Latin American Startups Slash Staff as VC Funding Falls

A sharp decline in venture capital has reportedly battered Latin America’s startup sector.

Two-thirds of startups in that region have cut staff in the last 18 months as VC investments have dropped, Reuters reported Wednesday (Aug. 30).

VC funding in the second quarter plunged 65% year over year in Latin America, per the report, which cited data from venture capital fund Atlantico. But with initial public offerings (IPOs) bouncing back around the world, unicorns — private companies valued at more than $1 billion — could start going public again.

“We expect at least 10 new companies to list in public markets in 2024,” said Julio Vasconcellos, Atlantico managing partner, in the report.

FinTechs are growing rapidly in the region thanks to the rise of digital payment systems, according to the report. As PYMNTS has written, daily real-time payments volume in Peru will reach 1 billion in 2027, increasing at a compound annual growth rate (CAGR) of 57% over the next four years.

Mexico is also on the verge of real-time payments growth, despite having a high share of unbanked households, which has limited the spread of real-time payments among the populace.

Data from the “Real-Time Payments World Map,” a PYMNTS and The Clearing House collaboration, showed that Mexico is projected to double the daily volume of real-time transactions in four years, surpassing 5 billion by 2026.

Despite having three different real-time payments programs, Argentina is not expected to see its real-time payments volume hit 1 billion like in other Latin American countries. However, it is on track to grow nonetheless, jumping from 25 million in 2021 to more than 300 million by 2026.

The funding situation in Latin America is not unique to that part of the world. Last week saw reports that startups in Europe were reconsidering expansion as they faced a VC funding drought.

The amount of VC funds invested in Europe declined by 61% in the first half of 2023, a larger drop than what American startups have contended with.

It’s a situation that has left the European Union’s development bank and five EU countries working to close the funding deficit, promising 3.75 billion euros (about $4.1 billion) to shore up Europe’s tech sector.