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LatAm Tech Scene: 2023 in Review

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This article is part of the LatAm Tech Weekly Series, composed by Julia De Luca and powered by Nasdaq. Our network at Nasdaq supports Latin American businesses to enhance their brand and gain access to the global markets. Discover more about Latin American Listings here.

December is here and so is a whirlwind of activity in the tech world. Latitud has released its comprehensive LatAm Tech Report for 2023, Kamaroopin has concluded its annual event, Female Force gathered at Google, and Amazon stunned with its AWS Reinvent conference. This week, we also mourn the passing of notable figures Henry Kissinger and Charlie Munger, acknowledging the losses the world has experienced.

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Opinions expressed here are solely my own and does not represent those of people, institutions, organizations that I may or may not be associated with in any capacity, unless explicitly stated.

In 2023, founders have faced immense financial strain. As Latitud rightfully notes, entrepreneurs are concluding this year not only with heightened resilience but also a wealth of wisdom. I strongly urge you to delve into their complete report (a whopping 285 slides). For now, let’s highlight the key insights. The report delves into the current state of the startup landscape in LatAm and zooms in on the future of seven vital sectors: fintech, e-commerce, logistics, SaaS, proptech, edtech, and healthtech. Each section explores fundamental questions:

1. What’s the current scenario?

2. What trends are shaking things up, and how are startups capitalizing on them?

3. What opportunities are emerging?

4. What hurdles are these sectors facing?

Now, onto the basics. It comes as no shock to my regular readers that VC investment in Latin America saw a decline this year. However, the buzz is all about AI. While it’s a work in progress in LatAm, a staggering 63.22% of startups are integrating AI into their operations in some capacity. This integration is impacting their businesses from marginally to significantly. This sentiment is echoed by investors, who observe widespread AI adoption within their portfolios.

Vc investment in LatAm

Fintech, my personal favorite and arguably LatAm’s most developed startup sector, garnered about 40% of all regional venture capital in 2023. The pandemic propelled consumers and financial services online, but the sector still faces a long road ahead. Following the initial surge in banking fintechs and the groundwork laid by software fintechs, the focus has shifted to lending and payment solutions. These ventures are tackling critical issues such as limited credit access and high rates of payment rejections.

Despite a drop in the number of new VC-backed fintechs, substantial late-stage funding rounds are making a comeback. For example, Nomad secured a commendable $61M in August, and QI Tech clinched a substantial $200M in October.

Marrying my two passions, AI in fintech spans from enhancing customer service to building sophisticated credit scoring systems. Aligned with other sectors, fintechs are harnessing AI, particularly large language models (LLMs) and natural language processing (NLP) to develop chatbots. These aren’t your run-of-the-mill chatbots; they guide customers from discovery to post-sale support, including payment follow-ups, and personalized interactions.

Latin America’s Financial Future: The Good, the Bad, and the Opportunities Ahead

It’s a wild, wild world out there in the Latin American financial sector, with challenges and opportunities battling it out like cowboys at high noon. From the explosive growth of e-commerce to the rise of secondary fund closes, the stage is set for a showdown of epic proportions between the major players and the rising stars.

The E-Commerce Frontier

In the wild, wild west of e-commerce, big names like Mercado Libre and Amazon reign supreme, holding the power to make or break the market. While Latin Americans are flocking to online shopping in droves, with three-quarters of the population getting in on the action, the thundering hooves of growth are expected to slow down from 2023, as the dust settles on the rapid expansion of the past years. With brick-and-mortar stores making a comeback, traditional retail growth rates are taking a hit, painting a changing landscape for the financial gunslingers of the region.

The Mobile Commerce Stampede

As if riding a wild stallion through uncharted territory, mobile commerce has been leading the charge in the e-commerce growth of Latin America. It now holds the reins for the majority of the sector’s transaction value, with a projected ride to account for a whopping 63% of all e-commerce transactions in LatAm by 2026. It’s a rate that leaves desktop e-commerce choking on its dust clouds. Latin America’s mobile commerce share even outshines that of the US, UK, and some EU countries, with untapped potential still glimmering on the horizon, echoing the mighty growth seen in countries like India and China.

The Good, the Bad, and the Opportunities

The rodeo of e-commerce isn’t without its bucking broncos and raging bulls. From data management struggles to the elusive hunt for profitability, and even the tangle of regulatory and tax complexities, the challenges are as fierce as a wild boar in the heat of battle. Yet, through the dust and sweat, opportunities emerge. The stage is set for the growth of niche verticals in SaaS and the expansion strategies of SaaS startups, painting a diverse landscape for the savvy financial gunslingers to conquer.

The Showdown of Secondary Fund Closes

But wait, there’s more action on the horizon! Enter the duel of secondary fund closes, with investors eyeing up the battlefield with fevered excitement. As traditional exit paths grow dim, secondary transactions have become the lasso of liquidity for LPs and GPs, with a record-breaking $3.25 billion fund close from Pantheon signaling the eagerness of private wealth clients to join the fray. The rebound of venture investors in 2024 looms on the horizon, with profitability as the key to hitching a ride on the winning horse.

The Final Curtain Call

As the sun dips below the horizon, leaving behind a trail of excitement and uncertainty, the future of Latin America’s financial frontiers promises to be a show worth watching. Whether it’s the rise of AI-driven customer experiences, the surging tide of hybrid work, or the dramatic twists and turns of emerging tech, there’s no telling which gunslinger will come out on top. So, saddle up and keep an eye on these trends as the new year unfolds – it’s sure to be a thrilling ride through uncharted territory.

Monday

General news:

  • The Brazilian Central Bank’s digital currency, Drex, has successfully completed over 700 transactions in tests, with blockchain platform Hyperledger Besu processing over 1.283 million blocks. The entity also plans to update Drex and Pix to function offline, aiming to enhance financial inclusivity for areas without reliable internet access.
  • Itaú Unibanco’s Íon app introduced a ‘portfolio diagnosis’ feature, providing a rating system for clients’ investment portfolios. This tool helps clients align their portfolios with their investment profiles and expected risk returns and offers easy adjustment options within the app.
  • Locaweb reported strong Black Friday sales, contributing to a positive outlook for the holiday season. The company updated its 2023 estimates to reflect a 17% year-over-year growth in ecosystem.

Furious Financial Tidbits Unleashed Across Latin America and Beyond

The financial universe has been a rollercoaster of events and transactions, with innovations and setbacks taking center stage.

Raging GMV For Q4 2023

The Gross Merchandise Value (GMV) for Q4 2023 has surged, underlining the importance of ecosystem GMV over platform GMV. This shift in focus is reverberating across the financial sector and reshaping perspectives on value creation.

Quantum Quest with BV Bank and Senai-Cimatec

BV Bank and Senai-Cimatec are wielding the power of quantum computing simulations to crack complex financial sector problems, especially in the realms of credit, data, and information security. This collaboration is a leap into the future of financial technologies.

Brazil’s Black Friday Blues

Black Friday sales in Brazil suffered a massive blow, plunging to the second worst performance since its inception in 2010, with sales plummeting by 14.4% compared to the previous year. This dismal outcome has rattled the financial landscape and raised eyebrows.

OKX Cryptocurrency Platform Enters Brazil

The global cryptocurrency platform, OKX, has officially kicked off its operations in Brazil, offering a transaction app, digital wallet, and customized products and services tailored for the Brazilian market. This bold entrance is reshaping the Brazilian cryptocurrency scene.

Wild Deal Revelations

From Destaxa securing a whopping $6.09M in Early Stage VC funding to the fintech BomConsórcio raking in R$ 96.1 million from its third FIDC issuance, the deal-making frenzy knows no bounds. Cubo’s USD$3.5 million round and SHEIN’s confidential IPO paperwork are adding to the financial thrill.

Financial Fireworks on Tuesday

Tuesday unleashed a frenzy in the financial world with NXTP closing its third fund at $98 million and Clara launching the game-changing Clara Account. InDrive’s $100M fund with a focus on social impact startups is igniting new hope, propelling the financial domain to greater heights.

Flourishing Deals

While Livance scooped up a staggering $13.2 million in Later Stage VC funding, Meddi and DiiMO’s investments highlighted the burgeoning potential of healthcare and financial inclusion in Latin America. This bullish trend is painting a promising future for financial startups across the region.

Wednesday’s Financial Frontiers

Wednesday brought a seismic surge in Latin American fintechs’ interest in serving SMEs in 2024, indicating a shifting tide in the financial sector. The drastic 41% decrease in venture capital transactions in Mexico and Lenovo’s strategic AI investment are paving the way for a financial revolution.

Stunning Deal Storm

Meddi harnessing $1.7 million to boost healthcare in LatAm and DiiMO’s $1.2 million investment driving financial inclusion in Central America are just the tip of the deal-making iceberg, signaling a transformative phase in the financial ecosystem.

Thursday’s Warrior Tales

Thursday erupted with Kamaroopin’s 2023 Investor Day, unveiling a trove of revelations and strategies. Vórtx and Mercado Bitcoin’s collaboration and Brazilian FitBank’s staggering growth further enriched the day, showcasing the unyielding dynamism in the financial arena.

Momentum in Deals

BRQ Digital Solutions’ strategic investment and Zubale’s USD$25 million raise reverberated across the financial landscape, underscoring the ever-evolving and robust nature of financial ventures and collaborations.

Furious Friday Finale

The week wrapped up with unbeatable vigor, marking a tumultuous yet thrilling ride through the financial cosmos. Each headline and deal stands as a testament to the unyielding spirit and evolving nature of the financial realm.

Totvs Strengthens HR Portfolio with Acquisition of Ahgora

Deals

  • Brazilian tech giant, Totvs, has completed its fifth and largest acquisition of the year, solidifying its position in the HR sector with a R$380 million M&A deal for Ahgora, a company specializing in HR software.

  • In a separate deal, Uruguayan startup Brinta secured a USD$5 million seed round led by Kaszek, signaling its rapid expansion in the Latin American market with a focus on streamlining tax compliance.

Kamaroopin’s Investor Day Highlights

  1. Portfolio and Investment Duration: With over 30% investment in companies like dr.consulta, ZenKlub + Conexa, and Consorciei, KMP Growth Fund II anticipates a shorter investment cycle compared to other growth funds.

  2. International Expansion: KMP plans to diversify with investments in Latin America and is eyeing one or two new ventures in the region.

  3. Investment Strategy: The firm aims to increase investment criteria to filter opportunities and explore partnerships with co-investors.

  4. ESG Focus: Emphasizing ESG (Environmental, Social, and Governance) as a competitive strategy rather than just a differentiator.

  5. Fundamental Investment Pillars: Quality of partners and close management relationships, emphasizing longevity, growth, and governance as the main factors.

  6. Emerging Market Trends: Notable shift in investment focus from China to India, and now to Brazil, particularly in the Private Equity market.

  7. Specific Company Insights:

    • Petlove: Demonstrating impressive growth in the petcare sector, transitioning from retail to a comprehensive pet health ecosystem.

    • ZenKlub: Recording over 40% CAGR since 2020 and focusing on mental health and telemedicine.

    • ZenKlub + Conexa: Positioned as Latin America’s largest digital health platform, emphasizing comprehensive healthcare.

    • dr.consulta: Targeting mid/low-income demographics with a strong focus on technology and telemedicine.

    • Consorciei: Exploring opportunities in the consorcio market with innovative service models.

  8. Thematic Investment Theses:

    • Climate Change: Addressing it as a crucial problem and investment opportunity, particularly in energy and sustainable agriculture.

    • Embedded Finance: Leveraging software to distribute financial products.

    • Pet Sector: Capitalizing on the trend of humanizing pets.

    • Health Sector: Addressing the growing healthcare needs, focusing on efficiencies and integrated models.

Thought-Provoking Insights

Delving into Kamaroopin’s Investor Day reveals a dynamic and forward-thinking investment landscape, with strategic focuses aligning with the evolving market trends in Latin America.

Quotes of the Week

In honor of the innovative spirit of the market, Henry Kissinger once stated, “The task of the leader is to get people from where they are to where they have not been.” Provocative words by Charlie Munger also ring true, “I never allow myself to hold an opinion on anything that I don’t know the other side’s argument better than they do.”

Originally published on my Substack.

Venture into the opinions expressed herein and gain insight into the nuanced perspectives driving the markets, without being influenced by any single entity.

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