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Mexico and Argentina are key to the fintech momentum in LatAm

ALLVP's Chloé Novène shares more about the status of VC investments in Latam's fintech ecosystem –way beyond what happens in Brazil.

Don't worry, we speak : Español (Spanish), too!

*By Chloé Novène

**Data shown here was last updated on October 1st, 2021

So far, 2021 has been a crazy record year in terms of fundraising for tech companies all across LataAm –especially in fintech. So what’s the current status of the fintech VC industry in the region? 

A few numbers to start

Going back to March 2020, it would have been difficult to forecast that investors would keep investing and betting on even more LatAm startups than in the past.

And yet, here we are! Numbers are speaking, and fintech is the clear winner among all categories of VC-financed companies. According to our internal research, fintech companies have raised over $3.6 billion so far in 2021, compared to the more than $1 billion invested in 2020.

No surprise here. Fintech is to be ranked No.1 in terms of VC money attracted. If we consider all VC fundings in 2021, the sector has gathered more than 35% of total investments.

Where did the VC invest the most? Brazil remains the undisputed leader in both the amount of funds raised and the number of rounds, but watch out: Mexico has been catching up fast.

In 2021, Mexico and Argentina clearly increased in proportion. Until the end of September 2021, at ALLVP we estimate VC investments to represent about $1 billion in Mexico and $450 million in Argentina –27% and 11% of all amounts invested, respectively. This is impressive considering 2020’s numbers, where Mexico’s proportion was closer to 16% and Argentina’s was lower than 5%. 

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It’s also worth highlighting that the size of funding rounds has evolved over the years. As a reference, the average round size in fintech has been increasing at each stage in the past two years.

We estimate that the average Series A ticket size in the fintech industry in LatAm has increased from $4 million in 2019, to $9 million in 2020, and $13.2 million in 2021. The announced pre-seed rounds also evolved from $300k in 2019, to $400k in 2020 and $2.4 million in 2021. 

The most active VC FintechXplorers

In 2021, Spanish-speaking LatAm finally got the attention of international investors, becoming an increasingly strategic region with a strong positive bias towards fintech.

As mentioned, Brazil had been covered for a while by these investors, but what really changed was these investors’ attitude towards other countries.

Many foreign VCs recently made their first commitments to the region by backing fintechs: Index Ventures made its first bet in the region by investing in the insurtech Sofia in Mexico alongside Kaszek Ventures and Ribbit Capital.

We were thrilled to back Flink alongside Accel Partners and Lightspeed. And this list has become longer and longer over months. The US-based investors QED Investors, Softbank, and Clocktower Ventures are now among the top 5 VC fintech investors in the region.

In May 2021, we published a list of TechXplorers VCs, or local VCs investors placing their money out of their home country. Taking a look back at the numbers, fintech is definitely one of the most attractive categories where VCs invest out of their homeland.

Fintech soonicorns

At ALLVP, we’ve also been tracking and asking ourselves which Latin American companies would become the next unicorns, hence our new definition of soonicorns.

What’s fascinating is that about 35% of them are fintech companies! It’s quite in line with the capital invested in the sector in 2021, but from 2018 to 2020, fintech investments only accounted for about 25% of all financed companies, which could infer that the fintech vertical overperformed – we’ll see it in the long run.

As another interesting fact: it takes them less and less time to become unicorns these days. Buenos Aires-based Pomelo took less than a year

You can see the 30+ fintech soonicorns on this map, including the ALLVP-backed companies Fintual, Flink, and Cumplo: 

What’s next?

At ALLVP, we believe that some of the causes behind the fintech boom are deeply rooted in the region, so we’re confident that this hype is only the beginning. The facts to confirm the supremely high potential for tech to reshuffle the cards of financial inclusion are in clear view. Take, for example, that less than 1% of the Mexican population had access to investment products as of June 2020.

The financial ecosystem in LatAm is broken, and fintech companies come to include millions of people in it. Regulation is also advancing, providing more visibility on where the ecosystem is moving to. And finally, amazing fintech success stories such as Nubank or Clip clearly demonstrate that Latin America is a land of fintech unicorns, with a clear path towards successful exits.

I’m definitely looking forward to seeing what will happen in the Latin American Fintech ecosystem in the next 12 months.

Chloé Novène is Investment Associate at ALLVP

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