Venture capital investments in Latin America have already surpassed US$600 million for the first half of 2018. This is significant, given that the amount of venture capital investment annually from 2013 to 2017 was around US$500 million, according to the Latin American Private Equity and Venture Capital Association (LAVCA).
We can deduce that this significant rise of investment is largely from the increase of foreign and corporate investors in Latin America, as well as the strengthening presence of Latin American accelerators.
Accelerators are vital programs that help startups in the early stages of their businesses. The programs often have a highly competitive application process, and accept startups in cohort batches one or more times per year. Typically, a seed investment is offered in exchange for equity. Most importantly, startup teams receive training and mentorship to help scale their operations, and the accelerator helps prepare teams to raise more capital if needed.
We went through five different startup accelerator programs that invested in Latin American startups in all industries and reviewed the 88 Latin American startups that were selected in 2018 to see which industries accelerators are mostly getting involved in this year. These accelerators include:
Top 5 industries where accelerators are investing in Latin America
1. E-commerce and Marketplaces
2. Social Impact
3. Business Software
4. Transport and Logistics
What’s going on with e-commerce and marketplace startups in Latin America?
As shown above, the industry in which accelerators seem to be the most active is e-commerce or marketplaces. In general, these companies serve as a type of intermediary, offering platforms that connect sellers of products or services to buyers. For example, Argentine startup VAQAPP provides an online platform to buy and sell livestock, and Waitry helps process online orders for food, restaurants, and events.
While e-commerce growth is slowing in the rest of the world, it is booming in Latin America. In the next five years, online sales in the region are expected to grow by 19% and to double to $118 billion in 2021. A major cause of this growth is the increasing presence of Internet and smartphones across the region.
What’s going on with social impact startups in Latin America?
Another area where accelerators in Latin America are investing is companies that are creating a positive impact on local communities and the environment. In Mexico, for example, ProTrash is working to democratize recycling, and Folia Water is selling affordable water filters.
Facebook also recently selected ten social impact startups from Brazil to join its accelerator program. Investments in this space have a real opportunity to make a change. While advances have been made in healthcare in Latin America, according to estimates from the World Health Organization, approximately 30% of the population still cannot access healthcare. According to LAVCA, Latin America is one of the regions most affected by the extremes of climate change, with threats to water supplies and agricultural productivity.
What’s going on with business software startups in Latin America?
Accelerators in Latin America are also looking at startups providing business software, such as My JobStudio for human resources technology and Rendy.io for 3D imaging. These businesses are helping other businesses optimize their operations. These companies are solving problems many businesses in Latin America face, adding a layer of technology to operations such as payroll, recruiting, training, and communications.
The business software industry is growing rapidly in Latin America. For instance, within the next year, 54% of companies in Latin America have plans to invest in HR technology.
What’s going on with transportation and logistics startups in Latin America?
Traditional transportation and logistics companies use legacy systems, and their operations are increasingly inefficient. As a result, there is a growing need for better solutions, especially to optimize deliveries in Latin America.
New startups in this sector are offering faster and cheaper delivery options, and they are also improving the trucking industry. For instance, Avancargo is a B2B trucking platform in Argentina that provides carriers and shippers with better availability, traceability, insurance, and tech support. Mienvío is a multi-carrier shipping API for ecommerce companies in Mexico. As shopping online becomes increasingly popular in Latin America, more and more startups that understand the local markets are sprouting up with logistics solutions to meet the demand.
What’s going on with fintech startups in Latin America?
Latin America has a large unbanked population. Estimates show that only 51% of the population had a bank account in 2014, and only 11% currently have access to credit from formal institutions. Distrust in financial institutions in Latin America is also high, and fintech startups are offering better alternatives.
Accelerators in Latin America are increasingly investing in companies with services such as online payments, financial planning, and insurance. For example, Fintual is a robo-advisor that helps small and medium-sized companies in Latin America with basic knowledge in finance to invest their money online. Apurata is bridging the information gap that keeps underbanked Latin Americans from accessing credit products from high quality institutions. As mobile usage expands in Latin America, it is very likely that we’ll see this investment trend continue.
Overall, accelerators are helping drive the success of Latin America’s startups, transforming them into competitive forces against the Silicon Valley giants.