The Latin American Private Equity & Venture Capital Association (LAVCA) has just dropped its Q1 2023 report on investment activity in Latin America, and it’s not painting a pretty picture. Reflecting what many of us have been witnessing firsthand on the ground, the serious dip in startup investment that began at the end of 2021 is still present in the first quarter of 2023, dropping to a meager $0.8B dollars from the impressive but unsustainable $5.2B peak in Q3 2021.

If we exclude the regular chunk of venture debt that reliably appears every quarter, the landscape appears even more challenging. We’re seeing just $400M in equity being poured into startups. This signals a rough ride for many startups struggling with their fundraising. If this funding drought persists, there’s a real risk of a significant number of startups failing to pull through.

However, it’s not all storm clouds on the horizon. Despite the overall downturn, seed financing for new startups is holding up better than later-stage funding. This implies we can still anticipate a steady flow of startup activity bubbling up over the next 12-24 months.

In these tough times, it’s crucial for startups to be agile and resilient. They need to operate lean and efficient businesses that drive growth while paving a path to profitability. It’s all about making savvy, hard choices that will help them stay above water and keep pressing ahead.

It’s worth noting that local and regional funds, like ours at Dalus, are still active and investing in the region, standing as steadfast allies to startups navigating this tricky terrain.