As we enter into the second half of 2019, there's never been a better time for tech investments in Latin America.
In November 2018, for example, Brazilian food delivery startup company iFood announced that it had raised $500 million in capital--the largest funding round for any Latin American startup. This came after another record-breaking year in 2017, when venture capital investments in Latin America surpassed $1 billion for the first time.
Latin America represents a great opportunity for tech investments and startups alike, as investors increasingly look beyond the U.S., Europe, and Asia. However, it's still not a "get rich quick" scheme, and you should always follow tips and best practices. This article will discuss some of the most important advice for startups raising capital in Latin America in 2019.
1. Expand internationally
Unlike monolithic markets such as the U.S., the Latin American market is composed of some 20-odd different countries, each with its own concerns and idiosyncrasies. Concentrating on just one of these markets or countries may not be enough to support the exponential growth that investors want to see from a startup.
For example, the online marketplace Mercado Libre began operations in Argentina in 1999, but has since expanded to 18 different countries in Latin America and the Caribbean. More recently, the grocery delivery app Cornershop, which was acquired by Walmart for $225 million in September 2018, operates in both Chile and Mexico.
2. Take it slow
While many investors are excited about the untapped potential of Latin American startups, the region still has few massive success stories that are on par with those in other regions. Insisting on an overly large valuation during an early fundraising round can be counterproductive for investors who are still dipping their feet in the water.
No matter your location, startups should be patient and open to the possibility of extending their timeline and having more investment rounds than originally anticipated. Taking the time to find the right investors can be invaluable later on down the line.
3. Get creative with funds
The traditional venture capital ecosystem in Latin America is still relatively small when compared with other regions such as the U.S., Europe, and Asia. What's more, using traditional venture capital may not be the best choice for all startups or funding rounds.
Fortunately, there's no need to constrain yourself to funds raised from venture capital. There are a variety of options for Latin American startups: crowdfunding websites such as Kickstarter and Indiegogo (as well as local alternatives), corporate partners, government grants, and startup accelerators.
4. Have an exit strategy
As with any other fledgling company, startup founders in Latin America should have a long-term strategy for their business growth and exit. For example, you should have a general idea of who you would like to acquire your startup--and for what price.
Building relationships with industry figures at other companies can make it much easier to sell the startup when the time comes. Depending on the relationship, these connections can also serve as mentors and investors.
Conclusion
Raising capital for Latin American startups can be a major investment opportunity. For the best chance at success, however, startup founders in Latin America need to plan out their long-term strategy and follow the tips above.
