume, both in terms of quality and quantity.”
Nicolas Szekasy, co-founder and managing partner of São Paulo-based Kaszek Ventures, agreed with Packer, although he is not convinced he sees too many differences in the Latin American fintech market this year compared to previous years. The quality of the startups we were fostering was evident.
Szekasy added that the first wave of fintech in the region was consumer-focused, but we are now seeing seasoned entrepreneurs building infrastructure businesses. He added that compared to fintech markets in the US and Europe, Latin America still needs a lot of innovation, so the influx of quality founders is a good thing.
“Financial services that we take for granted in the U.S. or in developed markets are very immature in this region,” he said.
Even as the market continues to gain momentum, it will not be without headwinds. There aren’t many exits in this area yet. Nubank’s 2021 IPO was the most notable, valuing the neobank at $41 billion at the time. There have been no major exits since. Packer added that Mexico, one of the most developed ecosystems in the region, does not yet have a significant exit.
Additionally, most of the funding for fintech companies in LatAm still comes from local funds or locally focused companies, Packer and Szekasy said. Although the size of local funds is increasing, this still acts as a limiting factor for startups seeking funding.
“I think the district is underfunded due to the (post) 2021 amendments,” Packer said. “We need more investors to see Latin America as a global opportunity, and we need entrepreneurs to believe that they can make a difference and make a difference.”
