In preparing the 2023 annual report at FEMSA Ventures, I was tasked with discussing our expectations for the industry in 2024. While I have some reservations about making predictions, below is a summary of the insights in a succinct and informal format:
The Latin American (LatAm) venture capital market is poised to continue evolving, driven by both local dynamics and global trends. There is room for optimism, based on the trends observed at the end of 2023 and the beginning of 2024. LatAm remains an attractive market, characterized by a digitally savvy population and a resilient entrepreneurial and investment community. Outstanding entrepreneurs and ideas will always find funding, regardless of market conditions.
The third quarter of 2023 marked the first investment growth in LatAm VC in nearly two years, a trend that persisted into the fourth quarter, according to data from LAVCA. I am eager to see how this trend develops in the first half of 2024. We also recently witnessed companies such as Yalo, Simetrik, Bold, and Yuno announcing significant funding rounds.
Startup hubs in cities like Sao Paulo, Mexico City, and Bogota are maturing, establishing themselves as significant players on the global stage. Additionally, capital-efficient business models, particularly in the B2B and enterprise SaaS sectors, are experiencing exciting growth.
Impact investing is gaining momentum, especially in climate tech, which accounted for about two-thirds of the new impact funds launched in 2023, according to a recent report by Tameo & IDB Invest. Moreover, sectors like financial inclusion, sustainable agriculture, and healthcare accessibility are increasingly attracting impact investors.
While LatAm continues to bridge the gap with developed markets, technologies such as artificial intelligence, the internet of things, and blockchain continue to reshape industries in the region. Navigating regulatory frameworks and ensuring compliance remain crucial for entrepreneurs.
Nearshoring is expanding, with Mexico taking a leading role. According to a recent McKinsey survey, 42% of supply chain leaders took steps to nearshore production in 2023, up from 17% in 2022 and 11% in 2021.
Themes of growth, social responsibility, resilience, and, hopefully, collaboration will continue to drive the agenda in the dynamic LatAm VC ecosystem.