Latin American tech and VC in 2019

As with many other amateur writers, my writing is first a personal exercise. It’s my way to process what I see, organize my thoughts and understand my world. It helps me have a prepared mind when investing and supporting portfolio companies. My predictions for the year are notes to self, as subjective and informed as for the next VC’s opinion. I submit these thoughts so you know me better and somewhat understand what I do. I post these predictions to start the conversation for the year in Latin American tech — plus it’s a fun exercise.

If last year felt confusing sometimes depressing, this year will feel worse. The world will face new challenges under terrible leadership. Absent a violent and unexpected shock, the US will fare well economically but will probably have a year of reckoning dealing with its daemons. Fred Wilson has a bold prediction on this. A global bear market coupled with unprecedented volatility will mostly spare the startup economy more vigorous after a rally of IPOs in the first half of the year.

Despite the resilience, global venture capital will appear more scarce due to more cautious investors and global volatility. Investors tend to focus on portfolio allocation and follow-on rounds when going through an economic downturn. One unexpected consequence of US travails may be American tech investors seeking additional diversification outside of the US either by pushing portfolio cos to expand internationally or by investing directly in high growth verticals in promising markets. They will realize Uber IPO premium price on Lyft comes not from US market leadership but from international exposure. Silicon Valley investors that ventured outside of the comfort of the bay area will begin to outperform peers. LPs will take note. I think the massive trend of venture capital globalization as seen below will get stronger this year.

Evolution of VC allocation — source: Endeavor

In this context colored by our own national complications, Latin American tech will cement all the progress made during the fantastic 2018. I think total VC investment for this year will miss last year’s mark while the number of deals will go up.

Let’s start with regional trends

  • The entrepreneurial ecosystem in Mexico will have a tough year. The new administration will halt all support to the high impact sector. Mexican VC industry will consolidate. The best will thrive and build on what we have learned as an industry since 2013.
  • I’m afraid Argentinian and Colombian ecosystem will miss a great opportunity. Large corporates and family offices will underinvest yet another year in their unique talent.
  • Chile will be a great surprise growing from acceleration sweetheart to regional tech hub. A generation of outstanding and opinionated entrepreneurs will lead cash-rich corporates and institutional investors to invest more in tech. The best local VCs will federate around this new mindset as technical talent supports solid industry growth.
  • I bet Brazil tech will take more risks this year expanding decisively to Mexico, Argentina, and Colombia. We might see some M&A activity as Brazilians learn from past failures.

Some random sector notes

  • I think the future of commerce will be the most active battlefield where American tech, Chinese challengers and regional corporates fight for supremacy.
  • Latin American banks will make their first big move in Fintech probably in Mexico, Brazil or Chile. I bet it’s a startup that starts with a C :)
  • After the big wallet wave in 2018 in Mexico, projects will be canceled, discarded or abandoned. Wallets as features will, for the most part, disappear or stay irrelevant.
  • Regional VCs will be more cautious in Fintech deploying capital in E-commerce, Edtech, and HealthTech. If you are building something in these sectors, 2019 may be the year your startup finally scales.
  • Mobility will consolidate further in the region behind Uber, Didi and maybe Cabify. Mobility-As-A-Service models will win the region. Expect some acquisitions and aqui-hires. I bet Uber buys Lime in part because of its successful expansion to Mexico.
  • I expect the first batch of successful products built on the chain that reaches Latin America will inspire the next generation of Latin American founders. As MIT argues, blockchains will start to become boring.

In a nutshell, if nothing terrible happens, 2019 will feel like a long year but one where Latin American tech has a chance to thrive. Bring it all!

I wish you all a happy year, full of learnings and love.