That鈥檚 the narrative playing out across Latin America in the wake of a sharp shift in the startup funding climate. Per 附近上门 data, investors put $8.28 billion into the region in 2022, down 79% from 2021, a record-setting year.

Over all of 2022, investment was down heavily at both early and late stage, while seed investment actually rose a bit. In the fourth quarter, funding at every stage came in far below year-earlier levels.

For perspective, we chart out total funding, color-coded by stage, for the past 12 quarters below:

A couple quick takeaways stand out from the chart above. First, the magnitude of declines from Q1 to Q4 of 2022 was quite dramatic, evidence that the year started on a much more optimistic note than it ended.聽

Secondly, it shouldn鈥檛 be understated that 2021 was a hard act to follow. While 2022 was below peak, it was still the second-highest funding year of the past decade, as illustrated in the chart below:

To get a clearer sense of the ups and downs of the 2022 funding scene, we break things down by stage below, including a look at the largest rounds and most active investors.

Late stage

We鈥檒l kick things off at late stage, which has seen some of the steepest declines.

For all of 2022, investors put $3.57 billion into late- and growth-stage deals, per 附近上门 data. That鈥檚 a drop of over 72% from 2021, when over $13 billion went into late-stage dealmaking.

The year-over-year comparisons are even starker for the fourth quarter. During Q4 of 2022, just $450 million went to Latin American late-stage deals, down 84% from a year earlier.聽

For a sense of the funding trajectory, we chart late-stage funding for the past five quarters below:

Even with the funding slowdown, we did see some good-sized rounds in the latter half of 2022. Standouts include , a Chilean maker of plant-based meat products that raised $70 million, and , a Brazilian business intelligence software provider that pulled in $50 million.

Early stage

Early-stage investment also slipped lower every quarter last year.

For the full year, an estimated $3.22 billion went into early-stage venture rounds. That represents a decline of just over 40% from 2021.

The fourth quarter came in especially low, with $344 million in early-stage investment, down 80% from a year earlier. For the bigger picture, we aggregated early-stage investment for the past five quarters below:

Some big early-stage rounds did get done, even in Q4. This includes a $28 million Series A for , an Argentina-based digital wallet startup, and a $27 million Series B for , which provides credit for Brazilian farmers.

Seed stage

Seed-stage investment in Latin America actually hit an all-time high in 2022. Reported deals totaled nearly $1.16 billion, up 9% from 2021.

However, the year-over-year gains are attributable entirely to heightened activity early in 2022. In the second half of the year, reported seed funding slowed considerably, as illustrated in the chart below:

Because there is often a lag between when seed funding occurs and when it is added to the dataset, it鈥檚 likely the Q4 numbers will rise in coming weeks and months. These additions, however, are still unlikely to change the general pattern of declining investment.

Big investors pull back

In 2021, much of the surge in venture funding to Latin America was the result of large, global investors upping their activity in the region. In 2022, by contrast, many of these active investors pulled back amid a worsening exit climate and diminishing valuations for their existing holdings.

The pullbacks were most pronounced in the second half of the year. , for instance, had no disclosed investments in the latter half of 2022, per 附近上门 data. had just two. Both firms were among the most active global investors in Latin America in 2021.

Regional investors also cut back. , the Brazilian firm that ranked as the most active regional investor in 2021, sharply reduced deal count in 2022, per 附近上门 data, most markedly in the second half. Deal count for Brazil-based , the second most active in 2021, was also down considerably in 2022.

Given that active investors did fewer deals across virtually all geographies in 2022, the pullbacks to Latin America aren鈥檛 necessarily indicative of growing pessimism about the region鈥檚 startup potential. Rather, this looks more like the familiar cycle of a down year after a very up year.聽

Methodology

The data contained in this report comes directly from 附近上门, and is based on reported data. Data reported is as of Jan. 4, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

The most recent quarter/year will increase over time relative to previous quarters. For funding counts, we notice a strong data lag, especially at the seed and early stages, by as much as 30 percent to 40 percent a year out.

Please note that all funding values are given in U.S. dollars unless otherwise noted. 附近上门 converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to 附近上门 long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. 附近上门 also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. 附近上门 includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the 鈥淪eries [Letter]鈥� naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a 鈥渧enture鈥� round. (So basically, any round from the previously defined stages.)

Illustration:

Much of the slowdown was concentrated in the second half of 2022, according to an analysis of 附近上门 data. And over this past year, late-stage funding took the biggest hit, having grown more than threefold year over year in 2021.聽

Despite the decline in funding, 2022 is still significantly higher than annual funding in prior years, with 2022 close to double the $46 billion in funding raised in 2020.聽

Comparing Europe

It appears that Europe has weathered the downturn better than other regions. Venture funding did not fall as sharply as North America or Asia in 2022 鈥� markets which each declined between 36% and 39%, respectively, year over year.聽

Europe has grown from a smaller foothold over the past decade compared to these leading regions 鈥� and gained a greater share of funding in the past two years, as it shot up in 2021 and did not pull back as sharply in 2022.聽

This increase as a proportion of global funding, however, might not hold up in 2023.聽

鈥淓urope in general has lagged behind the U.S.,鈥� said from . 鈥淭here’s a realistic chance that [the slowdown] might not really trigger fully in Europe until Q1 [2023],鈥� he said, noting that Europe 鈥渇luctuates more with the markets. When times are good it goes up higher than expected, and I suspect when times are low it will go lower than expected.鈥�

Quarterly pullback

So how does the slowdown in European venture funding look when broken down on a quarter-by-quarter basis during 2022?聽

Funding for the fourth quarter was close to flat quarter over quarter and down 46% year over year.聽

Again, Europe did not scale back as much as other leading regions, which declined from 58% to 63% this past quarter for the same time period.

Early stage suffered the most

The biggest cutback year over year for the fourth quarter was at early-stage funding in European startups 鈥� from $10 billion in Q4 2021 to $5 billion this past quarter. The dramatic drop at early stage is a signal that investors are adopting a wait-and-see approach to this market.聽

According to Kanji, 鈥淭here isn’t very much in the way of Series B, Series C, D right now in Europe. It’s really slowed down.鈥� He acknowledged that investors seem to be oriented toward earlier fundings at seed.

Seed deals

The slowdown at seed-stage funding is also deepening, but less than the other funding stages. Seed declined by 37% year over year in the fourth quarter, totaling $1.8 billion. The fourth quarter of 2021 was around $3 billion for seed fundings.

Late stage already dropped

Late-stage funding was flat quarter over quarter, having already dropped in the third quarter. Late-stage funding was down 45% year over year for the fourth quarter, reaching $9.4 billion compared to $17 billion in Q4 2021.

European gains

Whether the gains that Europe has made over the past two years will hold will be interesting to watch in 2023.聽

Late-stage funding grew threefold year over year in 2021. As global growth investors step back from investing, it is likely to continue to scale back in 2023.聽

The venture community in Europe has raised more funding in recent years, primarily focused on early-stage funding. The influx of U.S. venture capital in the market 鈥� whilst they are here to stay 鈥� have the majority of their portfolio in the U.S. market, which could take some attention away from Europe in the shorter term.聽

Whether the slowdown in Europe is lagging behind other leading markets and will show larger declines or is on a new footing will be interesting to watch in the volatile markets of 2023.聽

Methodology

The data contained in this report comes directly from 附近上门, and is based on reported data. Data reported is as of Jan. 4, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

The most recent quarter/year will increase over time relative to previous quarters. For funding counts, we notice a strong data lag, especially at the seed and early stages, by as much as 30 percent to 40 percent a year out.

Please note that all funding values are given in U.S. dollars unless otherwise noted. 附近上门 converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to 附近上门 long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. 附近上门 also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. 附近上门 includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the 鈥淪eries [Letter]鈥� naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a 鈥渧enture鈥� round. (So basically, any round from the previously defined stages.)

Illustration:

Venture and growth investors in private companies scaled back their investment pace significantly in the latter half of 2022, signaling a slower funding climate as we begin 2023.

To be fair, 2021 was a tough act to follow. Fast-growing startups were showered with capital, and tech firms went public at high valuations. Acronyms like SPAC and NFT were golden tickets to cash. Every type of investor had a role to play and there was every reason to believe the lavish show would go on in 2022.

But last year鈥檚 funding numbers said otherwise. Global venture funding in 2022 reached $445 billion 鈥� marking a 35% decline year over year from the $681 billion invested in 2021 鈥� according to an analysis of 附近上门 data. But despite the slower funding environment in 2022, investors spent $100 billion more last year than the $342 billion invested in 2020.聽

Indications that 2021 might be an outlier amid global funding鈥檚 more measured rise over the years instead of a new, heady normal, developed fairly quickly in 2022. The stock market鈥檚 fall, mass tech layoffs and crypto鈥檚 collapse left many investors and startups struggling to match 2021鈥檚 successes. Suddenly $445 billion of global venture funding in a year doesn鈥檛 look so bad.

Table of Contents

• Quarterly down
• Seed funding
• Early-stage funding
• Late-stage funding
• Unicorn pace slows
• A reckoning
• Methodology
• Glossary of funding terms

Quarterly down

Much of the 2022 decline was weighted in the second half of the year. Funding in the fourth quarter was marginally below the third quarter, which had already declined significantly, particularly at late-stage financings.聽

Fourth-quarter funding totaled $77 billion 鈥斅燿own 6% quarter over quarter and 59% year over year 鈥斅爉aking it the lowest since the first quarter of 2020, when $70 billion was invested.聽

As each funding stage attracts distinct investors, and is impacted in different ways through the downturn, let鈥檚 review funding for each quarter by stage.聽

Seed funding

Seed funding was the least impacted funding stage through last year鈥檚 downturn.聽

The fourth quarter was the first quarter in 2022 when seed-stage funding fell in a year-over-year comparison. Seed funding totaled $7 billion in Q4, down 35% year over year. The third quarter in 2022 was flat year over year, but the first two quarters were higher than a year earlier.聽

Early-stage funding

Early-stage funding totaled $31 billion in Q4, down by 54% year over year. The third quarter was also a much slower funding quarter, down 39% year over year. Prior to that, the first quarter was up and the second quarter down by less than 10% compared to a year earlier.

Series B fundings were down by a greater percentage than Series A fundings these past two quarters.聽

Late-stage funding

The pullback in late-stage funding started in the second quarter of 2022 and continued through each consecutive quarter.聽

Late-stage and technology growth funding was $40 billion, down 64% year over year for this past quarter, from $110 billion in Q4 2021, and flat quarter over quarter according to an analysis of 附近上门 data.

Unicorn pace slows

As expected, unicorn creation also slowed in Q4, when just 22 new unicorn companies joined The 附近上门 附近上门. That鈥檚 below the lowest quarterly count since the first quarter of 2020 with 23 new unicorns.聽

New unicorns in peak quarters in 2021 numbered over 150 companies joining per quarter.聽

A reckoning

The venture industry faced a reckoning in 2022.聽

In the pandemic-heavy days of 2021, startups growing the fastest were rewarded with abundant capital. A record number of technology startups went public well above their last private valuations and soared on listing. Momentum for special-purpose acquisition company IPOs peaked and . Thousands of buyers bought NFTs valued in the millions of dollars. And Bitcoin peaked at $65,000 in November 2021.聽

Capital to private companies came from an array of investors; venture firms with bigger pockets, sovereign wealth funds, private equity and hedge funds committed more to private tech, and corporate investors leaned into innovation in part by funding innovative tech companies.聽

As we entered 2022, the stock market crashed and spiraling public valuations put pressure on private company values. As capital became more expensive, conserving cash and demonstrating unit economics was advised by investors across the spectrum over the months that followed.聽

The market for NFTs slid, crypto dropped 鈥� and has not emerged as a technology with a strong use case, outside of a store of value.聽

The 鈥淕reat Resignation鈥� theme of 2021 turned on a dime in 2022 as broad layoffs hit across large and small public and private tech companies.

And the myth of the cleverest investor in the room was punctured with the collapse of eviscerating $38 billion in value.聽

Even artificial intelligence seemed to fall short of its potential with the closure of , a self-driving technology company that was unable to raise further funding despite its backing from聽 and . However, one bright spot in 2022 was the release of projects DALL-E for text to image creation and for conversational AI, an indication of productivity gains to be had from developments in AI.聽

The scaling back of late-stage funding will impact startups in 2023 as they prepare to raise funding at Series B and later. Round sizes have already come down, but investors will also be more cautious as a slew of startups 鈥攈aving held back 鈥� get ready to raise.聽

Methodology

The data contained in this report comes directly from 附近上门, and is based on reported data. Data reported is as of Jan. 4, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding values are given in U.S. dollars unless otherwise noted. 附近上门 converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to 附近上门 long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. 附近上门 also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. 附近上门 includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the 鈥淪eries [Letter]鈥� naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a 鈥渧enture鈥� round. (So basically, any round from the previously defined stages.)

Illustration: