Your Gate to Latin American IP

Venture capitalists maintaining support of start-ups

By E.C.V. & ASOCIADOS - 06/07/2020

According to a report from the World Economic Forum (WEF), venture capital investment in Latin America has doubled every year since 2016, reaching an all-time high of US$4.6B in 2019. But, despite years of hard work to get to this point, the region now faces unprecedented challenges to maintain it.

In an article published on the WEF website on July 1, 2020, Greg Mitchell, Regional Director for Angel Ventures, stated that the COVID-19 crisis is causing both local and global investors to rethink their strategies, and while deals are still happening, many VCs are doubling down on support for existing portfolio companies and shying away from new deals.

“Start-ups across Latin America have proven their resilience to economic shocks time and time again. Entrepreneurs know how to survive and thrive during economic hard times. In fact, vibrant tech hubs have blossomed despite periods of political and economic uncertainty,” Mitchell argues.

He specifically mentions places like Bolivia, Ecuador, El Salvador, Honduras, and Venezuela were start-ups pointed out a significant lack of resources. “Start-ups in Latin America’s smaller and more nascent tech ecosystems are at a higher risk of losing ground as resources and funding dwindle. Supporting them will be vital not only for the region’s recovery but to protect the extraordinary growth that has been achieved so far”, Mitchell explains.

As part of the solution he mentions more foreign investment and cross-border investment between regional and global investors. “Fostering cross-border collaboration between regional investors can help founders who are already starting out at a disadvantage in smaller start-up ecosystems. With an inability to meet with founders face-to-face, regional funds will need to rely heavily on local partnerships to establish trust and source deals. Local funds can reduce friction points for foreign investors by getting them engaged in the fund progress. Establishing transparent and repeatable cross-border processes now will also help regional investors compete for deals in the future when global funds return to the region”.

By E.C.V. & ASOCIADOS - 06/07/2020
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