SoftBank's LatAm Investments are Shrinking

Last year, we saw more VC dollars than in 2019 and 2018 combined.

An estimated 1,114 VC deals were closed, compared to 915 in 2021 — a 22% increase.

Yes, there's been a significant drop in the money flow into our region, but what happened in the last five years has kickstarted a movement beyond the dollar amounts. SoftBank was the primary catalyst for this new movement. From 2019 to 2022, the bold Japanese fund, backed by Chinese and Saudi money, committed $7.8B to startups trying to solve big problems in Latin America. These included the most notable: Rappi, Kavak, Bitso, Nubank, and Uala; it currently owns 60+ others.

Of course, there are downsides to so much money. Many investors poured capital into our region with little thought about sustainability and too much focus on growth.

SoftBank's LatAm fund is down 44% in value since its Q1 2022 high of almost $10B, and the losses will likely continue as more companies seek capital to stay afloat and are forced to re-state their private valuations. More restricted access to capital has rendered many companies unable to continue their operations as they were in the past two years; layoffs and bankruptcy filings have ensued.

But one thing remains — entrepreneurial hunger. Brazil, LatAm's biggest market and the biggest recipient of VC funds, increased the number of businesses registered annually by 60% from 2018 to 2020 (the latest year of data available). The giant seed that SoftBank planted put Latin America on the map; the competition intensified as other funds recognized the region's potential, creating a vibrant environment for innovation.

Rome wasn't built in a handful of years. It will take longer for Latin America to become its own Silicon Valley. After all, the region's highest estimated figures — $16B of VC investment in 2021 — is still just about 5% of what the US received in the same year.

One may look at these numbers and say they're discouraging, but seen through a different lens, there's an immense amount of opportunity and value creation left. Entrepreneurs from all over LatAm will continue to recognize the same opportunity, and the fact that capital has dried up somewhat will not deter the best ones from executing.