Brazilian startup Salvy, an enterprise mobile carrier, is the only Latin American-based company included in Y Combinator's latest batch, the accelerator confirmed to TechCrunch.
This is a significant decrease compared to cohorts that took advantage of the accelerator during COVID-19, which were remote, but is also similar for more recent classes. Y Combinator's winter 2022 batch included 33 Latin American companies, followed by 16 in summer 2022 and 10 in winter 2023.
One caveat to the Winter 2024 tough group data points is that the directory is not exhaustive. Some companies prefer to remain in stealth mode. But that also doesn't explain the steady decline of Latin American startups in the company's startup pool, which now appears to be in full decline, and that post-pandemic Y Combinator batches have once again become smaller. It also cannot explain the fact that it is now held face-to-face. In fact, you have to go all the way back to the summer of 2015 to find his one-man group of Latin American participants.
The promotion agency also cut back on previous efforts to encourage startups to apply, including a global outreach tour that once included visits to Brazil, Colombia and Mexico. According to research by TechCrunch, the last time this kind of tour took place was in 2022, and it was done virtually. This is one of several things that will change at YC for him after 2022, returning to the in-person batch.
Cristóbal Griffero of startup Fintoc, part of YC's W21 group, said: “The number of YC deals is declining across the board, not just in Latin America. However, in the W22 batch, about 8% of companies were from this region; Considering that the region accounts for less than 1%, it becomes clear that Latin America is disproportionately affected.”
Unpacking what's going on is worth knowing not only what it says about Y Combinator in 2024, but also about the broader Latin American startup landscape and where tomorrow's Rappis fits in. It's an exercise.
Yesterday's taste?
YC declined to comment. But now we know that team says it always funds founders, not ideas. In other words, it does not take into account the startup category. Still, that batch usually reveals a lot about what's popular among entrepreneurs and investors. This year it's clearly AI.
Almost double the number of winter 2023 batches, nearly triple the number of winter 2021 batches, and AI startups dominate Y Combinator's winter 2024 demo day, my colleague Kyle Wiggers said. He pointed out that it was.
Meanwhile, fintech representation has shrunk compared to previous groups. Only 8% of YC's newest group is listed as a fintech on its board of directors, compared to 24% as of winter 2022. Historically, about a third of the 231 Latin American companies have passed through his fintech-focused YC.
These data points could largely explain why Latin American startups are underrepresented in this group. Fintech has long been a favorite area of entrepreneurs in a region where there is a strong need for improved financial inclusion. In contrast, deep tech companies make up just 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 fits into both categories. However, AI-hungry YC will still have weak ties to the Latin American tech scene.
But it's not just about AI. His YC work on AI adds to the geographic challenge. Of the 89 AI startups included in the latest group, 73 were based in the US and Canada, three in Europe, and 26 in remote locations. So much for the AI buzz in Paris.
Perhaps the French AI scene is overrated. However, judging by the number of French-accented Demo Day pitchers, there were not fewer European founders supported by YC than in previous years, but more French representation. Only this time, they're probably not based in Europe – only 13 of his batch participants, according to YC's directory.
Despite being a virtual program, YC has actually been a Bay Area-based program for most of its 15 years. And in a conversation with YC's longtime partners Dalton Caldwell and Michael Sabel, Sabel acknowledged that startups can still “win” elsewhere. He insisted that the San Francisco Bay Area remains the right place.
“Access to the Bay Area is relatively easy.” [compared] to all the other things you have to do to be successful.Choosing where to live is relatively easy [compared] For everything else, you need to choose correctly. Why not get the easy win? It's a simple percentage multiplier. And this game is very difficult, so it is better to choose an easy game. ”
This belief is even more widely shared among AI startups, Brazilian entrepreneur Bruno Vieira Costa told TechCrunch. “My own company builds generative AI models [and] “Being based in Rio, I don't think that's necessarily true, but I understand that for younger founders this is more of a mindset and reference thing,” says No Code. said Vieira Costa, whose startup Abstra joined Y Combinator in Summer 2021. batch.
Abstra's founders believe that in-person batches are better for founders' success, but that doesn't mean there aren't tradeoffs. For many Latin American founders, relocating to the Bay Area will be difficult and perhaps riskier. Vieira Costa said their experience, college background and professional networks don't resonate well with U.S. investors. Conversely, there were scattered references to the United States throughout Demo Day, with founders mentioning their company's “national” reach and degrees whose reputation is not necessarily international.
Perhaps YC is also returning to its US-centric roots, although no particular group is trending. YC's latest solicitations for startups ask companies to “bring manufacturing back to America” (a term that many in Latin America find offensive), and in the “New Defense Technologies” section. Only the United States is mentioned. US military research and development area. […] “This decade is the time to return Silicon Valley to its roots,” wrote partners Jared Friedman and Gustav Alstromer.
If YC continues to lean toward U.S. companies, that doesn't mean its group will become less diverse. Several of his YC alumni with Hispanic founders were based in the US at the time of their applications.
Do Latin American startups need YC?
Founders who have gone to YC often describe the experience as “life-changing,” and the impact typically extends beyond the company. For example, Rappi, a Colombian startup and YC alumnus, has been transformed into a startup factory. Investigating its synergies, entrepreneurship network Endeavor found that 130 of its founders had previously worked for the on-demand distribution company, and that its founder had also invested in 20 of his startups. I discovered that.
Aside from Lappi being on the list of highest-earning YC alumni, there isn't much overlap between the accelerator's bet on Latin America and the region's top startups.
“If you look at the biggest startups that have come out of Latin America in the last five years, they didn't make it through YC,” Gina Gotthilf, co-founder and COO of Latitud, told TechCrunch via email. . “I don't know why, but YC may be better at assessing the U.S. market and opportunities. Latin America is difficult to understand without knowing the local situation and having a strong network. There’s a lot of local context that’s difficult to do.”
Latitud describes itself as “the operating system for every venture-backed company in Latin America” and provides a software platform for deal-closing with funding from a16z and NFX. This includes writing your own checks. At one level, YC becomes a competitor, but also a potential co-investor. The latest batch, Brazilian company Salvy, is a portfolio company of his Latitud, and “we were the first investors,” Gothilf said.
Despite his bullish stance on the region, Gotthilf also understands why fewer Latin American startups are included in the AI-heavy crowd. He said, “Most of the companies that are marketing [YC] We're doing something with AI. I believe that the core AI companies building his LLM in Silicon Valley are currently having a huge impact and that real innovation in this field will not come from Latin America anytime soon. . ”
This is also a reminder that many startups in the region are not applying to YC and are not seeking VC funding at all. His recent report on SaaS startups in Latin America shows that a third chose the bootstrapping route. This has advantages and disadvantages. While it can make startups more efficient, it can also get in the way of larger goals.
Griferro believes another factor is regional fragmentation, which makes it more difficult for founders to support each other, but he remains optimistic. “This is likely to change soon, as more founders in the region are starting to think globally, rather than imposing the self-imposed limitations of ‘X in Latin America.’”
Unlike predecessors like Mercado Libre, these companies have attracted interest from local and global venture capital firms and are less diluted, which was not common before YC became a potential rival. He will provide conditions.
The question remains whether this calculation will add up for investors, as large-scale exits remain a rare event for Latin American startups. But even if you're successful, doing it outside of YC means you won't be able to join our 10,000-person alumni network. A lose-lose situation, or a price to pay for SF to evolve from a “doom loop” to a “boom loop”? you decide.