By Roberto Peñacastro
Latin America’s venture capital scene has evolved fast. While funding has come down from the record highs of 2021, investment remains strong, hitting $4.2 billion in 2024 — up 27% from the previous year.
For founders, this means opportunities are ripe for the taking. However, they’ll need smart strategies to secure funding and scale effectively.
Here’s what’s shaping LatAm’s VC market, the hurdles founders face, and how to win in this space.
What’s shaping LatAm’s VC market?
Digitization has accelerated massively worldwide in the five years since the pandemic. In Latin America, fintech, in particular, saw distinct growth.
The region’s large unbanked population and cash-dependent economies allowed for massive opportunities for fintech solutions when physical banking became difficult. The number of fintech startups doubled between 2018 and 2021 and attracted a record VC investment of over $6 billion in 2021.
When AI gained significant traction in 2023, funding to the space skyrocketed. In 2024, AI accounted for 34% of total investment rounds in LatAm, becoming the leading sector.
Other factors have also progressed Latin America’s VC market, including the gradual decoupling between the U.S. and China. With similar time zones, shorter supply chains and reduced logistical complexity, Latin America offers the “nearshoring” advantage U.S. investors are looking for. This supports why the U.S. has remained the region’s largest investor, contributing 33% of LatAm’s total investment in 2023.
Spain also shows a dedicated interest, funding 11% of the total investment and promoting initiatives like ICEX-Invest in Spain and IDB Lab. The objective is to strengthen the connection between entrepreneurial ecosystems in Latin America and the Caribbean with Spain as a gateway.
Key barriers to VC funding for LatAm startups
Latin America is a collection of distinct countries with significant regulatory, operational and cultural differences, making scaling and attracting investment harder.
Unlike the U.S., where a company can incorporate in one state and operate nationwide, a startup in LatAm looking to expand faces multiple incorporation processes to operate in other Latin American countries.
For example, in Brazil, the instant payment system Pix represented 29% of transfers in the country in 2022, making it an essential tool for national and foreign startups. However, users needed Brazilian bank accounts and to be registered as legal entities to benefit from the low transaction fees.
Country-specific employment laws and varying tax reporting requirements further complicate expansion. In Mexico, the use of the Comprobante Fiscal Digital por Internet, or CFDI, system for tax compliance is mandatory. For foreign businesses, CFDI compliance can be a costly technical barrier, but partnering with local entities can help.
How to secure strategic partnerships
A problem shared is a problem halved — which is where startup accelerators come in.
One of the top accelerators in the region, 500 Startups LatAm, offers founders $300,000 for a 10% stake in the startup. Meanwhile, Platanus Ventures offers $200,000 for 5.5%. A favorable ratio ensures startups get enough capital to grow while maintaining a solid equity structure, keeping future funding rounds attractive.
Startups looking for U.S. investment should create a Delaware C-Corporation or similar entity. This allows them to access the world’s largest venture capital ecosystem, receive investments in USD, avoid currency volatility issues, and create a more straightforward exit path through U.S. acquisitions or IPOs.
VC funding is a relationship game, so attending network events, such as the Annual VC Latam Summit 2025 and Mexico Tech Week, are also useful access points to encounter accelerators and investors of all sizes and make meaningful connections. Strategic networking also provides crucial insights into investor priorities and expectations, helping startups create pitch materials they know will resonate with funding decision-makers.
A common mistake entrepreneurs must avoid is applying for funding too soon. A business must prove its thesis first and build a viable product/service through bootstrapping. Ultimately, this is the evidence and data that will help attract investors.
The story of venture capital in Latin America is no longer one of potential — it’s one of realized momentum. As global investors continue to direct capital to this region, and local ecosystems develop more funding and support opportunities, the next generation of Latin American unicorns is likely already taking shape.
Roberto Peñacastro, co-founder and CEO of Leadsales, leads an innovative startup focused on providing a specialized CRM for WhatsApp and social media, with a direct impact on tripling sales. Originally from Querétaro, Peñacastro is a passionate and visionary entrepreneur with an outstanding career in the industry. His innate ability to lead teams and find effective solutions to business challenges distinguishes him as a prominent figure in the entrepreneurial world.
Illustration: Dom Guzman
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