This year marks BuenTrip’s 10th anniversary. When we started, we weren’t looking to become investors. As Ecuadorian entrepreneurs with experience building companies in the US and Europe, we knew there was enough talent in Ecuador and Latin America to build successful startups. However, no one was investing in early-stage companies. Rather than simply raising a fund, we recognized that we first needed to build a community.
Through this approach, we became a leading ecosystem-building venture capital firm investing in Latin America and beyond. Our core commitment to supporting founders through a combination of community, know-how, and access to capital has never changed. As we celebrate this milestone, we take the opportunity to reflect on the lessons we’ve learned and share our vision for the future of investing in Latin America.
At BuenTrip, we recognize that traditional venture capital models, built on assumptions of abundant capital and rapid scaling, are not a one-size-fits-all solution for Latin America. Startups here often face capital scarcity, fragmented markets, and the need to build foundational infrastructure. These dynamics have shaped our investment philosophy, which we believe is uniquely suited to the region’s realities. Our revised approach emphasizes:
As Latin America’s venture capital landscape matures, we see enormous potential for those who understand its nuances and adapt their strategies accordingly. This paper outlines the market dynamics that shaped our thinking, explores the structural differences in the region’s private markets, and highlights the attributes of successful startups. We hope this serves as a guide for investors who, like us, are committed to empowering Latin American entrepreneurs and unlocking the region’s vast opportunities.
The Latin American market has unique challenges and opportunities for investors.
Atlantico’s 2024 Digital Transformation Report states Latin America has 66M people and a $6.4T GDP, making it the world’s third-largest economy if combined. The region’s digitalization rates match those of the US and China, surpassing other developed economies. In 2024, Latin America led global eCommerce growth. These trends indicate the region is ready for digital transformation, with a growing middle class eager to adopt technology. The report also highlights tech companies’ low market capitalization, signaling growth potential and investment opportunities as they catch up with other regions.
Digital infrastructure for eCommerce and financial services has already begun to transform the region. Well-known companies such as Mercado Libre and Nubank underscore the fact that consumers are willing and able to adopt technology to consume goods and services. Nevertheless, these giants underscore the first wave of digital transformation in the region that targeted consumers directly. BuenTrip Ventures is now focused on supporting and investing in the next wave of digital transformation that will provide business-to-business solutions. For example, AltScore used embedded lending technology to allow large CPG companies to provide credit to their distributors, expanding access to capital in the region at the level of businesses, not just individuals. Mercately uses WhatsApp integrated services and AI tools to boost eCommerce sales and deliver improved logistics for SMBs. In both cases, the impact in the regional economy is multiplied by the fact that businesses, not just consumers, can expand their reach and efficiency through technology.
However, the region faces significant challenges. The Atlantico report highlights historically high real interest rates and currency depreciation. High capital costs make borrowing and growing businesses more challenging. Despite a growing young population, the region struggles with low labor productivity and competitiveness. Finally, a complex and high taxation burden and subpar infrastructure make regional integration difficult.
This complex landscape has created challenges for investors. Over the last decade, LATAM VC funds have beaten public benchmarks; according to the Atlantico 2024 report, regional funds have ranked among the highest quintiles globally from 2012-2022. This suggests that local funds can deliver returns because the market is difficult to navigate. The managers who can position their funds to benefit from digital infrastructure growth have proven to be effective.
Nevertheless, overall investment in the region has faltered. Although private capital investments are on par with pre-pandemic levels, they’re trending down from the 2021 boom according to the Latin America Venture Capital Association (LAVCA). This suggests that despite many opportunities, the decision to invest in the region isn’t simple or clear.
This raises several questions for LPs considering investing in Latin American venture funds. Can LPs expect similar investment returns, timelines, and multiples as in the US for LATAM VC funds? Do private markets in Latin America operate like in the US, with slight timing or scale differences, or are a different set of strategies and expectations needed for LATAM?
Many investors have noticed the uneven capital market distribution in the region.
Brazil stands alone. According to LAVCA data, from 2008 to 2024, Brazil captured 83% of total startup exits in the region, well ahead of Mexico’s 5.8%. Brazil also leads in fundraising. Although VCs in Spanish-speaking Latin America are catching up, Brazil still captured 38% of all venture capital invested in the region from 2022 to 2024. Brazil holds 45% of all venture capital funds in the region, focused on early-stage, and 60% of all late-stage funds in Latin America. Given its size, scale, and capital depth, LPs investing in Brazil can find an ecosystem with funds for various stages and a market for exits.
In Spanish-speaking LATAM, two exit scenarios contrast with Brazil. Founders of tech companies can either start or move to Mexico quickly or pursue a regional expansion across Latin America. We can point to two startups that exemplify this pattern. Kavak, the online platform for buying and selling used cars, found success by consolidating its operations in a large market such as Mexico. By contrast, Picker, a BuenTrip Ventures portfolio company, is an example of a startup that started in a small market and expanded to Mexico first, then regionally to find success. Picker is a logistics aggregator platform that allows restaurants, pharmacies, and retailers across the region to manage their delivery needs from one place. Originally starting in Ecuador, they quickly expanded across the region without having to expand their team or operational footprint and now service customers in 10 countries in the region, including Mexico, Argentina, and Colombia. Despite these pathways to success, the exit landscape in the region is challenging.
Latin America has fewer and smaller exits than the US. Over the past decade, the US averaged 55 IPOs yearly, while LATAM had 4.6. In 2024, the average LATAM IPO is valued at $50.82M, much less than the US average of $236M. This could be due to less capital in the region, affecting exit size and frequency. Yet, US VC funds have an average Multiple on Invested Capital (MOIC) of 2.11x, compared to Brazil’s 2.60x, indicating structural market differences. Latin America can deliver high returns, but investors should understand its unique liquidity events.
Second, the region is skewed towards early-stage funds, including Brazil. This is expected since early-stage funds are easier to raise and deploy. However, assets under management raised by late-stage VC firms represent only 21% of regional venture capital funds, according to 2024 LAVCA data, compared to 41% in the US (Pitchbook data via SSTI). This suggests a gap in financing between the early and late stages, creating challenges for founders and investors in Latin America.
Third, these constraints are highlighted by the lower graduation rates of startups in the region. Data from CB Insights shows that from 2008-2011, 48% of US seed-stage startups raised a second round, and at least 28% raised a third round. In contrast, only 10% of LATAM seed-stage startups raised a second round, and around 30% raised a third round according to LAVCA data. Moreover, the graduation rates are trending downward, suggesting that LATAM companies have more difficulty raising capital and this problem is growing.
In conclusion, there are structural differences in Latin American private markets. Exits are smaller and fewer than in the US. Venture capital funds are skewed towards the early stage. This capital-constrained environment generates lower graduation rates, making it harder for startups to transition from the early stage to Series A and beyond. Investors need different expectations for the region.
Nevertheless, venture capital funds in the region have beaten public benchmarks and rank in the top quartiles globally. Despite the complexities, it’s possible to invest successfully in the region. Therefore, understanding how startups succeed amid these challenges is crucial for prospective investors.
In the book Out-Innovate, Alexandre Lazarow identifies two different types of successful startups. In developed economies like the US, startups can become successful “Unicorns” by focusing on rapid expansion and growth over immediate profitability. These companies can continuously access large amounts of venture capital funding to fuel their aggressive growth strategies to great success.
In contrast, Lazarow uses the term "Camels” to describe successful startups in developing economies. These companies must be highly capital-efficient to thrive in more resource-constrained environments. Rather than pursuing breakneck growth at all costs, startups in developing markets must focus on using their limited resources wisely to achieve sustainable profitability. The differences between these two startup models are highlighted in the 2024 State of SaaS (Software-as-a-Service) report by SaaSaholic.
First, consider the Customer Acquisition Cost (CAC) payback period given a company’s Annual Recurring Revenue (ARR) size. Top US startups under $1M ARR have an average payback period of 4.8 months (The Capchase Benchmark Report 2023), while comparable top LATAM startups have a payback period of 1.6 months. The State of SaaS report concludes that “most top-decile respondents report CAC Payback Periods that are 32% lower than US benchmarks.” This suggests that successful regional startups can acquire customers faster and more cheaply than their US counterparts when holding size and revenue constant.
Moreover, the ratio between customer lifetime value and acquisition costs is significantly higher. The State of SaaS report concludes that “LTV/CAC in LATAM is at least 2x higher than the US across all stages.” This suggests that successful startups in the region add more value to customers over a longer period for lower costs.
Finally, Latin American startups have longer runways. The report states that startups in the region “with > US$1 ARR still have 15 months longer runway than their US counterparts, while the top decile has 15 months more.” This suggests that despite constrained capital, LATAM startups survive longer and with less money than their US peers.
While these numbers may be insightful they are also abstract. Consider the case of Clicksign, a Brazilian startup platform for electronic document signatures. Although not comparable to Docusign in market size, valuation, or other metrics, they provide very similar services; and crucially, according to their CEO, “DocuSign has a CAC payback of 79 months. Clicksign has a CAC payback of 5.6 months” (TechCrunch). But companies outside Brazil and Mexico can also be capital efficient. While many companies in our portfolio are scaling regionally without expanding their footprint, Kriptos is a notable example. They use Artificial Intelligence to help companies classify and manage cybersecurity risks. They serve large enterprise clients and have operations in 12 countries, including in the US. Kriptos proves that a small LATAM-based team can provide scalable, long-term value to enterprise clients worldwide by being capital efficient.
In sum, startups in Latin America are more capital-efficient than their US counterparts. Due to the conditions of the market, they have to acquire customers more cheaply, deliver value at a higher margin, and become profitable faster. Out of necessity, they have learned to do more with less.
The traditional venture capital playbook honed in Silicon Valley is not a perfect fit for the Latin American market. While the US model has found great success in identifying founders who can disrupt large industries and scale rapidly with abundant capital, this approach does not always translate well to the unique challenges and opportunities of the Latin American startup ecosystem.
BuenTrip's revised strategy recognizes that startups in Latin America operate in a very different environment. Rather than focusing solely on outsized growth and valuation, BuenTrip emphasizes three key factors that are critical for success in the region: securing early ownership at attractive valuations; investing in capital-efficient startups; and building a supportive community for founders.
Obtaining early ownership at favorable valuations is crucial in Latin America, where the path to liquidity events is more uncertain and protracted compared to the US. By investing in startups at the earliest stages, BuenTrip can establish a strong position and benefit from the compounding growth of these companies over time. This is especially important given the lower graduation rates and smaller exit sizes typical of the region. Having early ownership is critical for generating attractive returns.
Equally important is BuenTrip's focus on investing in capital-efficient startups that can thrive without requiring massive amounts of capital to survive. The resource-constrained environment in Latin America demands a different strategy from the "growth at all costs" approach that has prevailed in some startup ecosystems like Silicon Valley. BuenTrip seeks out founders who have mastered the art of doing more with less, leveraging creative strategies to acquire customers efficiently and extend their runways. Throughout this thought piece, we have mentioned many of our portfolio companies such as AltScore, Picker, Mercately, and Kriptos but there are many more that exemplify the ethos of doing more with less. This capital discipline helps startups navigate the challenging funding landscape and positions them for sustainable long-term growth.
Finally, BuenTrip recognizes the vital role of community in supporting Latin American entrepreneurs. Rather than just deploying capital, the firm actively invests in building a network of founders, mentors, and ecosystem partners who can provide the guidance, resources, and connections that individual founders need to succeed. This community-centric approach reflects BuenTrip's deep understanding of the region's unique dynamics, where personal relationships and collaborative support can make all the difference in helping startups overcome obstacles and reach their full potential. To this end, we have collaborated with the University of Pennsylvania's Master of Behavioral and Decision Science to screen for founders who exemplify this community-first mindset. As a firm, we strongly believe that we invest in people and relationships, not just companies or trends.
By focusing on these key factors–early ownership, capital efficiency, and community building– BuenTrip's revised venture capital model is tailored to the realities of the Latin American market. This differentiated strategy allows the firm to identify and nurture the most promising startups, positioning them for success in a challenging but rapidly evolving landscape.
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