Venture capital rebounds in Latin America, but fewer startups are breaking through, report says

Venture Capital Grows in Latin America, But Startups Face Scaling Challenges

Latin American Startup Investment Trends and Challenges

By Kylie Madry

MEXICO CITY, Oct 13 (Reuters) -

Venture Capital Inflows and Deal Activity

Investment in startups in Latin America rose sharply in 2025, but the recovery is reaching fewer businesses and doing less to help smaller firms grow into major companies, according to a Tuesday report published by startup adviser Endeavor and investment firm Glisco Partners.

Funding Growth and Market Dynamics

• Startups in the region raised $4.7 billion in 2025, up 65% from 2024. But the number of funding rounds was still far below the market's peak, with 554 deals versus 788 in 2022.

Investor Perspectives on Scaling

• "The capital is returning to Latam, but the more important question is no longer how much money is coming in -- it is how many companies are actually scaling," said Alfredo Castellanos, managing partner at Glisco Partners.

Distribution of Funding Among Startups

Established Companies vs. Early-Stage Startups

• Many of the biggest rounds went to better-known companies that already have scale, including Mexican digital payments company Clip, online used-car platform Kavak, Argentine financial app Uala and Mexican fintech Plata, the report said.

Challenges for Early-Stage Startups

Deal Share and Funding Disparity

• Startups at the earliest stage made up 56% of all deals in 2025, but received just 7% of total funding. The pipeline also appears to be tightening. Of the startups that raised seed funding in 2022, only 5% had reached the next major funding stage by year four.

The Role of Artificial Intelligence in Startup Growth

Increased AI Investment

• Artificial intelligence attracted more money, even in a weaker market. Funding for companies using AI rose to $327 million in the first half of 2026 from $165 million a year earlier.

AI Applications in Scaling Operations

• Kavak is now using an AI "CEO" agent to handle logistics like inventory, beginning with operations in the Mexican town of Cuernavaca, Chief Product Officer Alejandro Maza said. He said such tools could be used to double profits through year-end.

(Reporting by Kylie Madry; editing by David Gaffen)