In mid-2024, Mike Packer, a partner at fintech-focused QED Investors, predicted that funding for Latin American fintech startups had reached its lowest point, and a recovery was on the horizon. Although the recovery hasn't been smooth, it seems he was right.
As of late 2024, the amount of venture capital invested in Latin American fintech companies has already surpassed 2023's total, with $2.6 billion invested across 174 deals, according to PitchBook. This compares to $1.5 billion in 2023 across 241 deals, reflecting a 73% increase in funding compared to the previous year. However, these figures still fall short of 2021’s $7.5 billion and 2022’s $4.3 billion investments, though they signal that the market is beginning to recover.
Packer, speaking at a conference in May, mentioned that he anticipated this rebound as companies that raised funds during the 2021 boom were now coming back for their next round of funding. Additionally, his firm was seeing fintech companies in its portfolio reaching important milestones and preparing for growth.
This renewed momentum can be seen in several successful fintech deals in Latin America. For example, São Paulo-based Conta Simples raised $41.5 million in January, Félix Pago secured $15.5 million in May, and Brazilian AI fintech Magie raised $4 million. These deals reflect a trend of growing interest in the region’s fintech sector.
Packer believes the resurgence is driven by two main factors: first, companies from the 2021 boom are returning to raise more funds; and second, fintech firms that are now reaching profitability or scale are ready for the next phase of growth. He notes that both deal volume and quality have improved.
Nicolas Szekasy, co-founder of Kaszek Ventures, agreed that there has been a noticeable improvement in the quality of startups, though he hasn't observed a dramatic change in the market. He highlighted the shift from consumer-focused fintech to infrastructure businesses and emphasized that the region still lags behind markets like the U.S. and Europe in terms of financial services innovation.
Despite these positive signs, challenges remain. The region has yet to see a significant number of exits, with Nubank’s 2021 IPO being the only notable one. Packer pointed out that Mexico, despite being a more developed fintech ecosystem, has not seen any major exits either. Additionally, most funding in Latin American fintech still comes from local investors, limiting opportunities for startups seeking capital. Both Packer and Szekasy agree that more global investors need to recognize the potential of the region.
Packer concluded by stating that Latin America remains underfunded, and for the region to thrive, it needs more investors to view it as a global opportunity, alongside entrepreneurs who believe they can drive significant change.
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