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Decline of Venture Capital Deals in Latin America – April 2015

by Emily Forbes

  • 23 Apr 2015
  • PE
  • VC

According to Preqin’s Venture Deals Analyst, there have been 484 venture capital financings in Latin America* since 2007, with an aggregate value of $2.7bn. Within this, there have been 19 deals in the Caribbean, 74 in Central America and 391 in South America, with aggregate deal values of $86mn, $358mn and $2.3bn respectively. South America represents 81% of the number of these deals and 84% of aggregate deal value. 

As can be seen in the chart below, Brazil is by far the most prominent country in Latin America* in terms of number of venture capital deals and aggregate deal value, with 258 deals recorded since 2007 with an aggregate deal value of $1.6bn, representing 53% and 60% of the Latin American totals respectively. Mexico is the second most active country in Latin America, with 68 deals occurring with an aggregate value of $357mn. In terms of aggregate deal value, Chile has the second highest amount with 37 deals recorded and an aggregate deal value of $418mn. Together, Brazil, Mexico, Argentina and Chile account for 87% of all venture capital deals in Latin America and 95% of the aggregate deal value in the period 2007-2015 YTD.

 

However, these countries and a number of other nations within the region face difficult macroeconomic conditions, and the latest statistics reflect this deterioration. Q1 2015 witnessed the lowest recorded figures in terms of number of venture capital deals and aggregate value in a quarter since Q1 2009, with 11 deals in the quarter with an aggregate value of $27mn. The number of deals for the whole of 2014 decreased 32% from the previous year, from 111 in 2013 to 75 in 2014, the lowest number recorded since 2011. Depreciation of Latin American currencies on the back of US dollar strength and lower commodity prices, in addition to weak growth outlooks and poor balance of payment dynamics, have evidently constrained capital flows into the region. However, Preqin data shows that the aggregate deal value for 2014 was at its highest since 2007, up 31% from the previous year, at $779mn. 

Via the promotion of entrepreneurship and innovation, venture capital activity in Latin America has been supported by development agencies, NGOs and governments. Angel/seed funding rounds are the most common type of venture financings in Latin America, representing over a quarter (28%) of all venture capital deals in the region in the period 2007-2015 YTD. The number of angel/seed rounds has increased every year since 2009 up until 2014. Last year, only 20 such rounds were recorded, down 58% from 48 in 2013. Angel/seed rounds only represent 1% of the total venture capital deal value recorded in Latin America since 2007. In terms of aggregate value, series C rounds account for the largest proportion (10.9%, $305mn) of all Latin America deals since 2007, closely followed by series D & later rounds (10.3%, $288mn).

*For this analysis, Latin America includes the Caribbean, Central America and South America.

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