Insights by Pygma - What's up with LatAm, and what we behold for this roller coaster year.
Insights is a new way to get a first-look into trending industries, top deals happening, VC tools, our own portfolio & more. In this edition, we bring you our 2024 starter.
TLDR
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๐ฆ Foreword: How we see AI shaping our portfolio!
๐ฅ Monthly Digest: The 2024 US Venture Capital Landscape
๐จ๐ด Bonus:
๐ฆ๐ท Country Deep-Dive [Argentina]: What a treat! This country has fascinating food, significant events for founders and VCs coming up and an incredible landscape for the next wave of entrepreneurs.
๐ ๏ธ Tool insights: In this edition, we reviewed 2 AI Powered tools for investors.
๐ Thatโs it, thanks for reading!
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AI is everywhere, we know. But exactly where?
We keep hearing about the ubiquitous AI, but itโs becoming such an overused word that sometimes it becomes hard to keep track of where it actually is.
๐ฟ Agriculture: We're transcending traditional practices with genomic sequencing and precision agriculture. Technologies like CRISPR are revolutionizing crop resilience, while IoT-based devices provide a new wave of edge computing capabilities to augment the agtech capacity. Precision agriculture allows optimization of costs, leading to sustainable farming solutions.
๐ Cybersecurity: The rise of quantum computing promises to revolutionize encryption, but it also poses new challenges in data security. Advanced cryptographic techniques and AI-driven threat detection systems are becoming indispensable in safeguarding our digital world.
๐ Operations: The integration of AI and IoT is leading to smarter, more efficient operational frameworks. Technologies like predictive maintenance and real-time analytics are reducing downtime and enhancing productivity in manufacturing and beyond.
๐งช Life Sciences: DNA being used for high-density data storage, advancements in genetic sequencing for disease prevention, and the development of lab-grown, synthetic foods that could revolutionize the food industry are only some of the various advancements that will keep pushing the bar forward.
โ๏ธ Law & Government: AI and blockchain are set to transform legal and governmental operations. From smart contracts to AI-assisted legal research and e-governance models, technology is paving the way for more efficient, transparent systems. Constitutional AI is also beginning to be explored in order to create fairer systems with non-biased models.
๐๏ธ Smart Cities: IoT is at the forefront, driving smart city initiatives. Technologies like 5G, AI-driven traffic management systems, and energy-efficient buildings with new more modular materials are converging to create urban environments that are not only smarter but also more sustainable.
๐ Transport: The transport sector is gearing up for a major overhaul with autonomous driving technologies, eVTOLs for urban air mobility, and V2V communication systems enhancing road safety. Hypersonic travel, underground hyper-speed roads, low-orbit flights and new imaginative ways of moving are going to keep coming.
โ๏ธ Cloud & Edge Computing: We're witnessing a shift from centralized cloud computing to edge computing, where data processing happens closer to the data source. Cloud is also being disrupted as non-incumbents join the space trying to bring new pricing and storage models.
๐ Education: Digital transformation in education is accelerating. From AI-driven personalized learning platforms to VR/AR in classrooms, technology is reshaping the educational landscape, making it more interactive and accessible.
๐ฆ Logistics: Drones are not just flying cameras anymore; they're becoming vital in logistics for efficient, automated deliveries, significantly reducing the time and cost involved in last-mile delivery. Smart mapping of cities and interconnected roads with real time data will allow for higher efficiencies and lower delivery times.
๐ณ Finance: The financial sector is witnessing a revolution with AI-driven credit checks and alternative scoring systems, providing more nuanced and inclusive financial services. Personalized AI assistants are aiding in financial planning and management, giving access to tools only previously available to the 1%.
๐ Connectivity: Projects like Starlink are redefining global connectivity, aiming to provide high-speed internet across the globe, even in the most remote areas.
๐ค Human x AI Collaboration: The synergy between human creativity and AI's analytical power is fostering innovations in various fields, leading to smarter decision-making and enhanced problem-solving capabilities. Many sectors will increase collaboration like in photography, arts, literature, philosophy & many more that require higher human inputs.
๐ IoT: From smart home systems to wearable tech like vision-enhancing devices, IoT is making our everyday lives more connected and efficient. In the industrial domain, IoT is revolutionizing manufacturing processes, leading to what's often called the fourth industrial revolution.
๐ฎ Quantum Computing: While still in its nascent stage, quantum computing is expected to bring colossal advances in computational power. The concept of Quantum as a Service (QaaS) might become crucial before it becomes widespread tech in more in practical applications.
๐ Space Technology: Satellite technology is advancing rapidly, enabling not just earth observation but also new forms of material production in space.
๐ Energy: The focus is shifting towards cleaner energy sources like advanced nuclear technologies and smart grids, which promise to make energy consumption more efficient and less harmful to the environment.
๐ฅ Work: The future of work is being reshaped by collaboration tools and the increasing need for up-skilling and re-skilling in the face of rapid technological changes.
๐ฎ Gaming: Advances in VR and AR are transforming gaming into a more immersive and interactive experience, blurring the lines between virtual and real worlds.
๐ฉบ Health: In healthcare, we're seeing significant strides in drug discovery and personalized medicine, thanks to advancements in AI and genomics.
The uses we found are short of the myriad use-cases AI is currently experimenting, however, as we keep uncovering this incredible sea of opportunity, we thought of sharing the top usages weโve been watching closely.
๐ฅ Monthly Digest: The 2024 US Venture Capital Landscape
This segment is brought to you by Curious Compass.
Decline in VC Fundraising: 2023 saw a significant drop in VC fundraising, with only $84 billion in new commitments, the lowest since 2017. This decline is attributed to liquidity challenges and poor interim fund performance. Limited Partners (LPs) have also become more selective due to depressed public market valuations and limited exit opportunities.
Projected Rebound in 2024: A slight rebound is anticipated, with estimated new capital commitments around $64 billion in Q3 2024 similar to 2020 levels. The environment is expected to stabilize, but much depends on public market valuations and technology IPO activity.
The Return of IPOs? Positive Signs, But Expect a Slow Build
Downturn to slow build: 2022 saw a drastic reduction in IPOs due to economic volatility and investor sentiment. Indications of a startup IPO comeback in 2024, influenced by softer economic landing and potential Federal Reserve rate cuts. A recovery in IPO value is anticipated, but a full-fledged boom is unlikely due to lingering uncertainties.
Valuations: Down Rounds to Persist amid Lasting Reset
Valuation Drop: There's been a significant drop in startup valuations across all stages. The valuation reset will continue, with private market valuations expected to decline further by 10-15%. Founders need to adjust expectations in this environment where raising at flat valuations is considered successful.
Nontraditional Investors: A 2024 Rebound from the Rate-Induced Retreat
Retreat in 2022-2023: Nontraditional investors retreated due to rising interest rates. A stable or declining rate environment in 2024 could attract more non-traditional participation in startup investing.
Unicorn Dynamics: Down Rounds and IPOs to Slow Creation
Down Rounds and Valuation Rationalization: Many unicorns will face down rounds and valuation cuts in 2024.: A 10-15% decrease in active unicorns and a 20% drop in aggregate valuations is expected.
Late-Stage Deals: Insider Participation to Bridge the Capital Gap
Capital Crunch: The late-stage funding landscape faces challenges, with a significant decrease in deal counts and valuations. Insider rounds will play a crucial role in keeping companies afloat in 2024.
Sector Watch: AI Winter Thaws, Fintech & Crypto Remain Chilly
AI Sector: Expected to see renewed interest and investment in 2024.
Fintech: Likely to face continued challenges without fundamental industry shifts.
Crypto: Remains ice-cold with little enthusiasm expected in 2024.
Geographic Insights: Globalization Slowdown Means More Domestic Focus
Decreased Cross-Border Investment: Geopolitical tensions and logistical costs will lead to a focus on domestic and friendly adjacent markets.
Accelerators and Microfunds: Specializing in Troubled Times
Increased Activity Expected: Accelerators and specialized microfunds will likely increase their activity in 2024, focusing on early-stage opportunities.
Conclusion: Cautious Optimism with Ongoing Evolution
2024 is expected to be a year of moderate progress with an ongoing valuation reset and gradual IPO reopening. The VC industry is moving towards a more traditional role, focusing on sustainable success and rational valuations.
Thank you to curious compass for the material!
Dealflow on the radar:
Pardux (PY1)ย ๐ช๐จย - ย Omnichannel sales management platform that integrates logistics and financial solutions with sales channels in one place.
We help SMEs in the retail sector to improve their omnichannel experience, increasing the competitiveness and quality of their sales process.
Key Insights:
- We grew 3x in 2023
- Opened Colombian operation ๐จ๐ด
- Raised: 135k angels
- Activate clients: +250ย
- Added an agreement with Bancolombia to support SMEs and small businesses.
- In 2024 Netlife, the most important internet provider in Ecuador with 1M customers, selected us as a product for their portfolio and their customers will be able to buy Pardux from their channels.
Key Investors: Buen trip Ventures, David Alvo (Impacta.vc) , Daniel Ospina (pygma) , Andres Cano (pygma), Andres Campo (pygma), Mario Larrea (Pagย Law).
๐ Want to get an intro? Reply to us at daniel@pygma.co, and we will connect you.
Argentina in the spotlight ๐ฆ๐ท
Foreword from our Argentinian founder Maximo Cabanillas, Qubik:
โI believe it is no news that Argentina has talent and world-class export startups. It is also not new that the number of startups in our country is growing rapidly. In 2024, I think that Argentine startups, like all startups worldwide, face the main challenge of surviving in a world where access to investment is quite limited due to the high prevailing rates. However, I consider this a situation that healthily influences startups, as it forces the creation and maintenance of profitable projects or at least those aiming for breakeven in the short/medium term. Investors no longer support an idea, but a tangible operation; they want revenue and a clear path to profitability, and I believe this corrects the fantasy that was lived in previous years where access to financing was abundant.
On the other hand, speaking more precisely about Argentina, measures have been taken for some time to promote the development of the technological industry, such as the Knowledge Economy Law. But now, in addition, the change of government and the ideology of the incoming administration will undoubtedly favor business and operations in our country, and they are already opening Argentina to the world, eliminating barriers and facilitating trade and all types of international relations. This is undoubtedly a huge opportunity for Argentine startups, facilitating the regionalization of companies, international commercial relations, etc. And for Argentine talent, it is also an enormous possibility to export their knowledge to the entire world.
The year is just beginning, and the new government is only a few days older than the year. It will be a matter of time to see if all that is proposed is fulfilled, and all that is foreseen happens. Meanwhile, at least for today, Argentina has renewed hope, and in these times, that is not a small thing at all."
Venture Capital Funding Trends: Argentina has not been a large recipient of venture capital by global or regional standards. In 2023, companies in Argentina raised just over $250 million in known seed and venture funding, which is relatively modest compared to Brazil, the largest startup hub in Latin America. The funding in 2022 was significantly higher, indicating a decrease in 2023.
Key Investment Sectors: The main areas of investment in Argentina's startup scene have been commerce and payments. The largest funding round in 2023 went to GeoPagos, a payments provider. Lemon Cash, a crypto exchange, and Clicoh, an e-commerce fulfillment provider, were also among the top recipients of investment.
Comparative Context: It's important to note that 2021 was an extraordinary year for Latin American startups in general, with around $19.5 billion invested in the region. This makes the reduction in funding in 2022 and 2023 appear more dramatic, coming down from a very high base.
Success Stories: Despite its smaller size, the Argentine startup ecosystem has produced significant successes. MercadoLibre, an online marketplace, is a prime example with a valuation of over $44 billion. Other notable firms include Despegar, a travel booking platform, and Bioceres Crop Solutions, focused on agricultural productivity.
Potential in Early-Stage Companies: The future of the Argentine startup scene might lie in its newer, earlier-stage companies. Innovations are emerging across various sectors, including edtech, foodtech, and CRM.