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Valuation Inflation: The Softbank Effect in Latin America

This article is an excerpt from As SoftBank goes big in LatAm, VC funds cautious on valuation inflation, which originally appeared on S&P Global by David Feliba.

No venture capital investor wants to miss out on the next fintech unicorn in Latam. And that anxiety is driving prices up.

A new phase of capital building across Latin America’s financial technology sector is taking hold, but industry experts caution that valuations are rising rapidly as foreign giants deploy capital at large and raise the size of investment rounds.

Recent rounds led by foreign companies include Argentina’s payments startup Ualá, which tapped $150 million, as well as Brazilian digital bank Nubank, which raised as much as $400 million. Konfio, a Mexican digital lender, raised $100 million as well this month.

Historical Latam-focused VC funds, on the other hand, report average tickets of $4 to $5 million each.

Earlier in the year, Japan’s SoftBank made the largest-ever bet placed in the region’s nascent tech space, deploying some $1 billion in Rappi. Softbank´s investments are shaking up the LatAm VC environment.

With more foreign dollars flowing, experts at Miami’s Finnosumit Lendit Fintech said LatAm startups have a much better chance of securing funding across their investment timelines. But it also means prices are rising rapidly, generating fear of missing out on the next great opportunity.

Still the level of competition, and as result inflated valuations, continues to be “much less intense” in Latin America as compared to the U.S. or Asia, Marcelo Lima, a partner with Brazilian VC Monashees, said.

“You can get a good team and plug it into the right investment with capital, and you might find yourself alone in the vertical … whilst in the U.S. you could have six companies already working on that. That’s the beauty of Latin America,” he added.

Read the original article on S&P Global.

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