Several venture capital firms in Latin America are reportedly planning to increase their investments in startups offering loans and artificial intelligence products. According to a report from Bloomberg, these efforts are driven by the region’s potential for financial-technology growth.
This focus on Fintech lending and AI comes as lower US interest rates may pave the way for more initial public offerings (IPOs) in the region, which has experienced a dry spell in recent years.
According to Tomas Roggio, co-founder and general partner at US-based Latitud Ventures, the region’s underdeveloped credit landscape presents a significant opportunity for fintech lending startups.
Roggio said in the interview they are bullish on credit because Latam is very underdeveloped.
Latitud Ventures specializes in providing pre-seed funding to startups, and is said to have approximately $30 million in assets under management.
The venture capital push into Latin America reflects the region’s growing fintech ecosystem, which has become a fast-growing ecosystem, including Fintechs like Nubank and MercadoLibre.
These companies have seen lending surge by 50% or more year-over-year in the third quarter of 2024.
The broader fintech ecosystem has more than quadrupled in number of firms to 3,069 by 2023, according to the Inter-American Development Bank.
Venture capital firms like Latitud are seizing the opportunity, with about a third of the almost 100 companies it backs being startups that directly or indirectly provide credit.
Roggio expects credit-related startups to represent at least 40% of the approximately 20 companies Latitud plans to invest in this year.
Additionally, Latitud’s executives see strong potential in startups developing AI agents, which can boost business productivity and reduce staffing.
Felipe Fujiwara, a general partner at Bicycle Capital, which raised $440 million in 2023, expects startups offering financial services to account for a significant share of the 10 to 15 companies the fund plans to invest in through 2028.
Fujiwara cited the high margins of financial products in Latin America as a key driver of this investment strategy.
Latin American startups have faced a challenging fundraising environment over the past two years, due to high US interest rates and increased investor scrutiny of their business models.
Venture capital investments in startups were almost flat year-over-year at about $4.2 billion in 2024, according to preliminary data compiled by Lavca.
Kaszek, a Latin American-based venture capital firm, are optimistic about the prospects for IPOs in the region.
Kaszek senior partner Nicolas Berman said they are very bullish on IPOs and they focus on company anticipated to go public.
Berman cited potential Federal Reserve interest rate cuts and a relatively more business-friendly administration as factors that could pave the way for startups to go public in 2025.
