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2017 was a record year for venture capital investment in Latin America, and the first quarter of 2018 saw three new Latin American unicorns born. So what’s driving a record year, and a big start to 2018, for the region? Let’s dig through the numbers and find out.

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VC investments in the region surpassed $1 billion last year for the first time, spiking by 128 percent over the $500 million seen in 2016, according to recent data from the ). Deal volume surged by 26 percent from 197 in 2016 to 249 in 2017.

Co-investing was also way up in 2017. Sixty-seven percent of VC dollars, or $633 million, were co-invested in Latin America in 2017 compared with $203 million in 2016.

Brazil was the largest recipient of funding in 2017, with Mexico coming in second. Brazilian startups accounted for 45.4 percent of reported deals closed in 2017 with $859 million invested across 113 transactions, up 208 percent compared with $279 million raised across 64 deals the year before.

Mexican startups accounted for 23.7 percent of the venture dollars raised in the region last year. Specifically, companies in Mexico raised $80 million across 59 venture deals in 2017, down from $130 million raised across 73 deals in 2016 (but we should point out that .)

Latin America is known for financial challenges, so it鈥檚 not shocking that fintech startups make up the biggest chunk (29 percent) of deals financed in 2017. But regarding fastest-growing sectors, marketplace and transportation startups were among those that saw the biggest surges in venture dollars raised. Marketplace startups raised $342.2 million in 2017 compared to $18.2 million in 2016. Transportation tech companies raised $203.5 million in 2017 compared with just $3.4 million in 2016.

鈥淲hen you look at Latin American tech startups, it鈥檚 hard to find an example of one that鈥檚 not solving a real problem or pain point,鈥� said , director of venture capital strategy of LAVCA. 鈥淗alf of the population doesn鈥檛 have access to traditional bank cards or capital, so there鈥檚 a lot of opportunity in fintech. So if you look at the underlying problems these companies are solving鈥攖hey鈥檙e huge.鈥�

The Big Deal(s) In Latin America

Unsurprisingly, in a record year, one can expect to see record rounds. Sao Paulo-based rideshare startup closed the largest publicly disclosed venture capital round to date in Latin America, raising more than $200 million in a Series C round from , , and .

叠谤补锄颈濒鈥檚 , which specializes in mobile marketplaces and online-to-offline applications, brought in a total of $135 million in 2017 with South Africa鈥檚 and Poland鈥檚 making follow-on investments. The company $271 million since its inception in 1998.

is a Sao Paulo-based ecommerce platform for shoes that raised a total of $215 million in expansion capital prior to its IPO on the NYSE in April 2017.

鈥�$100 million-plus rounds were relatively rare occurrences, but you鈥檙e starting to see more deals of this size happening,鈥� Ruvolo said.

And so far, 2018 is turning out to be another banner year as well. In the first quarter of 2018, three tech startups gained unicorn status: the aforementioned 99 when Didi Chuxing announced it would in the startup for about $600 million; digital finance startup out of Sao Paulo when it in a Series E round led by Hong Kong鈥檚 ; and via an that was actually the NYSE鈥檚 biggest IPO since Snap. 聽Colombian last-mile delivery startup million from Germany鈥檚 , , , and others, in January.

For those who have invested in Latin America for some time, these events are not a surprise. They鈥檝e been in the making 鈥渇or a while,鈥� according to Ruvolo.

鈥淗istorically, people have asked where are the unicorns in Latin America,鈥� Ruvalo said. 鈥淭o reach that size as a startup, you need access to growth capital. Historically, Latin America has not had access to growth rounds of financing and had to look abroad after a Series A round. But a lot of that is changing as we鈥檙e seeing a maturation of the local ecosystem. And these unicorns are a sign to international investors that there are companies reaching those kinds of valuations.鈥�

Going Across The Border

One likely factor behind the record earnings and surge in activity is that 25 global investors made debut investments in the region last year, according to LAVCA. Investors such as , TPG鈥檚 , , and participated in a number of notable deals.

The region has also increasingly been on the radar of global tech companies seeking to expand. Giants such as , , , , , , and have made it part of their strategy to grow their presence in Latin America. For example, Latin America is the, and Amazon in March 2018. It鈥檚 also investing in , logistics, and the .

Brazil has also benefited in an increase in cross-border funds such as which has its headquarters in New York but offices in Menlo Park and Sao Paulo. The firm was formed by in late 2013 specifically to focus on investing in Brazil and on 聽US-Brazil cross-border opportunities. It raised $40 million in its first fund, which closed in 2014. Out of that first fund, Valor has invested in 14 companies in Brazil and 10 in the United States with companies that have potential in the Brazilian market.

Among Valor鈥檚 U.S.-based portfolio companies are San Francisco-based digital currency startup , social networking site , and , a cybersecurity company.

Valor is about 90 percent deployed on its first fund with 75 percent of its capital going into operating companies in Brazil, according to , partner of Valor Capital. It was primarily focused on fintech, edtech, logistics, digital platforms, and 鈥渉ealth and wealth,鈥� he said.

The firm mainly invests in Series A rounds and had toward a $100 million second venture capital fund as of April, according to a filing with the SEC. Since Fund 2 launched early last year, Valor has made seven investments.

Nicklas believes Brazil is seeing a rise in its middle class, and that is in part driving some of the investment in the region. He also agrees with Rovolo that fintech is a significant sector in the region due to the nation having 鈥渟ome of the highest credit card interest rates in the world.鈥� (Rates were in late 2016 and early 2017.)

鈥淎lso, banks are very concentrated with the top five to seven banks controlling a significant portion of the market,鈥� he said. 鈥淪o the country is absolutely ripe for innovation in this sector, which is one of the reasons why you鈥檝e seen companies like Nubank scaling up rapidly.鈥�

Previously, business model innovation鈥攚here existing technology was applied to sectors鈥攊n Brazil was more prevalent.

But now startups are also focused on areas where they can address inefficiencies or can drive productivity often via a combination of cloud and mobile, according to Nicklas. The innovation that is currently being born in Brazil has the potential to go global, he added.

鈥淭he problems that are being addressed in this middle market emerging economy is more similar to the types of problems you see around the globe in countries such as China, Russia, South Africa and Turkey,鈥� he said. 鈥淪o, in some ways, the solutions being created here have more applicability around the globe than those created out of Silicon Valley.鈥�

Nicklas believes the Brazilian market has a lot of potential even as the country struggles to bounce back from a prolonged recession.

鈥淲e think the ecosystem has matured incredibly and on many levels,鈥� he said. 鈥淭his is evident in the quality of the entrepreneurs as well as the investors that are now active in the country. The startup culture is taking root in a powerful way.鈥�

Looking ahead, it鈥檚 clear the Latin American region is seeing more activity than ever. What remains to be seen is if it can continue this momentum in the years ahead.