Softbank ventured, Softbank gained

A wall of venture capital cash is accelerating the digitalisation of Latin America.

Venture capital is flooding into Latin America, with over USD 9.3 billion invested in the region in the first half of 2021 and USD 7.2 billion in the second quarter alone. Such record investment flows have taken Latin America above South East Asia in global rankings for the first time.

In March 2019, Softbank announced the launch of a USD 5 billion Latin American Fund, led by the Bolivian Marcelo Claure, who has since become the CEO of SoftBank Group International. To the surprise of some, the fund is doing exceptionally well: as of June this year, it had invested USD 3.5 billion into 48 companies across Brazil, Mexico, Chile, Colombia, Argentina and Ecuador. The fund’s fair value at June was USD 6.9 billion – a USD net IRR of 85%!

With results like these, it wasn’t surprising to hear the recent launch of Softbank Latin America Fund II in September with a commitment from Softbank of USD 3 billion and an aim to bring in others. Marcelo Claure said, “Over the past two years, we have seen tremendous success and returns from the SoftBank Latin America Fund that far exceeded our expectations. The amazing work and vision that Latin America’s entrepreneurs have demonstrated in the region gives us confidence that its digital transformation will continue to accelerate – in fact, we expect that 2022 will be the biggest IPO year in Latin America’s history.”

A partner at a US-based venture capital company rued a missed opportunity, “Latin America had been a technology laggard for decades, people didn’t trust apps, they didn’t want digital payment systems, the infrastructure wasn’t there. The pandemic changed everything, it accelerated the digitalisation of Latin America by 10 years and the region now has 25 unicorns and some of the most exciting growth prospects of any region in the world. I just wish I had a mandate to invest!”

“Latin America had been a technology laggard for decades, […] The pandemic changed everything, it accelerated the digitalisation of Latin America by 10 years.”

Partner, venture capital firm, US

“Until 2019, the only large investment opportunities in Latin America were in infrastructure, energy, mining and maybe a little in healthcare,” a retired venture capitalist in San Francisco reflected, “everything has changed now. LatAm has some of the most exciting tech companies in the world and a population of some 600 million people that have smartphones and are now prepared to use them like more developed regions. As a consequence, the rate of innovation is incredible and entire industries are about to be turned upside down: banking, e-commerce, healthcare and education in Latin America, will change forever. You’ve already covered some of these firms on Tidings, but more are coming.”

“The rate of innovation is incredible and entire industries are about to be turned upside down: banking, e-commerce, healthcare and education in Latin America will change forever.”

Retired venture capitalist, San Francisco

Others are taking note, especially the venture capital arms of multinational corporates. In Mexico, for example, Telefónica, Cinépolis, Volaris, Axtel, Coca-Cola, Grupo Expansión and Hoteles City Express are turning to venture capital to drive innovation.

With more venture funds now operating in the region, we are seeing multinational investment syndicates being formed and the size of the average financing round getting larger. For example, LIV Capital, a Mexico City-based private equity fund, joined forces with Fondo de Fondos, a Mexican private investment firm, and the International Finance Corporation of the World Bank to lead a USD 19 million financing round in YellowPepper, a mobile wallet start-up.

 

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