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Top 3 Startups Segments in Latam

Latin America is one of the most promising regions in the world, especially for the Venture Capital market. After more than two years of the pandemic, the startup ecosystem has undergone several transformations and the leap in digitalization has persisted beyond global trend lines in the region.


And even though 2021 brought an atypical boom in the number of deals and valuations, the region continues to prosper - 2022 was the second best year in history for Latin America.


We analyzed and separated the challenges, opportunities and trends of the three segments that have attracted the most attention from investors in recent years: Fintech, E-commerce and SaaS.


Fintechs


With more than 1,000 players in Latin America, the segment has been fundamental in driving the evolution of VC in the region. In 2021, fintechs raised a record US$12.9 billion.


Opportunities


The sector's growth in the region will continue to be driven by: Open Banking, migration to digital banking, Embedded Finance, digitization of payments, shift to high-yield investments, adoption of cryptocurrencies, innovation on top of existing financial infrastructure and M&A.


Challenges


Lagging regulatory environment, lack of consumer trust in financial partners, scarce talent pool, data security concerns, rising inflation and interest rates.


Top Trends


  • Digital Banking;


  • Digital Lending;


  • Payments & Remittances;


  • Investiments & Wealthtech;


  • Personal Finance & Education.


 


E-COMMERCE


The Latin American e-commerce market was the fastest growing in the world in 2020, with growth of 37%. The sector has constant innovations shaping its future, such as omnichannel strategies, artificial intelligence, customer loyalty programs, VoiceCommerce, customizations and the personal shopper feature.


Opportunities


The region presents great opportunities, as it is home to a large young consumer population and achieved a high level of penetration of the Internet comparable to developed markets.


Challenges


Local expertise to understand unique complexities, logistical challenges, high inflation and currency devaluation, financing and payment challenges, and difficulties of expanding into new countries.


Top Trends


  • Mobile First;

  • Digitization of payments;

  • Acceleration of cross-border e-commerce;

  • Growth of digital assets;

  • Social Commerce.


 

SAAS


Total investment in SaaS startups in Latin America reached more than US$2 billion in 2021, growth of 7x in one year (compared to 2020) and 100x since 2013.


Opportunities


The main opportunities for SaaS companies in Latin America are: investing in verticalization and regionalization, focusing on the SMB segment and building a robust local ecosystem.


Challenges


Competitive, global and mature competition; amount of capital required to scale; and the ongoing war for talent, accentuated by the pandemic.


Top Trends


  • SaaS market size growing at a CAGR of 24%;

  • 50% growth in spending and use of SaaS products per company;

  • SaaS waste doubling year on year;

  • Companies producing more than 30% of their apps annually;

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