New fund to support startups in Latin America
IFC, a member of the World Bank Group, is supporting the development of the early-stage startup ecosystem in small and medium countries in Latin America with an investment in Carao Ventures, the first venture capital firm in Central America. This partnership promotes the mobilization of private capital towards promising early-stage venture opportunities, creation of tech-based enterprises and high-value add jobs in the region.
Based in Costa Rica, Carao Ventures focuses on pre-seed, seed, and Series A investments in Latin American startups, with focus in Central America, the Dominican Republic, and the Andean region.
IFC’s financing of up to US$3 million dollars in the US$35 million Carao Ventures Fund I, is IFC’s first investment in Central America within IFC’s Startup Catalyst program, a facility that is backing commercially-oriented incubators, accelerators, seed funds, and similar structures, across emerging markets, through equity (and quasi-equity) investments. The Startup Catalyst program supports the development of local venture capital ecosystems that can boost entrepreneurship, improve products and services, and the create highly skilled, technology-enabled jobs.
“With this new fund we intend to invest in the most talented entrepreneurs in the region, and help them develop world-class technologies and innovative business models to disrupt traditional industries and create solutions for relevant human challenges,” said Allan Boruchowicz, Founder and Managing Partner at Carao. “Leveraging on IFC’s funding and expertise, we will be able to channel capital and other valuable resources to a region that has been historically neglected by venture capital” Boruchowicz added.
The Central American venture capital ecosystem remains underdeveloped despite record investments in Latin America. Less than 1% of the approximately $4 billion of venture capital allocated to Latin America in 2020 was deployed to Central American companies, according to LAVCA. Despite growing interest, the demand for institutional funding continues to outpace the supply of capital.
“This type of financing is not readily available for startups, and with the COVID-19 pandemic it is even more important to provide the financial market with innovative tools to mobilize funds to the private sector, and especially to small businesses,” said Sanaa Abouzaid, IFC Regional Manager for Central America.
IFC’s investment in Carao Ventures will streamline their ability to expedite the deployment of capital in targeting markets that have historically been underserved and overlooked by Venture Capitalists.