Ventura capital (VC) is a type of capital investment targeting nascent businesses that have high potential to grow. Despite the considerably high risk for all parties involved,
. During the last decade, the number of completed deals soared by over 600 percent, proving that the region’s startup potential has not gone unnoticed by investors around the globe. In 2020, Mexico concentrated the second
closed within the region, only behind Brazil. Although the Mexican venture capital scene is relatively new, it has proved to be lucrative for investors. The country is already home to two
(startups valued at 1 billion U.S. dollars or more): Kavak, an online platform for trading used cars; and Bitso, an online app for cryptocurrency trade.
The Mexican startup ecosystem
The
startup ecosystem in Mexico has done nothing but grow during the last years. It is predominantly composed of software and data companies and financial technology (fintech) businesses. Collectively, these sectors account for over 50 percent of all new businesses in the North American nation. Fintech companies are also the ones that attracted the most VC funding in Mexico, highlighting the potential investors see in the market. As of February 2021, investors have injected over 880 million U.S. dollars into
Mexico's leading fintech startups. The
online banking platform Konfío, for instance, already received a series D investment of 100 million U.S. dollars, contributing to its nearly 461 million dollars of overall venture capital funding.
Future in the balance
The Mexican venture capital market is maturing.
Levels of investment have increased within the last five years by close to 560 percent (879291), while the
number of deals dropped by around 100 percent during the same period. This indicates that investors are diverting their attention to companies that show the most potential for long-term growth. However, the
coronavirus pandemic has already impacted the global startup ecosystem, and with it the venture capital market. It was estimated that between December 2019 and June 2020, startups in the blockchain and crypto sectors suffered a 14 percent fall in revenue. Meanwhile, travel and tourism companies saw a revenue reduction of around 70 percent. This has also taken a toll on Mexican startups, which will need to adapt to the new normality that comes with vaccination campaigns and the reduction of new cases.
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