Key Players: Mexico and Argentina
According to a recent study, investments in Latin American startups have seen a significant 26% increase in 2024 compared to 2023, outpacing Europe’s 7% growth and surpassing Southeast Asia’s 34% decline. This positive trend is expected to continue into 2025, driven by a young population, rapid digitalization, and increasingly sophisticated capital.
The Study: Conducted by the Mexican entrepreneurship network Endeavor and private equity firm Glisco Partners, the report highlights Mexico and Argentina as major beneficiaries of the venture capital recovery in Latin America in 2024.
Challenges Ahead
Despite the promising growth, the industry faces hurdles such as low local venture capital fund participation in later-stage investments and global volatility, according to the study.
Alfredo Castellanos, Managing Partner at Glisco Partners, commented, “2024 was a year of redefinition. Startups that adapted to market changes now operate with more robust and sustainable models.”
The report noted that domestic investors typically invested early, while foreign investors targeted more established and scalable companies.
Investment Trends
Capital injections into existing companies have become more prevalent, accounting for 65% of the total capital raised in 2024 compared to 46% in 2023. The report states, “There are fewer rounds but more capital.”
- Debt Risk and Mixed Rounds: The report identifies three primary trends for 2025, including the use of debt risk and mixed rounds (combining venture capital and debt) as alternative investment methods.
- Secondary Market Growth: Annual growth in secondary markets (where investors can trade shares among themselves instead of directly with the company) is projected to increase by 60% to ensure liquidity for early-stage investors.
- Employee Stock Participation Plans: These plans are increasingly vital for attracting and retaining talent, though only about 20% of Latin American startups offer them to employees due to financial uncertainty.
Sector-Specific Insights
Tech financial services companies continued to dominate investment volume in Mexico, while emerging real estate technology and software companies experienced the fastest growth, as per the report.
Notable Investments
Mexico boasted large funding rounds for startups like Clip and Justo, maintaining a steady investment flow. Argentina’s Uala, a financial services firm, raised $330 million—73% of the total capital in Argentina, according to the report.
Key Questions and Answers
- Q: What drove the 26% increase in Latin American startup investments in 2024? A: The growth was fueled by a young population, rapid digitalization, and increasingly sophisticated capital.
- Q: Which countries benefited the most from the venture capital recovery in 2024? A: Mexico and Argentina were major beneficiaries.
- Q: What challenges does the Latin American startup investment industry face? A: The industry faces hurdles such as low local venture capital fund participation in later-stage investments and global volatility.
- Q: What investment trends are expected to shape 2025? A: Trends include debt risk and mixed rounds, secondary market growth, and employee stock participation plans.
