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Brazilian startup Salvian enterprise mobile communications company, was the only Latin American-based company in Y Combinator’s latest batch, the accelerator confirmed to TechCrunch.
This is a significant drop compared to the groups that went through the accelerator during the coronavirus when it was remote, but also the more recent classes: There were 33 Latin American companies in Y Combinator’s Winter 2022 batch, 16 in Summer 2022 and 10 in Winter 2023.
One caveat to this stark winter 2024 collection data point is that the evidence is not comprehensive; Some companies prefer to remain incognito. But that doesn’t explain the steady and now seemingly complete decline of Latin American startups in the company’s startup pools, nor does it explain the fact that post-pandemic Y Combinator payouts are smaller in scale and in-person again. In fact, you’d have to go back to the summer of 2015 to find a group with just one participant from Latin America.
The accelerator also scaled back efforts it had previously undertaken to incentivize startups to apply, such as global outreach tours that previously included stops in Brazil, Colombia or Mexico. The last such round took place In 2022It was hypothetical, TechCrunch has learned. It’s one of the many things that has changed at YC since 2022 and its return to in-person payments.
says Cristobal Griviero, who started it Fintoc He was part of YC’s W21 group: “The number of YC deals has decreased in general, and not just in Latin America. But if we take into account that about 8% of companies were from the region in the W22 group, versus the current group where the region represents less than 1 %, it becomes clear that Latin America is disproportionately affected.
Breaking down what’s happening is a worthy exercise for what 2024 Y Combinator has to say, but also for the state of startups in Latin America more broadly, and where Rappis could fit into the future.
Yesterday’s flavor?
YC declined to comment. But now we know that her team always says they fund founders, not ideas. In other words, don’t think in startup categories. However, their collections usually reveal a lot about what’s popular among entrepreneurs and investors. This year, it’s obviously A.I.
With nearly twice the number from the Winter 2023 cohort and nearly three times the number from the Winter 2021 cohort, AI startups dominated Y Combinator’s Winter 2024 demo day, as my colleague Kyle Wegers noted.
On the other hand, fintech representation has shrunk compared to previous batches: only 8% of YC’s latest batch listed them as fintech in their director, compared to 24% in the winter of 2022. Historically, about a third of the 231 Latin American companies that passed through YC focused on financial technology.
These data points can largely explain why Latin American startups have such a low presence in this batch. In a region that desperately needs improved financial inclusion, fintech has long been a sector that entrepreneurs have loved to engage with. In contrast, deep tech companies represent only 10% of the startup ecosystem in Latin America and the Caribbean.
Deep tech and fintech are not mutually exclusive; For example, AI-powered fraud detection would fall into both categories. But the AI-hungry city of youth will still be less in tune with Latin America’s tech landscape.
However, it’s not just AI; YC’s handling of AI is what makes it more difficult geographically. Of the 89 AI startups in the latest batch, there were 73 companies based in the United States and Canada, 3 in Europe, and 26 in remote regions. Lots of AI hype in Paris.
Maybe the French AI scene Exaggerated. But judging by the number of shooters on demo day who speak with French accents, YC is supporting fewer European founders than in previous years, where France was well represented. Only this time, they may not be based in Europe, as there are only 13 participants in the batch, according to YC Guide.
Despite its virtual programming, YC has actually been a Bay Area-based program for most of its 15 years. And in A Conversation between Longtime YC partners Dalton Caldwell and Michael Siebel acknowledged that startups can still “win” elsewhere, but argued that the San Francisco Bay Area is still the place to be.
“Getting into the Bay Area is relatively easy [compared] To all the other things you need to do to succeed. Choosing where to live is relatively easy [compared] For all other things you have to choose correctly. Why not pick up the easy wins? It’s an easy double ratio. This game is very difficult, so you might as well take the easy games.”
This belief is more widespread For startups in the field of artificial intelligenceBrazilian businessman Bruno Vieira Costa told TechCrunch. “My own company works on building creative AI models [and] “It’s based in Rio, so I don’t see this as necessarily true, but I understand that for startup founders, this has to fit the mindset and the references,” said Vieira Costa, owner of his own no-code startup. Apstra He was part of Y Combinator’s summer 2021 cohort.
Abstra’s founder believes that personal payments are better for a founder’s success, but that doesn’t mean there aren’t trade-offs. Moving to the Bay Area is difficult for many Latin American founders, and perhaps even riskier. Their experiences, university backgrounds and professional networks do not resonate with American investors, Vieira Costa said. Conversely, American references peppered Demo Day, with the founders mentioning their “national” reach and their credentials, whose reputation is not always universal.
While one collection does not represent a trend, YC may also be returning to its US-focused roots. YC’s most recent application for startups called for companies to “bring manufacturing back to America” — a term many in Latin America find annoying — and the “New Defense Technology” section only mentioned the U.S. “Silicon Valley was born in the early 1900s as a research and development area for the U.S. military . […] “This decade is the time to return Silicon Valley to these roots,” partners Jared Friedman and Gustav Alstromer wrote.
If YC continues its tilt toward corporate America, that doesn’t mean its collections will be less diverse. several YC alumni with Hispanic founders They were residing in the United States when they applied.
Do Latin American startups need YC?
Founders who went to YC often call the experience “Life changes“, and the impact usually extends beyond their companies. For example, Colombian startup and YC alum Rappi has turned into a startup factory. Consider it Double effectentrepreneurship network Endeavor discovered that 130 founders previously worked at the on-demand delivery company, whose founders have also invested in two dozen startups.
Rappi is on the YC alumni list With the most revenueBut other than that, there’s not much overlap between Latin America’s bets and the region’s best startups.
“When you look at the biggest startups coming out of Latin America in the last five years, they haven’t gone through YC.” Latitude Co-founder and COO Jenna Gotthelf told TechCrunch via email. “We don’t know why, but YC is probably better at evaluating the market and opportunities in the U.S. Latin America is tough, there’s a lot of local context that’s hard to understand if you don’t have local understanding and a strong network.
Latitud describes itself as “the operating system for every venture-backed company in Latin America” and offers a deal-making software platform, with funding from a16z and NFX. This also includes writing their own checks. On some level, this makes YC a competitor, but also a potential co-investor. Its latest batch, Brazilian company Salvy, is a subsidiary of Latitud “where we were the first investor,” Gottelf said.
Despite her optimism about the region, Gotthelf can also see why the AI-heavy group contains fewer startups in Latin America. “Most companies promote [YC] They do something in artificial intelligence. I believe that the core AI companies building MBAs in Silicon Valley have too much influence at the moment and that real innovation in this area will not come from Latin America anytime soon.
It’s also a reminder that many startups in the region don’t apply to YC, or even seek venture capital funding at all. A recent report on SaaS startups in Latin America showed that a third of them went the bootstrap route. This has both pros and cons: it pushes startups to be more efficient, but it can also get in the way of achieving greater ambitions.
Griviero believes another factor is the fragmentation of the region, which makes it difficult for founders to support each other, but he is optimistic. “This situation is likely to change soon, as I see more founders from the region starting to think globally, rather than imposing an ‘X for Latin America’ limit.”
Unlike previous companies like Mercado Libre, these companies will find venture capital firms both local and global willing to look at them and offer less lenient terms that were not the norm before YC became a potential competitor.
There is still a question about whether the accounts will benefit investors, given that massive exits are still a rarity for startups in Latin America. But even if they succeed, doing so outside of YC means they won’t be part of its network of 10,000 alumni. A lose-lose situation, or the price to pay for science fiction’s evolution from a “death loop” to a “boom loop”? It’s your decision.
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