By: Javier Cueto, Managing Partner at Imagine Ventures
We have repeatedly read, heard, and debated in recent months about the decline in Venture Capital investment in Latam and the world in 2022, coupled with a complex macroeconomic context post-pandemic and a sort of hysteria regarding the future and the sustainability capacity of startups. This debate goes hand in hand with a collective mood of uncertainty, anxiety, and apprehension due to various external and internal factors, which generates a state of “freeze” that can let unique opportunities slip by.
If we analyze the data and not the opinions, the first half of 2022 shows a total of investments in Latam of about USD 5 billion, representing a 23% drop compared to the first half of 2021. However, this is a 340% growth compared to the first half of 2020 and 21% more than all that was invested that year.
Additionally, this comparison requires further analysis, as this decline has not been uniform across the various investment stages. The “angel and seed” segment has globally shown an increase in the last year of 9%, unlike the early-stage sector (series A and B), which has fallen by 9% in the last year, and the late stage, where it reaches 38%.
This makes us question the generalization of a “crisis,” or if we are facing an investment slowdown or rather a correction after a record-breaking year that broke any trend or prediction supported by pro-investment conditions never before seen due to the pandemic. Segmented analysis allows us to notice that today the “mega-rounds,” startups that raised capital at disproportionate valuations or with a growth focus at any cost, are the ones being hit today because market uncertainty (and not of the VC industry) leads companies to focus on sustainable growth and demonstrate through metrics, and not just promises, the value and impact they are creating.
Today the early-stage segment (pre-seed and seed) continues to thrive because funds understand that this is a long-term race, countercyclical to economic crises, and that in contexts of greater uncertainty, the real opportunities to generate change and high-potential impact emerge. With this correction and market adjustment, VCs in this segment manage to resume normal rhythms of evaluation and investment, generating comprehensive and systematic processes for identifying the best opportunities, getting to know the startups, and not making hasty decisions for fear of missing out on deals.
This presents a tremendous opportunity for institutional funds, family offices, investors, and corporates to bet on early stages and not take a passive or pause position to wait.
“What will happen?”, since the moment to bet on innovation, disruption, and investment in funds and startups is NOW, given that the inflection point is happening, and the pioneering players will be able to capture the majority of the generated value, learn in unique conditions about this type of investments, and take an active role in this industry.
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