According to a report by TechCrunch and CB Insights‘ State of Fintech Q2 report, fintech companies in Latin America and the Caribbean raised US$500 million, a 150% increase compared to the previous quarter, while the number of deals (69) remained almost the same as the previous quarter.
The Association for Private Capital Investment in Latin America (LAVCA) reported that venture capital investors deployed US$7.8 billion across a record 1,114 deals in Latin America in 2022, down from US$15.9 billion in 2021. The fintech sector was by far the main recipient of venture capital dollars in 2022, representing 29% of last year’s investments.
The report highlights that early-stage deals accounted for 81% of the total for 2023, reaching a five-year high. The standout deal in the region during the quarter was for the DeFi platform Kross Wallet, based in the Cayman Islands, which raised US$100 million in an initial funding round. Blockchain and cryptocurrency companies are considered fintech in CB Insights’ data.
Other deals during the quarter include a funding round of US$60 million for the Mexican spend management startup Clara and a US$26 million investment for the Brazilian payments infrastructure company Liquido. (It should be noted that these rounds were actually raised in 2021, but Liquido only recently announced the financings as it operated in stealth mode).
Global Fintech Landscape
CB Insights points out that the second quarter was not as favorable for payments startups, despite starting the year strong. According to the report, funding for these types of companies decreased by 75% during the quarter, reaching US$2 billion, down from US$8 billion in the first quarter and US$4.9 billion in the second quarter of 2022. CB Insights stated that this was a “six-year funding low for the sector,” and there were no new unicorns in this category.
Tipalti, which automates accounts payables for mid-market companies, had the most prominent capital deal of the quarter, raising US$150 million in a growth round, adding to its impressive list of large investments, such as its US$270 million Series F and US$150 million Series E. Other companies on the list include Nymbus, Clara, Volt, Spiff, and Episode Six.
Lastly, all five of the quarter’s IPO exits come from fintechs based outside of the United States, with four of them coming from Asia. Additionally, fintech saw a 20% drop in M&A activity, with 142 exits recorded during the quarter, according to CB Insights.
Why is it relevant for Fintech investment funds?
- The outlook in the region appears complex yet promising for the fintech sector. However, globally there is a significant reduction in deals and investments.
- The significant increase in funding for fintech in LatAm and the Caribbean during Q2 of 2023 indicates a region with high growth potential, presenting attractive investment opportunities for funds seeking substantial returns.
- Amidst the reduction in global fintech deals and investments, the flourishing fintech landscape in this region offers funds the chance to diversify their portfolios and tap into emerging markets.
To read more in detail, visit: TechCrunch