The ecosystem of startups in Latin America will grow and consolidate in the medium and long term, and will remain a region of high potential and opportunity. This is the result of trends that accelerated due to the new habits brought about by the pandemic and that pave the way for new companies to reach even more ambitious opportunities in the medium and long term, maturing the ecosystem in the process.
This is according to the trend report prepared by Latitude, the technological platform that offers solutions and develops the infrastructure that will support the next generation of startups in Latin America. The study addresses the trends of the main sectors of the startup ecosystem in the region: Fintech B2C and B2B, SaaS, Healthtech, E-commerce, Proptech and Climate tech.
The LatAm Tech Report, is an analysis carried out through surveys of founders and managers of startups in Latin America, it also has the participation of local, regional and international investment funds.
This is the first study of its kind, we are going deep into the present and future of seven industries in Latin America, which are also the ones that have gained the most attention from investors in recent years: Fintech B2B, Fintech B2C, E-commerce, SaaS, Proptech, Healthtech and Climate Tech.
Brian Requart, co-founder of Latitude.
“Part of growing and promoting an ecosystem is having more information about it, what we did with this study is go directly to the key players to identify trendswe consolidate the information on the investments that have been made and we also identify the main challenges that each sector faces” complements Gina Gotthilf, COO and co-founder of Latitude.
The full reports can be downloaded for free here. These are some of the main findings, in the sectors with the highest investment volume:
Fintech B2C
Two out of three dollars of fintech investment in 2021 went to consumer fintechsthis means 7,200 million dollars, the largest amount of that money went to digital banking and digital lending startups. Asset management, insurance, payments and remittances, as well as personal finance and education complete the list of investment preferences. Even with these figures, Latin American consumer fintechs account for only about 5.5% of global fintech funding record total of US$132B in 2021.
In fintech companies whose client is the final consumer, some of the Opportunities for the coming years will be the integration between means of payment and personalized loyalty programs, payments based on blockchain and alternative lending companies that increase their efficiency thanks to technology. Likewise, innovations in biometrics are expected together with technologies such as GPS, AI and ML (machine learning) to make payments faster and more secure; autonomous finance, along with AI; and voice commands, focused on improving the fintech consumer experience.
Fintech B2B
In enterprise-focused fintechs, companies Actual trends and in the short term at the global level are that they become payment facilitators; offer payment solutions focused on B2B, seeing the growth of e-commerce in the segment; income-based financing; expense management, accounting and procurement software solutions for unbanked SMEs; banking infrastructure and API-based banking software, both leveraging Open Banking and focused on integrated finance; and advanced salary and reward programs based on increased connectivity.
Software as a Service (SaaS)
Latin America has seen incredible growth in the volume of capital raised for SaaS startups. Venture capital funding grew 100% between 2013 and 2021, and only between 2020 and 2021 it grew 7x. The rounds are getting bigger, going from US$3 million in 2013 to US$500 million in 2021.
The report shows that there are strong local players in Latin America; especially in segments such as eCommerce enablers, Sales/Mkt/CX, ERP/Accounting and Fintech. The analysis highlights that there are segments that still do not have that strong local player in segments such as DevOps/Warehouse; Design/Product/Collaboration; cloud infrastructure and verticals.
health tech
This is a sector that increased its funding at a faster pace. Health-related startups in 2021 increased their annual funding by 4,700%compared to an equally impressive growth of the general startup ecosystem, which was 1,800% in the same period.
Among the immediate trends, the study highlights the greater impact and opportunity of technology in telemedicine; mental health; health insurance; wellness; dental solutions and employee benefits. In the medium and long term for Latin American health technologies, the greatest opportunities are detected in data interoperability; remote monitoring of patients; virtual reality for surgeries; wearables; the internet of medical things; and big data and AI.
E-commerce
The size of e-commerce in the region is still represents only 19% of US e-commerce and 8% of Chinese e-commerce. Latin American e-commerce is still fragmented when it comes to the number of players. there is also heavily concentrated in urban areas.
It is currently observed greater penetration of purchases made through mobile and digital payments; growth of cross-border e-commerce and digital goods and services, such as video games, e-books and streaming; social trading; and loyalty as a currency to differentiate yourself from competitors and retain valuable customers.
Also mentioned medium and long-term opportunities in models such as social commerce, e-commerce aggregators, and players who benefit from network effects. The Investors are also looking for logistics providers that are environmentally friendly and fintechs that enable e-commerce.
Proptech
Real estate tech companies aim to transform and digitize property, affordability and marketability, removing the friction of property management and fractional ownership. in the last 5 years consumers moved onlineimportant changes made it easier to obtain mortgage and rental guarantees, arose solutions focused on real estate tourism and temporary housing solutions.
Global players dominate segments such as commercial real estate and tourism/short-term rentals. The Regional players lead the construction and residential real estate segments.
In the proptech sector in the short term the integration of work and leisure will be creating a demand for houses in the suburbs and more amenities and services within the properties. Some markets that local proptechs have yet to work on are commercial real estate, construction, and foreign property investment.
In the medium and long term in Latin America, The real estate sector faces challenges such as greater fragmentation and lower penetration of online classifieds. At the same time, there is accelerating digital adoption, an increase in remote work, and a reallocation of capital from commercial to residential real estate. Fractional ownership, verticalized SaaS solutions, and the creation of entire platforms and marketplaces are some of the opportunities noted by participating proptechs.
Climate Tech
Investment in climate technology is recession-proof, with a growing demand for solutions. Even during the difficult year of 2022, investment in climate technology remains. A Pitchbook analysis shared by TechCrunch shows that the median value per deal was $23.6 million at the end of Q2 2022, more than triple what it was five years ago. There was +15.4% in the number of rounds between Q1 2022 and Q2 2022. In the next five years, Pitchbook estimates that the climate technology market will reach $1.4 trillion.
Current and conjunctural trends in Latin America are for adaptation responses, such as paid protection of ecosystems, ocean and coastal initiatives, urban water and housing management, climate-smart agriculture, and reforestation.
Worldwide, some trends seek biotech replacements for high-emission foods, provide carbon calculation and accounting toolsencourage agroforestry and reforestation, provide electric transportation, and tokenize carbon credits and other environmental assets. Latin America could look at these global trends at the same time, as we have already seen in segments such as high-emission biotech feed replacements and reforestation.
In the medium and long term for climate technologies in Latin America, the report indicates that some opportunities are technology in agriculture, green real estate, access to water, renewable energy and green hydrogen, AI and ML with a focus on biodiversitynature-based solutions and reimagining of processes and systems through R&D.
The trends are different for each area of the startup ecosystem, but the common denominators are that all will use Artificial Intelligence and Machine Learning for their development in the coming years and all have benefited from growth in internet access and the use of mobile solutions in Latin America.
The Latitude report concludes that, despite the very notable growth, Technological startups in Latin America still have a lot to do and today they are facing the common challenge of hiring talent across all industries, in an environment of global competition, and the challenges of continuing to innovate, grow, undertake and improve its efficiency and productivity, for the benefit of technological and business development in the region.
“These companies are the commitment to sustainable innovation that will undoubtedly help achieve the fundamental objectives of inclusion, equality and economic benefit in Latin America” concludes Brian Requart.
Editorial Team The editorial team of EMPRENDEDOR.com, which for more than 27 years has worked to promote entrepreneurship.