The endless potential of Corporate Venture Capital in Latin America
Collaboration between startups and corporations has gone from being an emerging strategy to a consolidated reality on a global scale. As a result, Corporate Venture Capital (CVC) has gained ground in the market. This type of Venture Capital enables corporations to create a team dedicated to investing in external growth-stage startups and makes it possible to expand the innovation ecosystem and make companies even more competitive. By sharing capital, experience, and stability, corporations benefit from the speed, talent, and disruptive solutions of startups, creating a mutually beneficial partnership that drives growth and innovation.
Latin America has recognized the potential of this model in recent years and has been making efforts to implement it. According to the “State of CVC 2022 Report” by CB Insights, at the end of 2022 there we saw a decrease in startup and/or fintech investments. Globally, however, the number of transactions in which CVCs participated in 2022 grew to USD 22.4 billion, according to PitchBook. This represents a clear increase compared to 2021, when this stood at USD 17.6 billion.
Recognizing the advantages offered by CVC is critical to fostering their growth. CVC not only grants access to new markets, but it also helps achieve greater dynamism, creativity and strength, as well as identifies new trends and attracts new customers
Recognizing the advantages offered by CVC is critical to fostering their growth. CVC not only grants access to new markets, but it also helps achieve greater dynamism, creativity and strength, as well as identifies new trends and attracts new customers, providing large companies with a new perspective. Access to new technologies and disruptive business models are achievable. It is possible to promote talent and entrepreneurship, while creating new forms of business management in which everyone wins and an ecosystem of innovation that is increasingly relevant.
According to the report “Corporate Venture Capital and its impact on Latam”, by MIT Technology Review and with the support of 32 large companies in the region, 90 % of those companies are interested in investing capital in technological ventures but face a series of challenges in converting intention into action.
Many of the principal obstacles involve the lack of a corporate culture shaped by a traditional dynamic that favors CVC, as well as the lack of a collaborative environment, a digital mindset and training in the field. External factors also come into play, such as the absence of technological and fiscal regulation, making the institutionalization and accreditation of the industry more urgent every day.
The region’s organizations are recognizing the need to implement improvement measures to continue promoting the fintech ecosystem. Taking successful CVC cases in developed countries can serve as a point of reference for building an effective model in Latin America.
For example, Europe has witnessed a notable increase in Corporate Venturing activities, including CVC. Models have been tested with a variety of comprehensive collaborations and investment strategies, such as direct equity investments, strategic partnerships, joint ventures and, in recent years, acquisitions.
Wayra Hispam, Telefónica’s open innovation arm in Latin America, was a pioneer in establishing CVC in the region 12 years ago. It remains active to this day, reinventing itself and looking for new opportunities. In 2022, the company made a global investment of more than USD 6 million in 40 startups in different fields.
Markets like Europe set an example for Latin America as it continues on its path, which is where we should be channeling our efforts. With the upcoming Spanish Presidency of the Council of the EU during the second half of this year, there is an opportunity for cooperation and to strengthen relations with our region. We have a great opportunity for joint economic development and investment and for strengthening technological and innovation systems, in which CVC should undoubtedly play a leading role.
Corporate Venture Capital can be an important source of financing for businesses in the region given its social and economic benefits
Corporate Venture Capital has evolved from a promising concept to an increasingly important reality. Companies that fail to implement CVC run the risk of being left behind. Latin America has potential in this regard, but there is still a long way to go to create innovative solutions that improve citizens’ lives. CVC can also be an important source of financing for businesses in the region given its social and economic benefits.
At Krealo, the Corporate Venture Capital company of the Credicorp Group, we are clear about this. With this in mind, we identify, evaluate and invest in fintechs or startups in the Andean region that include financial services as part of their operations. This translates into a market of more than 100 million people across Peru, Chile and Colombia. Our aim is to promote the fintech ecosystem and transform financial services in the region.
With the right tools and by pooling efforts, we can take the leap and make collaboration a consolidated reality in our region as well.