Latin American startups are increasingly taking on high-interest loans as venture capitalists pull back on equity investments in the region.
Debt represented about one-third of all venture capital raised in the first half, the highest proportion on record, according to data from Lavca, a nonprofit association for private capital investment in Latin America.
Venture spending has declined globally as policymakers raised interest rates, but the impact has been acute in Latin America’s relatively young startup scene. Due to a lack of options, companies are being forced to accept terms and conditions such as minimum return guarantees, make-wholes and equity kickers — on top of high interest payments, Goudie said.
Habi raised about $300 million in debt lines over the last 12 months at very low rates, allowing it to grow without diluting shareholders further, Kantt said.
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