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Contxto – We knew it and so did Twitter: coronavirus (Covid-19) and the current state of affairs are changing the venture capital (VC) scene in Latin America. The only thing one really pined for was for this to come from the mouths of VC investors themselves. And this week we got our wish.
In a live broadcast carried out last Wednesday (1), investors from various funds in Latam exchanged perspectives as to what’s going on in their corresponding firms and with their portfolio companies. And from their discussion it was said: investments will slow down, term sheets may change, and many will be shifting their focus towards helping their portfolio startups.
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Changes to investment behavior
The 2008-2009 economic crisis left a few lessons that can be applied to today’s upcoming/ongoing recession. But the Covid-19 pandemic is adding a new level of complexity to the global economic slowdown.
So despite their vast years of experience in VC, neither these investors, nor anyone within the startup ecosystem for that matter, have ever dealt with something of these dimensions.
Naturally, that means they’ll be proceeding with greater caution in the coming months.
In sum, expect funding to slow down because markets are far too unstable to offer a reliable picture for investing.
Help those you’re already in bed with
It’s not surprising to report that some of these investors like SoftBank’s Paulo Passoni and Redpoint eventures’ Anderson Thees at least for the moment, they’ll be focusing on supporting their portfolio companies.
What’s more, in this short term, because of Covid-19, some of these VCs’ startups have seen their revenue drained due to consumer shortfalls. While others, like delivery and logistics startups, are experiencing high levels of growth.
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As a result, each VC fund is considering different strategies to help their portfolio companies cope. Some, like Valor Capital are pondering follow-on rounds to provide life-support for their startups. To that end, it’s carried out stress tests to visualize worst-case scenarios.
For Atlantico’s Julio Vasconcellos, the recession will last somewhere between one year or a year and a half. So this VC is planning in terms of that timeframe and long-term growth of its portfolio companies.
If you want the scoop on what these hot-shots said, check out the full discussion here:
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