Kaszek Ventures, the largest venture capital firm based in Latin America, is sitting on $1 billion it raised early this year as it waits for new deals to materialize and for more mature companies to run low on cash and potentially accept new valuations.
(Bloomberg) — Kaszek Ventures, the largest venture capital firm based in Latin America, is sitting on $1 billion it raised early this year as it waits for new deals to materialize and for more mature companies to run low on cash and potentially accept new valuations.
After the record year in 2021 for funding of Latin American technology companies, founders were still trying to accept the tougher realities in 2022 but have now come around to the need to balance growth and profitability, Kaszek co-founder Hernan Kazah said in an interview.
That’s already increased Kaszek’s deal flow this year. After just two investments in 2022, the Sao Paulo-based firm has invested in seven companies through September and 2024 is poised to be better, he said. This week, the firm announced a $13 million investment in Colombia-based financial technology startup Cobre.
“Companies are still struggling trying to find the right model, the right unit economics, and the right balance between burn and growth,” Kazah said. “Some of those will get capital, maybe at a totally different valuation than what they raised last time, and some might not make it.”
Funding for tech startups has dried up globally after record-low interest rates and abundant liquidity gave way to central bank tightening to head off galloping inflation. But in Latin America the squeeze has been even more acute. Investments fell to $1.7 billion in the first half of 2023, down 75% from 2021 highs in the same period, according to data from Lavca, a nonprofit association for private capital investment in Latin America.
Kaszek, founded by former MercadoLibre Inc. executives Kazah and Nicolas Szekasy, defied the downturn early this year when it raised $540 million for early-stage investments and $435 million for late-stage growth companies.
In total, the company has raised nine funds for a total of $3 billion. It has backed more than 120 companies, including Nubank, a Brazil-based fintech company that went public in late 2021.
Roughly one third is left in a fund it raised in 2021, Kazah said, which should be fully deployed by the end of this year, or early 2024.
Kazah, an Argentine native, attended Stanford University alongside Marcos Galperin in the late 1990s before they co-founded MercadoLibre. He held the roles of chief operating officer and chief financial officer of the e-commerce firm before leaving in 2011 to found Kaszek. MercadoLibre today is worth $61 billion and is one of the largest companies in Latin America.
‘Things Are Better’
In the absence of equity funding, many Latin American startups are increasingly turning to high-interest loans. Kazah said his firm does not offer venture debt, but welcomes it as a complementary source of capital.
Read more: Latin America Startups Turn to Venture Debt as Equity Dries Up
Speaking at a tech event in Sao Paulo late last month, Kazah said that he’s particularly interested in climate technology startups and how artificial intelligence is being used by businesses.
Deal flow should accelerate in 2024 and Kaszek is currently looking at six to seven deals with a high chance of closing, he said, without elaborating.
“Founders have adjusted their expectations, and will get financing at whatever conditions they find in the market today,” Kazah said. “There is still a significant gap from 2021, but things are better.”
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