Venture capital activity in Latin America is experiencing a resurgence, with startups in the region gaining access to a new pool of capital. NXTP, a venture capital firm specializing in early-stage business-to-business startups, has successfully secured $98 million in capital commitments for its third fund, marking its largest fund to date.
Positioning itself as one of the region’s earliest venture capital firms, NXTP was established in 2011 by Ariel Arrieta, Marta Cruz, and Gonzalo Costa, with offices in Buenos Aires, São Paulo, and Mexico City.
Over the years, the firm has witnessed the growth and fluctuations of the startup ecosystem. Darly Bendo, managing partner of NXTP, reflects on the limited investment made just five years ago from the firm’s second fund.
“At that moment, the ecosystem was obviously still very nascent,” Bendo shared with TechCrunch. “The annual investment in the region was still under $1 billion of total capital. In 2020 and 2021, closer to the peak of the market, a lot of international funds entered, and we saw that number increase to about $15 billion of annual investments, almost over a 10x increase from 2018 through 2021.”
Similar to trends observed globally, there has been a slowdown in investments, smaller funding rounds, and an extended fundraising timeline at the growth stage over the past few years, according to Bendo.
NXTP has also noted a shift in the experience and quality of founders and teams launching new companies in the region. A decade ago, less than 10% of founders had prior experience as second- or third-time entrepreneurs, with most hailing from non-technology backgrounds, as mentioned by Bendo. Today, the percentage of repeat entrepreneurs has surged to as high as 30% or 40%, and many founders bring previous experience from tech companies.
Amid these changes, certain trends have remained robust, particularly in the realm of B2B software and cloud solutions for the enterprise and mid-market. Bendo highlighted the continued growth in the penetration of workflow software in Latin America, describing it as being “still very much in the early innings.”
In alignment with this strategy, NXTP focuses on B2B technology verticals, encompassing cloud and software, fintech and payments, e-commerce and enablers, B2B marketplaces, and data and AI. The funds from NXTP are deployed at the pre-seed, seed, and Series A stages, with investment checks ranging from $500,000 to $5 million. Additionally, provisions are made for holding capital to facilitate follow-on investments.
Brazil continues to be a primary focus for the firm, and this emphasis will persist with the new fund. Over half of NXTP’s investments have been directed toward Brazil, with the remaining portion allocated to startups in Mexico, Colombia, Argentina, Chile, and other Latin American regions.
The firm has already initiated investments from the new fund, including contributions to online payments platform Barte and Teachy, an edtech company in Brazil offering an AI-powered platform for teachers to assist with after-school work, lesson plan creation, and exams.
“We’ve had a lot of success within these categories that have very strong secular tailwinds behind them,” noted Busse. “They all remain evergreen, at least for now. The market depends on the serendipity of an incredible founding team, potentially moving into one of those spaces and building something where there’s large opportunities. We remain open to finding the best teams that are building within those domains.”
Source: Tech Crunch