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Latin America’s startup ecosystem is not immune to COVID-19

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Over the last number of years, Latin America has emerged as a significant growth market for big tech, including Uber, Airbnb, Amazon, Facebook, Coursera and others.

It has also become a growing and vibrant homegrown startup ecosystem. The region has sprouted 19-plus unicorns, several exits and even a billion-dollar, single-round financing. The coronavirus pandemic, however, is having an outsized impact on Latin America’s startup activity compared to other regions, judging by Q1 2020 activity numbers — and this is just the beginning.

When including the U.S., Western Europe (WEU), U.K., China and Latin America, the global startup innovation landscape experienced a 27% drop in Q1 2020 in terms of the number of deals completed compared to the previous quarter. Giving some comfort to venture capitalists and startup founders alike is that the amount of invested capital remained essentially constant. The average deal size increased across these regions — up a matching 27%. So, from a global perspective, the venture capital community did fewer but larger deals, on average, during the quarter where COVID-19 started wreaking major havoc in the economy.

Looking at each of these innovation hubs individually, we see different levels of impact from, presumably, COVID-19 between Q4 2019 and Q1 2020. Deal count for the U.S., WEU and U.K. each went down approximately 20% each. Fairly modest, all things considered. China’s deal count, however, suffered almost a 50% drop while Latin America’s deal count went down almost 60%.

We also see a stark difference between these regions from an invested capital perspective. The U.S., WEU and U.K. each invested approximately 28% more capital in Q1 2020 as compared to Q4 2019, while China’s and Latin America’s invested capital both went significantly down. China deployed a bit over one-third less capital and Latin America deployed a very significant two-thirds less.

Source: https://techcrunch.com/2020/04/29/latin-americas-startup-ecosystem-is-not-immune-to-covid-19/

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