The venture capital activity in Latin America is coming back, and startups there have a new pool of capital to go after. NXTP, a venture capital firm investing in early-stage, business-to-business startups, secured $98 million in capital commitments for its third fund — its largest fund to date.
Touting itself as one of the region’s earliest venture capital firms, NXTP was founded in 2011 by Ariel Arrieta, Marta Cruz and Gonzalo Costa. It has offices in Buenos Aires, São Paulo and Mexico City.
Since that time, the firm has seen the growth of the startup ecosystem ebb and flow. Darly Bendo, managing partner of NXTP, recalls how little investment was made just five years ago when investing from the firm’s second fund.
“The ecosystem was obviously still very nascent at that moment,” Bendo told TechCrunch. “The annual investment in the region was still under $1 billion of total capital. In 2020 and 2021, when it was closer to the peak of the market, a lot of international funds came in, and we saw that number increase to about $15 billion of annual investments, almost over a 10x increase from 2018 through 2021.”
Similar to the rest of the world, in the past few years there was a tapering off of investments, smaller rounds and companies taking longer to raise at the growth stage, Bendo said.
NXTP is also seeing a shift in experience and quality of the founders and teams starting new companies in the region. Ten years ago, less than 10% of founders were second- or third-time entrepreneurs, with most coming from non-technology backgrounds, Bendo noted. Today, the number of repeat entrepreneurs is as high as 30% or 40%, and many founders have previous experience in a tech company.
What has remained strong during this time are trends around B2B software and cloud for enterprise and mid market. Particularly the penetration of workflow software in Latin America, which Bendo said “is still very much in the early innings.”
To that point, NXTP seeks out B2B technology verticals, including cloud and software, fintech and payments, e-commerce and enablers, B2B marketplaces and data and AI. Its funds invest at the pre-seed, seed and Series A stages with checks ranging from $500,000 to $5 million. Capital is also being held for follow-on investments.
To date, the firm invested in over 130 companies, including Auth0, Nuvemshop and Mural that have reached unicorn status, with over 30 exits. It has also invested in companies like product recommendation platform Inventa.
NXTP Fund III represents over a 2x increase from the size of its previous fund, enabling the firm to invest in between 25 and 30 companies this time around.
A majority of NXTP’s existing limited partners backed the new fund. Those include U.S. and global institutional funds, regional fund-of- funds, multi- and single-family offices, high-net-worth individuals and technology founders. Several new global institutional investors joined as well, Alexander Busse, managing partner of NXTP, said in an interview.
Brazil has been a major focus for the firm and will continue to be with the new fund as well. More than half of NXTP’s investments have been made in that country with the other half going into startups in Mexico, Colombia, Argentina, Chile and the rest of Latin America.
The firm has already made some investments from the new fund, with Busse noting one in online payments platform Barte and Teachy, an edtech company in Brazil providing an AI-powered platform for teachers to help with after school work, lesson plan creation and exams.
“We’ve had a lot of success within these categories that have very strong secular tailwinds behind them,” Busse said. “They all remain evergreen, at least for now. The market depends on serendipity of an incredible founding team, potentially moving into one of those spaces and building something where there’s large opportunities. We remain open to finding the best teams that are building within those domains.”