By Rafael Escalera Montoto
MEXICO CITY (Reuters) -Capital raised for startups in Latin America grew 26% in 2024 from 2023, more than in Europe, which was up 7%, and Southeast Asia, which shrank 34%, according to a study published on Tuesday.
Funding for Latin American startups is also expected to increase in 2025 thanks to a young population, accelerated digitalization and increasingly sophisticated capital, said the report from Mexican entrepreneurship network Endeavor and private equity firm Glisco Partners.
Still, the industry faces challenges from low participation of local investment funds in later-stage investments and global volatility, the study said.
“2024 was a year for redefinition. Startups that managed to adapt to changes in the market now have more solid and sustainable models,” said Alfredo Castellanos, managing partner at Glisco Partners.
The report noted domestic investors tended to invest early, while foreign ones did so after companies were more established and scalable.
Capital injections in mature companies, rather than brand new ones, are increasingly dominant. Such investments made up 65% of all capital raised in 2024, compared to 46% in 2023.
“There are fewer rounds, but more capital,” the report said.
Through 2025, the report identified three main trends, including the use of venture debt and mixed rounds, which combine risk capital and debt, as alternative ways of investing.
Additionally, annual growth in secondary markets – where investors can buy and sell shares from each other rather than directly from the company – was projected to rise 60%, as a way for early-stage investors to secure liquidity.
Finally, it found employee stock ownership plans were an increasingly relevant way of attracting and retaining talent, though less than 20% of Latin American startups offered them to employees due to uncertainty surrounding the financial implications.
Financial technology firms remained the sector with the highest volume of investment in Mexico, with property technology startups and software companies growing at the fastest rates, according to the report.
Mexico and Argentina were two of the big winners in the recovery of venture capital in Latin America in 2024, the study found.
Mexico boasted large financing rounds with startups Clip and Justo, which have maintained a “solid flow of investments,” according to the study.
Uala, an Argentine financial services company, raised $330 million, which amounts to 73% of all capital raised in Argentina, the report said.
“The region is advancing toward a more solid ecosystem, but must strengthen its local financing in later stages,” it added.
(Reporting by Rafael Escalera Montoto; Editing by Jamie Freed)
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