Latin American startups raise 17% less investments in the 1st semester

RIO DE JANEIRO, BRAZIL – According to a Sling Hub survey, the volume of investment raised by Latin American startups dropped 17% in the first half of the year, totaling US$6.8 billion.

The fall in the period was driven by a strong decline of 76% in June, from US$3.1 billion between January and June last year to US$734 million now.

The slowdown was even stronger in Brazil, which accounts for a little more than half of the market. The capital invested was a third less, totaling US$3.7 billion.

In June, there were US$410 million, 81% less than in the same month last year, when US$2.13 billion in checks were signed.

The drying up is a result of the aversion to risk due to the increase in interest rates to fight inflation, which affected the stock and venture capital markets.

Those who have suffered the most are the companies in an advanced stage of development, which need more generous checks to finance themselves.

Yesterday, for example, Loft made its second wave of layoffs of the year, cutting 12% of its staff of 3,200 people. With the reduction, the proptech, valued at over US$2 billion in its Series D round in March 2021, adds 543 layoffs.

The point is that investors are less likely to make the same bets on businesses burning cash at a rapid pace than they were one year ago.

Since the higher checks are not available right now, the entire market ends up being impacted – in terms of values, the mega-rounds greatly influence (or inflate) the overall numbers.

It is worth remembering that 2021 was a record year for the venture capital market globally. So backing away from this milestone, especially in a year of such uncertainty, is only natural. And we can look at some indicators optimistically.

The US$734 million raised by Latin American startups in June represented the lowest amount since February 2021. In Brazil, the US$415 million for the month were higher than the US$363 million in April.

The correction is in place. But the scenario is far from a catastrophe. At least yet.

Sling Hub highlighted some positive movements throughout the 1st semester. Brazilian agtechs, for example, raised US$186 million in the period, a result 86% higher than that recorded one year earlier. Agrotools’ US$20 million series B with Inovabra and KPTL was the highlight of June.

In Latin America, hr-techs stood out with US$306 million in investments between January and June. The amount was almost nine times higher than the US$35 million received a year earlier. The fundraising of Gupy, Flash, and Solids pushed the numbers up.

With information from Startups

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