editorial
Startups in Latin America are facing layoffs due to a decline in venture capital funding, but they are also preparing for an increase in initial public offerings (IPOs) by 2024. A report by VC fund Atlantico reveals that around two-thirds of Latin American companies, or approximately 67%, have laid off staff members in the past 18 months.
Venture capital funding in Latin America’s markets dropped by 65% in the second quarter of 2023 compared to the previous year, and there was a 50% decline internationally during the same period. However, as IPOs start to recover globally, venture capitalists and Latin American unicorns, which are businesses valued at $1 billion or more, may look to return to the financial and capital markets.
Out of the 37 unicorns in the Latin American market, only seven have gone public so far. However, Julio Vasconcellos, managing partner at Atlantico, expects this number to increase significantly in 2024, with at least 10 new companies listing in public markets.
One factor that could shape the IPOs of Latin American firms is the valuations of established companies such as Arm Holdings, supported by SoftBank Group Corp, and Instacart. Latin American firms may be more cautious and mindful of these valuations when considering their own IPOs.
Fintech firms are currently one of the fastest-growing sectors in Latin America, with virtual payment platforms such as Brazil’s PIX initiative helping to improve banking account penetration rates in the region. Around 87% of Chile residents and 84% of consumers in Brazil have banking accounts, while Argentina follows with 72%. However, cash remains the most popular payment option in Mexico, with only 49% of residents having banking accounts.
The report suggests that the introduction of virtual payment solutions in Mexican markets and the entry of all-digital banking challengers could potentially transform the financial sector in the country. Latin American startups are facing challenges due to a decline in funding, but they also see opportunities in the IPO market and the growing fintech sector.
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