In recent years, the entrepreneurial ecosystem has featured stories of ventures that have achieved the title of unicorns in Latin America.
When a small company or venture obtains the title of unicorn, it is because it achieves a valuation of one billion dollars. When this association is made in the business world, it is said that it is a unicorn in reference to the uniqueness of the mythological animal.
It is not only about raising capital and achieving this level of valuation (billion). It also requires a long road to success through different stages:
The venture or small business makes a round of investment among their relatives or also known as Friends, Family, and Fools (FFF), it can even be from an angel investor. At this point, it is essential to have resources to start giving life to the business model.Based on the constancy of the venture the paceof growth of the business model will be determined.
Seed stage and business validation
The next step is the seed stage.In this stage, according to an analysis by the firm Deloitte,small companies usually use private equity to obtain investments and boost their business. This is usually the first approach to private equity or venture capital funds and is one of the main investment alternatives for those companies that are not attractive to angel investors or FFF.
Growth and consolidation stage
At this point, the startup or small business has formed its brand and business model in its first year of life, in a way that the next step is scalability to new markets. In this stage, companies require a large amount of investment, so it is common that in this part of their development, they add more than one series of private equity investments.
In the process of raising capital, each stage is focused on driving the development and growth of the project. In the end, the estimated value is linked to factors such as profitability, sales, and the potential to be a benchmark in its industry. Those elements will make it worthy of being a unicorn company.
Unicorns in Latin America
The incursion of venture capital investments has led to an increasing number of success stories for small businesses and ventures in Latin America.
The GovTech Index 2020, prepared by the Development Bank of Latin America, destaca los highlights the top five countries leading the region in terms of entrepreneurial ecosystem developments:
In the region, one of the challenges will be to build the conditions to maintain the momentum of the entrepreneurial ecosystem through private capital investments, which have contributed to the transformation of small companies into unicorns.
Top of unicorns in Latam
Around 694 startups with unicorn valuation have been registered worldwide this year, according to CB Insights. Below is a list of the highest-rated unicorns in Latam according to the platform:
It is a fintech company founded in Brazil and has presence in other countries of the region such as Mexico and Colombia. The company specialized in the financial sector is valued at 30 billion dollars and represents one of the main alternatives for providing neobank services.
This platform specialized in trading pre-owned cars was the first Mexican unicorn. The Mexican company founded in 2016 is the second best-valued unicorn in Latin America with 8.7 billion dollars.
This is a delivery platform that connects consumers with local stores.Through its service, there is an exchange of clothes, food, and medicines. It is based in Colombia and is valued at 5.2 billion dollars. Destaca en el sector Fintech por ser una opción accesible y eficiente para empresas.
A video game company founded in Brazil. This video game developer is valued at 3.5 billion dollars and is the fourth largest unicorn in the Latam region. In the long term, they seek to position themselves as a lever for innovation in new markets such as digital education.
This company originally from Brazil specializes in eCommerce and Proptech.The online real estate platform became the fifth most valuable unicorn in Latam and the most important in its sector by reaching a valuation of 2.9 billion dollars..
The recently named Mexican unicorn managed to position itself in sixth place with a valuation of 2.2 billion dollars. The fintech specializing inthe purchase of cryptocurrencies and online payments is one of the most important in the region and the first to be listed as a unicorn in the cryptocurrency industry.
In recent months at least 7 unicorn companies have emerged in Mexico that, like Bitso, have become a benchmark in their market. Undoubtedly the path traced by Kavak as the first unicorntranslates into a better dynamism of private equity investment and in turn into more Mexican unicorns.
Mexico plays an important role in private equity to detonate this industry in Latin America. In recent months, the interest of foreign investors has triggered the creation of more unicorns based in more than one country in the region.
If you want to know more about how to invest in innovative projects with growth potential, you can read: What is a venture capital fund?