Connect33 Newsletter, Q2 2022
Hi Connect33 readers — we’re back with the second edition of our newsletter covering Latin America market trends, recent tech expansions, and Connect33 news. During Q2 we observed a wave of LatAm startup layoffs, a slowdown in late-stage startup venture capital investment, and an increase in M&A appetite across the region, most notably among international software firms looking to establish a presence in the region. ¡Vámonos!
Market Trends
M&A activity heats up: Latin America had 26 M&A transactions in April per Slinghub highlighted by Pegasystems (NASDAQ: PEGA) acquiring Everflow, a Brazilian software company.
Our take: There is an increasing appetite for international software firms to pursue M&A in the region due to the significant time investment needed to set up a large-scale operation. This strategy is also becoming more widespread among Latin American fintech companies such as Nubank which is looking to continue its M&A activity.
LatAm hiring spree continues: Deel’s State of Global Hiring Report highlights that Latin America continues to be an attractive destination for foreign technology companies to hunt for talent with Brazil, Argentina, and Mexico leading the way.
Our take: It is becoming increasingly difficult to hire and retain top talent in Latin America. Deel’s report showed a salary growth of 57% in Mexico and 21% in Argentina in 2021. With increased competition and salary increases — our team aims to educate our clients on how to build a strong culture and ensure they have the latest salary data to stay informed on labor market trends as they expand into LatAm.
LatAm Startup funding Shrinks Sharply in Q2: Latin American startups venture investment saw its lowest quarter since 2020. Venture investment in Latin American startups totaled just $2.3 billion in the second quarter of 2022, per Crunchbase data (see chart below).
Our take: The tighter Q2 funding cycle comes as no surprise after many consecutive quarters with a high influx of capital. That being said, many deals are continuing to close for earlier-stage companies and we are continuing to observe new US VC firms scouting companies. This downturn is the first big test for many of these founders, and as Nubank CEO David Velez said in recent days: “this will enable the survival of the fittest”.
Expansion Activity
April: Coinbase unsuccessfully explored a Latin American expansion with the acquisition of Brazilian 2TM.
May: Ukraine-based, Softserve, a digital authority and consulting company opened delivery centers in Guadalajara, Mexico, and Medellin, Colombia as part of its strategy to extend operations to Latin America.
May: Amazon Music launches in Argentina following its expansion into Colombia and Chile in Q4 of 2021.
June: Google announces plan to invest $1.2B in LatAm over the next 5 years across four areas; digital infrastructure, digital skills, entrepreneurship, and inclusive, sustainable communities.
June: Oracle opens its fourth LatAm cloud region and first in Mexico becoming the first major cloud provider to establish a dedicated cloud region in the country.
Connect33 News
Amy Feldman has joined our team as Head of Research. Amy brings tremendous experience having built Terminal.io’s global talent intelligence and expansion analytics model. She currently leads global expansion, location strategy, and workforce analytics planning at Twilio. Welcome, Amy!
Additional stories we’re following:
Headhunt for Latin American Talent Follows Wave of Startup Layoffs
Economist Intelligence webinar covering the global and domestic outlook
SoftBank announces early-stage spinout, Upload Ventures
Thanks for reading Connect33 Quarterly.