A strong ‘sweep’ is taking place in Latin America, which could wipe out a series of startups
The ongoing plunge in venture capital funding could wipe out startups across Latin America, delaying potential IPOs by years, Bloomberg reports. Even so, the head of a Mexican payments company called Clip said his company will still thrive.
Latin America was the fastest growing region in the world for venture capital funding last year. Now, however, they are facing unprecedented gloom as investors turn away from risky bets. As a result, “many companies won’t survive,” Clip CEO Adolfo Babatz said.
Babatz chatted about the issue in an interview with Bloomberg from the tech startup-style company’s headquarters in one of Mexico City’s new towers. While Mexico’s more mature startups are expected to be able to IPO this year or next, the current “crisis” will “delay everything possible for 24 months,” he said.
Other so-called Mexican “unicorns” valued at more than $1 billion, such as used car company Kavak and cryptocurrency exchange Bitso, are also expected to choose the US market when it can list. listing, it will be another blow to the local stock market, which has seen a series of delayed IPOs and hasn’t had a major IPO since 2017.
Babatz said he doesn’t need to raise capital from private investors or move into the public market any time soon. Early last year, Clip received a $250 million investment from SoftBank Group Corp’s Latin America fund. and Viking Global Investors LP gave the company a $2 billion valuation.
Clips are now focused on consolidating their position. At a presentation Wednesday night, Babatz held it Silicon Valley style, showcasing the latest versions of the company’s point-of-sale terminals starting at as little as $10 along with a new tablet for $150.
“With the launch of this product, Clip will change the face of commerce in Mexico,” Babatz said as he strode across the stage in a black T-shirt.
Babatz declined to discuss specific data.
Clip’s white and orange devices are gaining popularity across Mexico in stores and restaurants on every street corner, but there’s still a huge market. Babatz said only about 900,000 merchants are served by traditional banking terminals out of 11 million formal and informal businesses in the country.
Argentinian company MercadoLibre, with product Mercado Pago, Zettle of PayPal Holdings and local startup Sr. Pago, acquired by Mexican fintech lender Konfio last year, are Clip’s competitors. Argentina’s Uala, the mobile payments company backed by George Soros, Steve Cohen and Tencent Holdings, launched the terminal last month.
A big factor limiting growth is the country’s payments network, which is controlled by two companies owned by major banks. Babatz said he is confident Mexico will take steps to increase competition as Brazil and Argentina did about a decade ago.
“With more competition at the network level, we’ll have a better chance of having lower fees, better access, and most importantly, better technology to be able to deliver products that are more affordable.” better for sellers, like e-commerce payments and the like. And the market will also increase competition by allowing foreign products to enter the field more easily,” Babatz said.
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