Now is the time to invest in LATAM — Why Newlin.vc is bullish in the region

Newlin Ventures
6 min readSep 7, 2022

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By: Pedro Cecilio

Source: Paulista Avenue from João Tzanno

While many investors remain skeptical, we at Newlin Ventures are confident in LATAM’s exponential growth over the next decade, which is why we are actively seeking exceptional Latinx founders to back.

Our team firmly believes that this is the right time to commit to Latin American companies for several reasons, today we will dissertate the top 6 reasons why we invest in the region.

1) The local market is huge:

Source: World Bank

Latin America has a large domestic market potential with more than 665 million habitants and a combined gross domestic product (GDP) of more than $ 5 trillion. This represents a large mass of potential consumers whose needs are not yet 100% tapped.

2) The region is still underserved:

Although the digital economy has enormous potential and has one of the highest internet and smartphone usage rates in the world, there are many issues to explore: is an immature market that lacks solutions that are already available in developed countries and where access to venture capital is scarce.

Source: World Bank

For comparison, when we evaluate LATAM-based early-stage startups that are fundraising a pre-seed round, for example, we realize that these companies generally already have signs of product market fit and some traction. On the other hand, in a pre-seed round in the US, it is common to find PowerPoint startups being negotiated at a much higher valuation than Latin American companies that are already validated.

Source: CB INSIGHTS

According to a study conducted by CB Insights, the United States received $52.9 billion in funding for 2,698 deals in the second quarter of 2022, while Latin America received only $2.3 billion for 224 deals during the same period. This means VC funds provided 23x more capital and supported 12x more deals in the U.S than in LATAM in the same period — it’s a sign that there are opportunities being overlooked.

Source: CB INSIGHTS

Finally, the same study analyzed the median value of deals in different regions of the world and found that the average value of financing rounds in the U.S. is $5 million, while in Latin America it is just $3 million — Which might prove two things about LATAM:

a. There is less capital available for growth rounds;

b. The average valuations are lower in the region.

We believe that investing in companies with an active customer base exponentially minimizes the risks of failing

Grant Newlin, GP of Newlin Ventures

3) There are potential gains in the exchange rate spread:

If we consider Brazil as a base, the leading economy in Latin America (with a GDP of $1.75 trillion and a population of more than 210 million), we find that the current exchange rate might be favorable for foreign investors. According to IRS, the average exchange rate of BRL /USD in 2021 was 5.395, while 5 years ago it was 3.632. Therefore, assuming that Latin American economies will mature and the exchange rate differential might narrow, it is possible to benefit from the exchange rate spread for one’s portfolio over time.

Check out the graph below, compiled by CEIC, the evolution of the exchange rates between the dollar and the real

USD/BRL in a 10-year ratio by CEIC

4) Tech talent is on the rise:

Source: Newlin Ventures

As the startup ecosystem in the region starts to mature in the last 10 years, young talent is moving from working in the financial market or multinational corporations to positions in startups or as founders. Also, there are a growing number of initiatives in the region to foster talent in technology and entrepreneurship.

The best example is Latitud, a program founded by Brian Requarth that is considered a Y-Combinator in Latin America, as well as other multiple initiatives, to invest in early-stage and educate tech talent.

5) Latin America is turning into a real cradle of global tech companies:

Source: CNBC — IPO of Nubank at NYSE

Instead of importing technology from more mature markets and copying it to Latin America, proprietary technology is growing in emerging markets and some startups are becoming global benchmarks.

To give a few examples: Nubank, a Brazilian neobank valued at $52 billion, has become a global benchmark for a digital bank; Gympass, a Brazilian HRtech valued at $2.2 billion, is taking to the next level the concept of enterprise benefits for many startups around the world; Cornershop, the Chilean grocery delivery app acquired by Uber for $1,4 billion in 2021 operates in 8 countries including the U.S and Canada; among others. The bottom line is there are new tech hubs consolidating away from the valley and LATAM is definitely one of them.

6) Second-time founders are flourishing:

According to the “Panorama Founders Report” launched by Distrito and Maya Capital Currently, about 30% of startup founders in Brazil are former entrepreneurs. This shapes a cohort that is much more resilient and skilled at building long-lasting companies.

Source: Nfx

Also, it is common to see mature founders scaling new companies in the region much faster; moreover, these same founders are becoming Super Angels, creating a virtuous cycle for the region — some examples are Sergio Furio of Creditas; Paulo Silveira of Alura; David Velez of Nubank; Gabriel Braga of Quinto Andar; Tiago Dalvi of Olist; Andres Bilbao of Rappi; and many others.

Finally, the number of serial entrepreneurs, who scale and perform exits at multiple companies in a snapshot, is growing sharply.

These are just a few of the many reasons we invest in and support the region. If you would like to learn more about our work, please do not hesitate to contact us — we love to talk about LATAM.

Lets Talk!

If you are a founder or investor and would like to meet, send us a note:

Global: Grant Newlin (grant@newlin.vc )

LATAM: Pedro Cecilio (pedro@newlin.vc)

About us

Newlin Ventures is an emerging VC firm based in Chicago and Austin.

We are on a mission to find exceptional latam-based founders and support them from the beginning. We aim to be the first institutional contact for these companies, so we invest primarily in early-stage deals.

We position our portfolio as a diversified asset class. We, therefore, invest in segments with low failure rates and companies offering products and services that complement the innate human desire for psychological and security needs.

We currently screen and speak with hundreds of funders in the following segments:

  1. Internet of Food (“IoF”) / Food Tech;
  2. IoT and Smart Hardware;
  3. InsurTech;
  4. Consumer

In addition, we have continued to diversify our portfolio in the Americas. We have a track record of investing in North America, but we are increasingly expanding our network and becoming relevant in Latin America. This allows us to diversify our portfolio in light of macroeconomic change. Currently, we have two LATAM-based companies in our portfolio:

Wareclouds (From Chile — offer decentralized fulfillment services for e-commerce)

Source: Wareclouds

VipLink (From Brazil — enables the connection between brands and creators for paid advertisement gigs).

Source: Viplink

Thanks for the reading — Newlin Ventures Team

DISCLAIMER — This is not financial advice, this article has been written by the Newlin Ventures team for informational purposes only, you should not construe any information or other material as investment, financial, or other advice.

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