Integra Five LATAM Dispatch

July 1st, 2022

Which Latin American Cities are the Strongest Seedbeds for Startups?

In 2021 venture capital investment in startups in Latin American for around $15.7 billion. This record figure surpassed the amount invested in the previous decade, however this year startups are facing more adverse conditions. There is greater difficulty in accessing capital amidst higher interest rates and global economic uncertainty due to the post pandemic economic recovery, supply chain shortages, climate change and war in Ukraine.

Latin America has been swept by layoffs, but Habi a Colombian proptech has become the the country’s second unicorn after Rappi. The Ecuadorian fintech Kushki has become the country’s first billion-dollar-valuation status. Brazil has been listed as number 28 by the Global Startup Ecosystem Report 2022. About São Paulo, the report states “its size and density offer founders a large market and the opportunity to connect with other innovators”, adding that the value of the city’s startup sphere is equivalent to $108 billion.

The second most robust startup city in Latin America is Mexico City, with a startup seedbed valued $22 billion where average seed rounds are $500,000 and Series A rounds average around $9.5 million.

Source: Bloomberg en Línea

The New Energy Order

Foreign Affairs published an article on how governments will transform energy markets in the wake of Russia’s invasion of Ukraine and climate change. Written by Jason Bordoff (Columbia University) and Meghan O’Sullivan (Harvard Kennedy School) the authors go into great depth on factors that have led to this moment, and the difference between our current energy crises and those from before.

Europe has shown its vulnerability to the disruption of Russian energy imports, with the war being defined as Europe’s 9/11. They suggest that a more expansive role for government is likely to become a defining feature of the new global energy order. If government intrusion into energy markets had a profound economic, political, and geopolitical ramification in the 1970s, such activity will be transformational today, but positively if achieved correctly.

The dual imperatives of energy security and climate action whilst not allowing one to compromise the other will require harnessing the power of markets and an expansive governmental role in leveraging, shaping and steering those markets. They suggest that without government intervention, tailored and restrained but nonetheless increased, the world will suffer a breakdown in energy security or the worst effects of climate change—or both.

JPMorgan Says Crypto’s Deleveraging Cycle Won’t Last Much Longer

JPMorgan analysts believe that the current phase of deleveraging in cryptocurrencies is at an advanced state and may not last much longer. Multiple crypto company failures ought not to come as a surprise given the massive price declines amongst tokens and entities that used higher leverage in the past are most vulnerable. Three Arrows Capital hedge fund said that the liquidity crunch “is a manifestation of this deleveraging process.”

The crypto space has endured a number of high-profile blowups and hiccups. According to CoinGecko, total market cap was down to around $930 billion on Thursday, after surpassing $3 trillion in November.

Crypto exchange FTX has been granting lines of credit to select firm and is apparently also looking at acquisitions. Fund raising efforts from venture capital have continued as is evident from data firm Kaiko’s $53 million haul this week.  JPMorgan suggests that a good portion of the troubles are now behind crypto. Indicators like the firm’s net leverage metric “suggest that deleveraging is already well advanced,” the strategists said.

Source: Statista, Bloomberg

How Gustavo Petro, a former guerrilla, might govern Colombia

June 19th saw the election of Gustavo Petro, Colombia’s new left-wing president. On the day he said “We are writing a new history for Colombia, Latin America and the world,”. Once he takes office in August, he will be the country’s first left-wing president. A radical departure from a century of right-wing and centrist rule. Francia Marquez, Petro’s running mate is an environmental activist and will become the first black vice president.

Petro won by 50.4% to 47.3% in a run-off against Rodolfo Hernández, a property tycoon. He got 11.3m votes on a turnout of 58%, the highest in 50 years. Petro’s win was a victory for press the flesh campaigning over social-media savvy. He secured almost 3m extra votes through grassroots work among young and poor people.

On the other hand, Hernández focused on finger-jabbing rants on TikTok. His standing among conservatives took a hit when a video emerged of him dancing on a yacht with a dozen young bikini-clad women. These actions led Petro to come across more statesman-like. However, there is still distrust as polls have shown that Petro is less popular amongst older voters due to his former membership of the m-19 guerrilla group which was demobilised in 1990.

Which Startup Sectors Are The Bulls And Bears In 2022’s Sluggish VC Market?

Crunchbase reports this year’s funding into startups with a closer look at the most bullish and bearish startup industries midway through 2022. Cybersecurity is bullish as threats continue, compared to last year where the industry flourished, raising a record amount of venture capital and unicorns were cemented on a fast basis. This year cybersecurity has birthed more than a dozen new unicorns and investors don’t expect that to change.

Crypto is facing headwinds pushing it into bear territory. Both Bitcoin and Ether, the two largest cryptocurrencies remain significantly below their all-time highs. Some who follow the sector think Bitcoin could head down toward $25,000 or lower.

Biotech is also slowing down, despite not being particularly hard hit by VC funding. Global funding to biotech startups reached about $24 billion in the first five months of the year. This figure is below the record setting 2021 annual total of around $72 billion.

Source: Crunchbase

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