(Bloomberg) -- Venture investors sitting on nearly $4 billion are turning aggressive after a dire year for Latin America’s startups.

After largely waiting on the sidelines in 2023, some of the largest funds in the region say they are ready to make fresh investments in companies working on everything from climate technology to artificial intelligence. They’re wading back into the high-risk realm of tech startups as Latin America’s central banks embark on interest rate cutting cycles. 

“Investors will look for alternative ways to invest their money,” said Hernan Kazah, co-founder of Kaszek Ventures, the region’s largest venture capital firm. “The Latin American case for tech is compelling because there are more gaps, so there are more opportunities.”

In January alone, the region’s startups raised $315.5 million in 63 investment rounds, according to Distrito, a Brazilian data tracking firm. That was the most amount of activity in three months, and included a $40 million fundraising round for Argentina payments startup Pomelo, which was led by Kaszek. 

Also last month, Conta Simples, a Brazilian developer of digital bank accounts, raised $41.5 million in a series B round led by Base10 Partners. And more recently, Vemo, a startup offering electric vehicle taxis through Uber Technologies Inc.’s app in Mexico, secured $60 million to expand its EV business and charging infrastructure. 

Few expect a return to the bonanza days of 2021 when venture spending in the region topped $15 billion, minting a crop of so-called unicorns — private companies valued at $1 billion or more — and attracting several foreign funds. 

Instead, investors are being more choosy with where they write checks. Last year, venture funds dedicated to the region raised $2 billion, a 40% increase from 2022, according to data provided by PitchBook. 

At the same time, Latin American startups suffered their worst year of investments since 2018. They received about $4 billion last year, according to Lavca, a nonprofit association for private capital investment in Latin America. 

That’s left dedicated Latin America venture funds with at least $3.7 billion waiting to be deployed, according to the latest PitchBook data. 

“Good companies will get funded, but they will be funded at fair values,” said Luis Cervantes, a Mexico-based managing director for US private equity firm General Atlantic. Investments to the region currently make up about 10% of the portfolio for General Atlantic, which deploys $7 billion to $9 billion globally per year.

“There is enough dry powder in Latam with both large local dedicated funds serving the region and global investors such as ourselves,” he added. The firm this week led a $50 million series C funding round for Bold, a Colombia-based financial technology company.

Kaszek has been sitting on $1.3 billion, which should be deployed in the next four to six years. Kazah expects to start investing capital from the new funds this year, but the amount will depend on the opportunities seen in the market, he said.

Read: Venture Fund Has $1 Billion Ready for Latin America Tech Rebound

Notable entrant Bicycle Capital also added to the region’s cash pile. Started by former SoftBank Group Corp. executives Marcelo Claure and Shu Nyatta, it announced a $500 million Latin America fund in 2023. 

Meanwhile, global funds like QED Investors are seeking new equity investments in the region after “going on defense” over the last two years, said Mike Packer, partner and group lead for Latin America. 

“Latin American companies are growing faster than portfolio companies in other regions,” he said. 

Packer said he plans to dedicate a bigger proportion of his funding to new investments and less to companies already in QED’s portfolio. QED has around $4 billion under management across 200 investments, out of which a third is in Latin America.

Investors are looking at companies in biotechnology, health care, financial services such as payment providers and banking platforms. Brazilian fintechs are particularly attractive, QED’s Packer said, because of the country’s interest rate environment, solid regulation and talent. 

Andrew Seiz, head of finance at Mexican fintech Kueski, said funds are focusing more closely on a company’s ability to grow revenue and its path to profitability. 

“There’s cash on the sidelines to put to work and the investor base is being a lot more discriminating,” he said. “Overall it’s a healthy sign.”

--With assistance from Carolina Millan.

(Updates with General Atlantic’s Latin American investments starting in 10th paragraph.)

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