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Last week saw one of the most anticipated moments for founders and investors in the innovation ecosystem. North American Accelerator Y combinatorwhich is considered one of the oracles of the startup market in Silicon Valley, held a new edition of its famous Demo Day, which serves as a showcase for accelerated startups to present their business to investors and potential customers.
The big surprise was that this time only one startup in all of Latin America was chosen to participate in the party. The entire region was represented by a Brazilian Volleys, a platform that works as a cellular operator for companies. In accordance with TechCrunch, the main reasons for the lack of representation in Latin America are a reduction in fintech participation and an increase in the search for artificial intelligence solutions – although this issue is more complex. But let’s go in parts.
The last time that YC in the summer of 2015, only one startup from the region chose North America. Since then, participation in Latin American countries has gradually increased until 2022. In that year, the Winter Batch of YC it featured 33 startups from Latin America, a number that dropped to 16 in Summer Batch 2022 and only 10 in Winter Batch 2023.
The accelerator has also scaled back efforts it previously made to encourage startup registrations, such as global rollout stops that included Brazil, Colombia and Mexico. In accordance with TechCrunch, the last meeting of this type took place in 2022, virtually. “The number of transactions in YC declined overall, not just in Latin America. But if we consider that about 8% of companies from the region in the W22 group, compared to the current one, where the region represents less than 1%, it becomes clear that Latin America has suffered disproportionately”, – assesses Cristobal Grifera, CEO and co-founder from Art Fintocmake Winter Batch 2021 da YC.
What happened?
O TechCrunch was looking for Y combinator for more information. However, the accelerator refused to comment. “Your team always says they invest in founders, not ideas. In other words, he doesn’t think in startup categories. However, their lots tend to reveal a lot of interest among entrepreneurs and investors. This year is clearly AI,” the report says.
AI startups dominated the final showcase day of Winter Batch 2024. AI startups represented almost twice as many as Winter Batch 2023 and almost triple as many as Winter Batch 2021. On the other hand, fintech participation decreased significantly for the same period. . Only 8% off last batch YC listed as fintech, compared to 24% of the Winter Batch 2022.
“Historically, about a third of the 231 Latin American companies went through YC focused on fintech. This data may largely explain why Latin American startups are less present in this batch. In a region with a strong need for financial inclusion, fintech has long been a favored sector for local entrepreneurs. In contrast, deep tech companies make up only 10% of the startup ecosystem in Latin America and the Caribbean. Deeptech and fintech are not mutually exclusive; For example, AI-powered fraud detection falls under both categories. But one YC the desire for artificial intelligence will still be less in line with the technological scenario in Latin America,” explains TechCrunch.
But the reason would not be exactly AI, but rather an approach to Y combinator regarding this technology. Of the 89 AI startups in the latest batch, 73 were based in the US and Canada, three in Europe and 26 remotely. “Despite virtual programs, the YC has really been a Bay Area-based program for most of its 15 years. In a conversation between Dalton Caldwell and Michael Seibel, longtime partners in the YCSeibel acknowledged that startups can still “win” elsewhere, but argued that the San Francisco Bay Area is still the place to be,” the report emphasized.
Latin American potential
Although there are many founders who have passed YC describe the experience as “transformative”, Latin America has a strong competitive potential to stand out globally even without necessarily going through an accelerator.
“If you look at the biggest startups in Latin America over the last five years, they didn’t make it through YCLatitud co-founder and COO Gina Gotthilf told TechCrunch. “We don’t know why, but maybe it’s because YC better assesses the US market and opportunities. Latin America is complicated. There is a lot of regional context that is difficult to understand unless you have local understanding and a strong network,” he added.
Despite her optimism about the region, Gina understands why the AI-focused group will include fewer Latin American startups. “I believe that the companies that are doing artificial intelligence as a core business and that are creating LLM programs in Silicon Valley have a huge advantage right now, and that the real innovation in this sector will not come from Latin America anytime soon.” However, she says that situation could soon change as more and more founders in the region start to think globally.
TechCrunch points out that many startups in the region are not applying YC or seek venture capital, with many choosing to go the bootstrap route. “This has pros and cons: it encourages startups to improve efficiency, but it can also hinder larger ambitions,” the report analysed. According to the survey “State of SaaS LatAm 2024″about 31% of SaaS startups in the region are bootstrapped.
