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It’s Always Been Bad Times

Regional investment figures from the Latin America Venture Capital Association (LAVCA)

Mary Ann Azevedo at TechCrunch recently reported that venture capital (VC) funding to Latin America jumped 67 percent year over year in the first quarter of 2022 to $2.8 billion. That compares to 8% year-over-year global funding growth in the same period, pointing to the resilience of Latin-American startups in the middle of a tech market downturn. She gives the example of Kushki, a payments startup that just became Ecuador’s first unicorn after surpassing a billion-dollar valuation. FinTech startups like Kushki took 43% of regional funding last quarter.

Not so fast, say Azevedo’s TechCrunch colleagues Alex Wilhelm and Anna Heim. If you look at quarter over quarter figures instead of year over year, VC funding to Latin America has declined during the last four consecutive quarters, and it looks as if the downward trend will continue in the current quarter. Far from an outlier, they think that the latest funding figures from Latin America are probably a sign that startups everywhere will continue layoffs, which have increased worldwide since January 2022 as VCs cut back investment. Look at how Latin American startup valuations are plummeting they say, citing Brazilian neobank Nubank, which is currently trading at one-third of its 2021 IPO capitalization.

Nubank CEO David Velez takes this gloomy picture in stride in comments he offered the Financial Times this month. One silver lining, he says, is that Nubank is looking at acquisition opportunities at a 70% discount compared to one year ago. Last quarter his company added 5.7 million clients for a total of nearly 60 million, 78% of whom were active during the period, and Velez says they would have already turned a profit if they weren’t busy using their abundant IPO capital to grow faster. But will Nubank continue growing now that bad times are here? That’s the wrong question to ask a startup from Latin America, where inflation and recession are frequent, Velez said, adding that “Brazil has always been bad times.”

You could add Argentina, Ecuador, and several more Latin American countries to the “it’s always hard times for businesses” list. Perhaps startups from Latin America could offer tips on how to grow your business when the market is against you. If that’s you, TechCrunch is looking for guest articles that can help others navigate this downturn.

Latin America gives you an education

Speaking of surviving adversity, Microsoft Latin America’s Hybrid Learning Summit last March featured some concerning statistics from UNESCO indicating that students in the region lost 56 weeks of classes, more than a full year, because of the pandemic, more than any other region in the world. As you would expect, Microsoft made this a virtual event showcasing how resourceful teachers across Latin America turned to technology to keep children engaged, and some of them improvised innovative approaches which managed to make students feel more included in society than before the pandemic. Microsoft Latin America education director and friend of Verb Luciano Braverman commented that “when education grows, inequality shrinks.”

Double the Guatemalan companies now sell online

Julio Ochoa, Territory Manager for Guatemala, El Salvador, Honduras and Nicaragua at Avaya

Another friend of Verb, Guillermo Mata, tells us that the number of companies selling online in his home country of Guatemala doubled between 2020 and 2021, using WooCommerce and other ecommerce platforms. Speaking at the Tech Day event in Guatemala this week, Julio Ochoa of Avaya explained why things might be changing in the country: “to succeed in the current economy, we need to show up wherever our customers are,” he said. And companies in the country seem to be doing just that. Ecommerce user penetration in Guatemala is now over 37% and growing, according to Statista, so Guatemalan companies are going online to meet their customers there.