Momentum Returns in Latam, India and other Emerging Innovation Hubs Despite the Pandemic
2021 has been hot, red hot for growth stage companies in Latam, India, and other new innovation hubs outside of the US and China. Just this week, Brazil’s Loft raised $425MM at a $2.25B valuation from a who’s who of international investors. In January, Nubank closed on $400MM in funding at a $25B valuation, making it the most valuable venture backed, private fin tech company in the region.
Similarly, in India Dream 11 raised $400MM at a $5B valuation announced this week and last month online food company Zomato raised $250MM at $5.4B valuation. At the same time Brazil has become the epicenter of the pandemic globally while India, which has fared better than expected is seeing a surge in Covid -19 cases. So how do these divergent trends tie together?
The answer is largely the same as what has happened in the US and other developed markets. Sheltering in place and restrictions have accelerated the move to digital, and tech and innovation are providing solutions for remote work and managing day to day life. Given that the movement to digital is earlier in the curve than in developed markets, the acceleration is even more pronounced.
From my vantage point having worked in the innovation ecosystems of Latam and India for a decade plus, we have experienced tremendous growth. Venture capital investment in Latam in 2019 was $4.6B and is nearly 32x of where it was in 2011 according LAVCA. 2020 began the way 2019 ended, however when the pandemic kicked in, funding came to a screeching halt. According to the IVCA and Venture Intelligence, VC in H2 2020 fell more than 28% from the prior year. Compare that to the US where VC investment rose 4.7% in the same period.
It stands to reason that newer, less experienced innovation hubs had a greater degree of uncertainty than more mature markets that have gone through several corrections. As VCs and entrepreneurs made adjustments and found their footing, green shoots began to emerge in Q3 and by Q4 momentum came roaring back. Take a look at the India numbers again that show H2 numbers increased 15.6% over H1, though for a full year VC fell 21% (demonstrating some recovery from H1).
The LAVCA ’20 VC data will be released in a few weeks so we will understand the details soon, but I suspect this V shaped recovery will be even more pronounced in Latam. LAVCA has already indicated that deal count in 2020 was in excess of 2019, a record year for the region. The momentum that has been present in US VC, which hit an all time high of $156B invested in 2020, has an echo in new innovation hubs around the world following a more pronounced slowdown in the first half of the year.
Global investors never really stopped investing in India or Latam, but as the year went on, we saw many established US and international investors make their first investments in the region. Should the year continue at this pace, I predict we will have record high VC investment for both India and Latam. I have long said that innovation is globalizing and increasing outside of traditional hubs like Silicon Valley and Beijing, and I predict 2021 should see that trend continue.
All this in the face of a raging pandemic, and that I would never have predicted.
PS: I will add an update here post LAVCA data release in April and see how my prediction plays out.
Authors Note: These views are my own and do not represent those of my employer.
