The rise of the mega-hybrids
The potential for internet growth in Latin American remains among the highest in the world, though that is not sufficient to support large numbers of start-up companies. Financing is hard to come by in both the public and private equity markets. But Latin American internet companies are about to show the rest of the world where the new economy is heading. The convergence of internet, traditional media and telecom businesses is at hand.
Since the Nasdaq market crash in March this year only one Latin American internet company, AOL Latin America, has managed to go public.
It is one of the few firms with a record of good performance, granted by its market-leading parent, AOL. Even that deal barely succeeded and the vendor and lead banks had to reduce the initial offer price of the shares by half. The feeling persists that if they cannot do it, who can?
Without a feasible exit strategy, venture capital, too, is hard to find these days for Latin American internet plays. Private placements of equity are the last resort, since valuations there also came down by up to 80%, in line with public equity values. The lucky few will be able to sell themselves to industry buyers. But many more start-ups will burn through their cash before any chance of raising new funds arises.