Tough times in LatAm: but that's business as usual

How has Covid-19 impacted venture capital investment in LatAm tech?

Venture capital has poured into Latin America in recent times. VC investment in the region has doubled every year since 2016, climbing to an all-time record figure of US$4.6bn in 2019. But the Covid-19 crisis looks set to have a grave impact on this situation.

In May, the Inter-American Development Bank (IDB) published a survey covering 429 different organisations involved in entrepreneurial ecosystems across 18 Latin nations. Two out of three respondents said they had significantly reduced or stopped their work altogether. Between 2019 Q4 and 2020 Q1, the deal count across LatAm countries dropped by nearly 60 per cent.

The Covid-19 crisis is causing both local investors and those from outside LatAm to reconsider their plans. Deals are still being inked, but a lot of VCs now prefer to continue support for their pre-existing portfolio ventures: many have ceased to seek out new investments, at least for the present.

It's clear that tough times are here again, but Latin startups may not be as badly hit as some in other parts of the world. Those still standing in the LatAm venture space have, in many cases, already battled their way through severe economic and political shocks. Latin entrepreneurs know how to survive and even thrive during hard times. Indeed, vibrant tech hubs have burgeoned in countries such as Argentina, Brazil and Colombia despite recent periods of turmoil.

 

Interface, not face-to-face

Furthermore, new technologies would seem, at least in some cases, to offer opportunities to do business almost regardless of Covid-19. One such example could be the range of automation and data-processing technologies often bundled together under the somewhat overhyped label "Artificial Intelligence" (AI).

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