Over the past years, something very striking has been happening in Latin America. Venture capital, which many used to think was too risky or simply not made for this part of the world, has become one of the most active forces in the region’s economy.
Investors that once looked only at Silicon Valley or at Asia are now seriously betting on Latin American startups, and some of those bets are paying off in the form of new unicorns. These are startups valued at more than a billion dollars.
The Evolution of Venture Capital in Latin America
Of course, the road hasn’t been smooth. For years, venture capital avoided the region because of instability, political changes, and currency volatility. There was also a feeling that there wasn’t a clear way for startups to exit.
But around 2017-2018, something shifted. Global funds, including the famous SoftBank, began to inject serious amounts of money into the region. At the same time, a few startups showed that it was possible to grow fast, expand into several countries, and offer services that people really needed.
Rappi from Colombia or Nubank from Brazil became prime examples of how far a Latin American company could go if given enough capital and vision.
Key Sectors Driving the Boom
The Fintech Explosion
The big push came from technology adoption. In much of Latin America, millions of people didn’t have access to services that in developed countries were already normal. Banking is the clearest example.
A large part of the population in Brazil or Mexico didn’t even have a bank account. Suddenly, digital wallets and neobanks made it possible to join the financial system just by downloading an app.
Fintech exploded, and investors loved it because the potential market was so big and so eager for a change. That is why today the majority of unicorns in the region belong to fintech, like Nubank, Ualá or Creditas.
E-commerce: Accelerated by the Pandemic
E-commerce was another winner, and the pandemic only accelerated the process. MercadoLibre had already opened the path long ago, but in recent years the new wave of startups has focused on solving specific bottlenecks:
- Faster deliveries
- Payment solutions
- Logistics for smaller merchants
For venture capitalists, this was music to their ears. They didn’t have to invent demand; people already wanted to buy online, the only thing missing was the infrastructure. These startups were offering it.
Emerging Opportunities: EdTech and HealthTech
It’s not only about money and shopping. Education and healthcare, two areas traditionally unequal in the region, are now attracting more capital too. Platforms for online classes or telemedicine are growing fast.
While they haven’t yet produced unicorns at the same level as fintech, many people believe it’s just a matter of time. For more information about the author’s perspective, you can visit his professional profile.
Factors Propelling a Mature Ecosystem
Maturity of the Entrepreneurial Ecosystem
Another key factor is how the ecosystem itself has matured. Today it’s common to see entrepreneurs who already sold a company or at least scaled one, and now they reinvest in new projects or act as mentors. This recycling of talent helps foreign investors feel safer, because they see a professional environment instead of isolated dreamers.
The Arrival of Global Funds
The arrival of big international funds has also changed the game. Suddenly, it was no longer an “emerging and maybe promising” market, but an actual priority market. Other global funds like Tiger Global, Sequoia, or Andreessen Horowitz began looking more seriously as well.
This allowed startups to raise rounds of hundreds of millions, something that before sounded impossible in these countries.
Lingering Risks and a Unified Vision
Of course, not everything is bright. There are still many risks. Economies in the region remain volatile, currencies can lose value quickly, and regulations sometimes change without much warning. Infrastructure is another barrier, especially outside big cities.
But even with all those challenges, investors keep coming back, simply because the population is so big and the needs are so obvious. With more than 650 million people, half of them still without full access to modern services, the opportunity is enormous.
One interesting aspect of the new unicorns is how they no longer think only of their home country. Rappi, for example, didn’t stop in Colombia, it expanded to several countries at once. Nubank did the same, entering Mexico and other markets. This regional vision increases the value of startups and convinces investors that these companies can grow way beyond local limitations. It also slowly builds the idea of Latin America as one tech ecosystem, even if cultural and regulatory differences still exist.