These are seed capital and entrepreneurial capital operations. The first correspond to investments for less than US$1 million, and the second exceed that amount. According to the head of ARCAP, “in Argentina there is a strong drive from entrepreneurs” which is above what it should be generating based on its population and the size of its economy. The sectors in which companies focus their activities are biotechnology, finance, fintechs and agriculture.
One element that gained strength after the pandemic is that Argentine entrepreneurs are turning more towards business projects focused on end users and consumers, given the need for digital solutions to problems caused by isolation. Last year, 36% of the ventures focused on this segment and 64% were dedicated to B2B, that is. business solutions. Suarez pointed out that covid19 “accelerated the process.”
Regarding the geographical distribution of the entrepreneurs, the majority are based in the Metropolitan Area of Buenos Aires, (AMBA) with 75.9%. The other areas that are emerging in the country are Mendoza, Córdoba and Santa Fe, as startup generating centers.
Despite the multiple problems that entrepreneurs in the country may face, at ARCAP they consider that “there is a lot of room to grow.” A comparative measure explains it. In Latin America, 7 dollars per inhabitant per year are invested in startups, while in Israel, for example, it is US$800 per inhabitant per year. The number of new companies of this type in Latin America represents 2% globally, while the region represents 6.5% of the world’s GDP.
But this year the investment impulse is expected to decrease in light of the changes that have been taking place in global financial markets since the middle of last year, when the United States began to define a tightening of monetary policy to counteract inflationary pressures. Suarez explained that last year there were many funds looking for profitability and that part of it was focused on Latin American ventures. The rise in interest rates and the war in Ukraine are causing investors to withdraw and a “flight to quality”, which will surely result in fewer funds. “We are seeing that there was a liquidity situation worldwide that caused a lot of capital to go to emerging markets. We believe that this trend will be reversed. Suarez explained. And he estimated that “there will be a downward correction” both in the number of investment rounds and in the amounts to be invested.
In the opposite direction, explained the directive, there are already basic conditions for this industry in Latin America that are unalterable, such as the development of communications, and that will mean that there will be more of the target population to attend to technological solutions. In the case of Argentina, Suarez He pointed out that “more stable and predictable economies generally make it easier for entrepreneurial activity and to seek capital.” “Political, currency or institutional instability are always elements that generate greater difficulties, however This profile of companies are those that serve regional or global markets and for this segment talent is what prevails and the context does not have such a direct impact”, he concluded.
Source: Ambito
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