The number of investments has decreased since the beginning of 2020 and has worsened since the second quarter. Both geopolitical risks and the pandemic have played a role.
Is it possible to receive millions of dollars in investment in the midst of the Covid-19 pandemic? Liftit has done so. The Colombian startup, which automates and makes last-mile logistical deliveries, received investments of $22.5 million USD. The cycle ended on July 30.
“The services we offer adapted very well to the new normal, and that generated the confidence necessary for investment. I don’t think other companies will have the same luck,” says Miguel Jiménez, country manager for Liftit Mexico.
Liftit is one of the ventures that has managed to raise capital during the health crisis. In the second quarter of 2020, 2,354 venture capital investments, valued at $35.6 billion USD, were made in America, according to data from KPMG consultancy.
Venture Pulse Q2 2020, KPMG’s quarterly report on global venture capital trends, indicates that the region ranked as the global leader in investments. It was followed by Asia (with $16.9 billion USD raised through 1,011 deals) and Europe (with $10.1 billion USD through 1,062 deals).
The most important transactions in the region were backed by US funds. The automotive, fintech, agriculture, pharmaceuticals, biotechnology, and software application sectors were those which received most investment during this period.
According to the consulting firm, venture capital investments in the region remained stable in the second quarter of the year. But what happened in Mexico, specifically?
The data reveal that the pandemic did affect venture capital investments in the country, although several specialists are positive about the future.
“The emerging nature of the venture capital ecosystem in Mexico has caused big differences in each quarter. This variability has been evident in recent years,” explains Gerardo Rojas, lead partner at KPMG’s Deal Advisory in Mexico. “Since the first quarter of 2020, there has been a decline as a result of geopolitical risks; this was exacerbated in the second quarter, which was marked by the global pandemic.”
According to KPMG’s analysis, the number of venture capital investments in the country was less than 10. Their value was of approximately $25 billion USD.
In the same period last year, the amount was around $50 billion USD, and the number of deals was more than 20. But we are still missing the rest of the year, say specialists consulted by Tec Review.
“The venture capital investor knows how to react to uncertainty very well. Of course, at first it was not very clear where this (the pandemic) was going to go. But we exist within changing market conditions. We feel comfortable with long-term commitment,” explains Fernando Lelo de Larrea, partner at ALLVP, a financing fund.
In the first half of 2020, ALLVP made investments in five businesses. Lelo de Larrea says that they made three investments in the same period last year.
The experts agree that the advantage of investment funds is that a temporary event (such as the pandemic) does not affect investments that have already been made. Liliana Reyes, Director General of the Mexican Association of Private Capital (Amexcap), explains that the reliability and support investment funds provide are able to help developing companies to continue their operations.
“Fund managers, who are our partners, provide the stability necessary to help companies get out of a difficult situation. They take advantage of opportunities, which always exist within a crisis, and help businesses to adopt specific technological strategies. There were very interesting synergies within the portfolio and between the companies that comprise it,” says Reyes.
Across the country, 88 funds are willing to finance startups with seed capital (up to $1 million pesos) and, for series A, B and C, the amount is unlimited.
“The entrepreneurship, innovation, and investment ecosystem is just as active as before, but is now focusing on capitalizing everything related to business and, particularly, online businesses,” says Rogelio de los Santos, Chairman of the Board for the Eugenio Garza Lagüera Institute of Entrepreneurship.
Although the pandemic turned companies and entrepreneurs upside down, when considering digital services, there are ways to continue operating. “Entrepreneurs made an extraordinary effort to continue developing their capacities, but also to continue innovating. That is a characteristic of the entrepreneurial profiles and leadership that exist in Mexico,” highlights De los Santos.
Technology is fundamental when it comes to starting a business and looking for investors. At the Latin American Venture Capital Association (LAVCA), this characteristic has not gone unnoticed.
“Technology entrepreneurs have always distinguished themselves as being extremely resilient people. They can modify their business models and see new opportunities in the midst of a storm. I think we are well-positioned in that sense. Furthermore, companies know how to respond responsibly and proactively, so that they will come out of this well-capitalized, and with high levels of performance,” emphasizes Carlos Ramos de la Vega, manager of Venture Capital at LAVCA.