One of the industries that did not stop the pandemic in Mexico was venture capital or financing for ventures. On the contrary, the sector reached maximum investment amounts in 2020.
The largest venture capital investments identified in Mexico during 2020 exceeded 10 million dollars, five times more than the highest amounts recorded in 2019, which reached two million dollars, according to information from the Mexican Association of Private Capital ( AMEXCAP).
Investments in 2020, according to AMEXCAP, registered the highest figures observed throughout the history of entrepreneurial capital in Mexico.
“What we saw in 2020 is the fruit of everything that has been done in previous years. It was a good year for venture capital because it was already seeing a cycle of maturity that allows for this growth ”, says Liliana Reyes, general director of AMEXCAP.
Reyes points out that financing for entrepreneurs is an industry that is affected to a lesser degree by situations such as the one caused by the pandemic. “The industry is consolidated and strengthened when there are complex conditions, because there are problems to be solved and areas of opportunity,” he adds.
You just have to take a look at what has happened to companies such as the Mexican Kavak, which reached a valuation of more than 1,000 million dollars, thus acquiring the category of unicorn, in October 2020. after raising 485 million dollars in new funds, reported on April 7.
“Companies have reached maturity and that is why we are seeing those results and these important news. They are built with the time and efforts of many actors who participate. It is very good and we have to celebrate it, because that gives us the idea that Mexico can be the cradle of many more unicorns ”, affirms the director of AMEXCAP.
Fernando Lelo de Larrea, founding partner of the ALLVP venture capital fund, considers that 2020 has been “an extraordinary year” in venture capital for Mexico and Latin America. “Despite everything, the CV industry is at its best in history despite macroeconomic conditions and the pandemic,” he says.
In Latin America, investors closed 488 deals in 2020 with entrepreneurs, surpassing the mark set in 2018. While the amount raised, 4.1 billion dollars, was approximately 10% lower than 2019, according to the Latin American Private Equity and Venture Capital Association (LAVCA).
Factors that played in favor of the industry
Lelo de Larrea points out four important factors that have played in favor of the entrepreneurship and venture capital ecosystem.
1. Lower opportunity cost to start a business , due to the cuts and reduction in some cases of working hours, due to the crisis, have allowed entrepreneurs to start a company that they had postponed.
2. There has been an acceleration in the adoption of technology in Mexico during the pandemic and changes in people’s habits, for example, in the consumption of goods and services.
3. There is international money. There is liquidity in the capital markets and the funds realized that good stories are being built in Latin America. “They are eager to put money into it,” he says.
4. An inertia of entrepreneurship has been accumulating for several years. The ecosystem has been coordinating and growing. Thus, talent and investors who were in a startup that has already consolidated as a larger company are in others that are starting.
