BBVA Spark reinforces its role as a key ally of the LATAM entrepreneurial ecosystem at LAVCA Week

Investment is going through a complex period both globally and in Latin America: 2023 and 2024 have seen a significant drop in venture capital activity in the region compared to the 2021 investment record, stabilising at pre-pandemic levels. This is according to the latest ‘Mid-Year 2024 LAVCA Industry Data & Analysis‘ report from the Association for Private Capital Investment in Latin America (LAVCA).

However, funding for the entrepreneurial ecosystem in Latin America shows signs of recovery and consolidation: venture capital investment in the region has reached a steady level, with quarterly investments averaging around 1 billion dollars over the past two years, according to the same LAVCA report. Another report, LAVCA’s ‘2024 Latin American Startup Directory & Ecosystem Insights’, also shows that the number of venture-backed startups in the region continues to grow, to nearly 3,000 in the first half of 2024.

These and other ecosystem trends set the agenda for LAVCA Week 2024, held from 8 to 11 October in New York City.

LAVCA Week, a high-profile gathering

LAVCA Week annually brings together leading private equity investors from Latin America and around the world. This year, the meeting was attended by renowned speakers such as Maria Teresa Azevedo, Chief Investment Officer of SoftBank Latin America; Nicolás Szekasy, co-founder and Managing Partner of Kaszek and President of LAVCA; Irene Arias Hofman, CEO of IDB Lab; and Francisco Álvarez-Demalde, co-founder and Managing Partner of Riverwood Capital.

“Since 2009, LAVCA Week has been the cornerstone of our community. This is the main forum to connect, share ideas, find inspiration and shape the future of private investment in Latin America,” said LAVCA’s Szekasy at the opening. “We can be the bridge between the world’s capital reserves and the exciting opportunities in our region.”

Among the discussions generating the greatest interest were topics such as the future of private markets, the partnership of the entire American continent and the role of venture capital (VC) in Latin America in the global investment landscape. The meeting also hosted discussions on advancing cleantech technologies for the energy transition, the future of artificial intelligence and its application in the professional field and the keys for successful exits. Overall, LAVCA Week has provided key ecosystem players with a central space to exchange expert advice and strategic foresight.

Alternative financing models in Latin America

Rodrigo Velasco, Head of BBVA Spark in Mexico and Latin America, participated in the meeting, following his presence at FINNOSUMMIT 2024, which took place at the end of September in Mexico City. Velasco emphasizes that “LAVCA is a fantastic meeting point to get together with long-time partners and also to meet new faces with common goals.”

During the panel ‘Towards sustainable growth: structured financing for venture capital-backed companies’, the head of BBVA Spark in Mexico and Latin America debated with Elena Amato, Managing Director of Community Investment Management; Armineh Baghoomian, co-director of Global Fintech at Partners for Growth; and Andy Tsao, Managing Director and Head of Global Gateway at Silicon Valley Bank, about complementary models beyond venture capital for funding technology companies in Latin America.

The decline in financing from traditional players has spurred the attraction of private credit funds in the region, such as warehouse financing or venture debt. Velasco highlighted the importance of these alternative financing models, and also stressed the power of synergy between venture and private equity funds and how shared knowledge drives Latin American companies to grow and scale effectively.

Investment in the region: a promising future

The investment and market situation in Latin America looks promising. The ‘Latin America Digital Transformation Report‘, presented at LAVCA Week by Atlantico, shows that 24% of Latin American venture capital funds rank within the top 5% in the world and 52% are in the top quartile. Moreover, investment in the region is yielding positive returns: profitability in Latin America is the highest in the world, as is the market share of the leading companies. In addition, they achieve stronger market capitalisations than those in other regions.

Additionally, in the first half of 2024, VC funds raised 3.5 billion dollars in commitments across 36 Latin America-focused funds, according to LAVCA’s ‘Mid-Year 2024 Industry Data & Analysis’. This capital will help support growth and the path to profitability for startups in the region: according to LAVCA data, 40% of venture-backed startups last raised funding between 2021 and 2022, and given that the average runway is between 12 and 18 months, this means that a large number of them are likely to need to raise capital again soon.

This situation gives reason for optimism, emphasises Velasco, of BBVA Spark: “We are confident that the trajectory of venture capital investment is only going to continue to rise in our region in the medium term. There’s always room for improvement, and the world relies on entrepreneurs to keep driving our society forward.”