SURGING venture capital (VC) investment in Latin American (Latam) startups has financed international expansion across the region and beyond, as business models that do not require large amounts of capital have helped many firms avoid silos common in the region.

New venture capital funding in the region quadrupled over two years to a record US$2 billion in 2018, according to the Association for Private Capital Investment in Latin America. And that total has already been matched in the first seven months of 2019.

Analysts say fundraising rounds this year could double 2018’s total, thanks to Japan’s SoftBank Group Corp., which launched its US$5 billion Latin America fund in March, the region’s biggest-ever venture capital deployment.

SoftBank’s investments this year have helped to mint a new wave of Latin “unicorns,” or tech startups valued at more than US$1 billion, with high expectations hinging on their potential beyond their headquarter countries.

André Maciel, managing partner at the SoftBank Latin America Fund, sees huge potential for such companies to tackle regional barriers to productivity.

A pair of U.S. initial public offerings last year valuing Brazilian fintechs StoneCo Ltd. and PagSeguro Digital Ltd. at close to US$20 billion combined dramatized how far the Latin American startup scene has come.

The added attention has brought a burst of funding from investors seeking synergies in their global portfolios, with China’s Tencent Holdings Ltd., for example, taking a stake in Brazilian financial startup Nubank.

Latin American startups flush with fresh capital are also eager to tap additional markets.

While Brazilian banks have struggled to post strong returns from acquisitions abroad, local fintechs are hoping their online platforms will cross borders more seamlessly.

Nubank has opened offices in Mexico and Argentina, while lending platform Creditas plans to expand into Mexico and opened a research and development center in Spain. Colombian delivery app Rappi has ramped up operations in Mexico and Argentina.

(SD-Agencies)