Taking advantage of Latin America’s market downturn

Through the year, Latin American venture capital and growth investments have averaged $2 billion. The few investors in the region were making a lot of money. Having invested in its Latin American franchise throughout different cycles, General Atlantic has an internal rate of return greater than 50%.

I quit my job at J.P. Morgan to invest in the region because I thought there was a chance to do so. When I called Nicolas to thank him for his support, he told me he would introduce me to another person. The launch of SoftBank in Latin America was worth more than the entire industry at the time.

The market dislocation didn't last long, but great companies like Nubank, Inter, Gympass and Quinto Andar were in their early days. Latin America was the fastest growing VC region in the world. In 2020, I founded a new growth fund to fill the funding gap in the region, giving me the chance to see how startup from recent vintages fare in a scenario of bonanza

In the third quarter of 2022, late-stage funding in Latin America declined by more than 90 percent from a year earlier. The region will suffer more from its lack of local growth capital than any other market.

Only three investors were active in the third quarter of 2022. The majority of those investors were non-dedicated growth capital and included a high number of individuals.

The LAVCA is a source. Series C, D, and beyond are considered by late stage. The image is from Volpe capital.

By solving local issues, startups will build pricing power, which should allow them to thrive.

So far this year, early-stage funding has been relatively active, and many good companies are raising early rounds. More than 200 late-stage Latin American companies are holding back as much as they can before they try to raise more capital. Funding needs will only be covered by foreign capital

My first job was at J.P. Morgan, where I wrote portfolio reviews and helped untangle a large portfolio of internet companies that were mostly failures by the time I got there. I learned a lot from those days about how some companies thrive while others fail.

There are a few things that come to mind.

Milk every dollar, save every penny

The examples below show how companies did all they could to survive.

Mercadolibre used a freemium strategy to gain market share in the Latin American online auction market. The platform allowed users to sell their products for free. The company introduced fees across its markets after that.