LAVCA – the Latin America Venture Capital Association – just reported venture capital investment data for the first half of 2022. The results are in line with what anyone can perceive in the market. Fundraising has slowed down, impacted by 1) the steep adjustment in valuations of public tech companies, especially in the US market, and 2) many VC investors are on the sidelines as they wait for the market uncertainty to pass while concentrating their attention and resources on their existing portfolio companies.
Investments in the first half of the year are down 19% to $5.4B dollars in 541 startups. However, the second quarter is 50% down in dollars invested compared to the same quarter last year. I expect to see a similar trend in the third and fourth quarters of the year.
2021 was a year of excesses in venture capital, globally and in Latin America. Too much capital was invested at too high valuations. Now the market is adjusting to a much healthier and more disciplined pace of investment.
This is good news for the region. Great entrepreneurs with a lot of talent, in some cases with solid tech experience from having worked at some of the more mature successful startups, continue building great startups in the region. These will be great opportunities for investors, including us at Dalus. Venture capitalists with conviction in Latin America will continue to support these emerging startups with capital and experience, but now in a more rational investment environment.
Even if down from 2021, the investments in 2022 and later years will be far greater than what we saw pre-pandemic. The future of the startup and venture capital ecosystems in Latin America continue to be very bright despite current market volatility. Founders and investors are building companies for the next 10-20 years, not for the next 6 months.