Startups in Latin America are reportedly laying off staff members and are now expecting significantly more initial public offerings (IPOs) by 2024.
According to reports, around two-thirds or roughly 67% of Latin American firms have now laid off staff members during the past 18 months, as VC funding declined considerably in the area. This, according to the “Latin America Digital Transformation” released report by VC fund Atlantico.
As first reported by Reuters, VC funding during Q2 2023 dropped by as much as 65% in LatAm markets, when compared with figures from the past year, and plummeted around 50% internationlly during the reported timeframe.
As the overall volume of IPOs started to make a gradual recovery internationally, VCs and LatAm-based Unicorns (businesses valued at $1B or more) could potentially return to financial/capital markets.
And of the 37 unicorns established in the LatAm market, merely seven had actually gone public. Julio Vasconcellos, Atlantico managing partner, told Reuters that they now “expect at least 10 new companies to list in public markets in 2024.”
Latin American firms could be more attentive to business valuations in the recently unveiled public offerings of large firms like SoftBank Group Corp-supported chip maker Arm Holdings as well as Instacart.
It’s worth noting that Fintech firms are currently some of the fastest-growing businesses in LatAm, with virtual payments platforms like the Central Bank of Brazil’s PIX initiative assisting with improving banking account penetration rates in the area.
Around 87% of Chile residents and about 84% of Brazil-based consumers maintain banking accounts. Meanwhile, Argentina comes up next with about 72%, even though cash is still the most popular payment option in Mexican markets, with just 49% of local residents keeping banking accounts.
The introduction of a virtual payments solution in Mexican markets, and the entry of all-digital banking challengers, might potentially transform the financial sector, the report noted.