“Doing more with less money”: Fintech investment slides backwards
The cooling of Latin America’s investment climate is palpable. This time last year, the fintech industry’s mindset was grow at all costs but over the course of 12 months it has changed drastically, with financial startups adjusting costs and internalizing the view that raising fresh capital will be more difficult in the coming months.
The drop in the valuation of unicorns making their debut in international markets during the last year is having a negative effect on the rest of the market; and the war in Ukraine has complicated an already challenging
“Investors are feeling uncomfortable and they prefer to wait for a better scenario for investing,” Jorge González, managing partner of the firm G2 Momentum Capital in Mexico, tells iupana.
That discomfort hasn’t yet been fully reflected in the amounts of capital being raised by fintechs: the flow of capital is expected to stagnate in the coming months, in the best-case scenario.The Latin American Association of Venture Capital & Private Equity (LAVCA) said investment reached US$5.5 billion in the first quarter of this year, 88% more than
in the same period of 2021. Venture capital accounted for 50% of investment in the region.
However, the figure is well below levels reached in the preceding two quarters: US$9.3 billion in the third quarter of 2021 and US$9.2 billion in the fourth quarter.
“Companies that raised capital three or four months ago will have a period of growth in the near future. However, those who are looking for funding will have to settle for smaller rounds. In addition, they’ll need to reduce their expansion plans or the creation of new products,” adds González. His comments are in line with those of other market sources consulted by iupana.
“Obviously, companies are going to have to modify their
strategy—they’ll have to do more with less money. Regarding future investments, investment funds are going to be more cautious and demanding,” he said.
To delve deeper into this topic, we’ve put together a panel of top investors to discuss the investment climate going forward. Don’t miss it.
Buenbit makes deep cuts in face of capital drought
Against the backdrop of tighter access to capital, the news of layoffs at Buenbit in Argentina
and Klarna in the United States may be the start of a wave of industry cutbacks.
Buenbit, a cryptocurrency exchange, fired one hundred employees—equivalent to half its workforce—citing the worsening global economy. It also acknowledged that it won’t be easy to raise fresh financing.
“Phenomena outside the crypto economy are affecting us like any other company,” the firm told iupana via email “Startups like Buenbit, which had plans to raise more capital to continue growing, are facing a changing macro situation and frightened investors.”
The fintech sector is braced for more staff reductions and a freeze on hiring processes.
Buenbit added: “We’re forced to be self-sustaining and therefore we have two options: continue as we are, begging some investor to give us capital to continue sustaining the structure or risk of having to lay off 100% of the team; or do what’s necessary to sustain the company without external capital, even if this means reducing almost 50% of the team. We’ve chosen the second option.”