Why Pre-Seed Venture Capital fails startups in the Dominican Republic—and across LATAM

By Jonathan Joel Mentor | @jonathanjmentor 

Across the Dominican Republic, and much of Latin America—the dominant narrative is that startups struggle because capital is scarce.

It is a convenient explanation. It suggests that if more money enters the system, better outcomes will follow.

But the data and the outcomes suggest something more structural.

Latin American startups have attracted between $4 and $6 billion annually in venture funding in recent years, even amid global tightening cycles. Yet only a small fraction—typically no more than 10–15%—reaches the true pre-seed layer, where experimentation, iteration, and discovery actually occur.

This is not a shortage of capital.
It is a failure in how risk is priced.

The Illusion of Early-Stage Support

In mature ecosystems, pre-seed capital is not deployed with certainty. It is deployed with clarity about uncertainty.

Top-tier venture portfolios in the United States are built on an explicit acceptance that most investments will fail. It is common for 70–80% of early-stage bets to return little or no capital, while a small number generate outsized returns that define the fund.

This is not recklessness. It is discipline.

In the Dominican Republic, and across much of LATAM, pre-seed behaves differently. Capital often waits for traction, revenue signals, or some form of early validation before it commits. In effect, investors look for proof before funding the process designed to discover that proof.

The result is a quiet but consequential distortion: capital arrives too late to shape the company, and too early to rely on its stability.

When Risk Is Mispriced, Output Declines

The consequences are not theoretical. They are economic.

If one models a simple pipeline of 100 potential startups, the difference between correctly priced and mispriced risk becomes clear. In a constrained system, where capital is deployed cautiously, perhaps 10 companies receive funding. Of those, one or two survive, and rarely does one scale meaningfully.

In a system where risk is priced appropriately, that same pool produces a very different outcome. Forty or more companies are funded at the earliest stage. A smaller subset advances, and one or two ultimately scale into regional or global players.

The delta between these models is not marginal. It determines whether an economy produces companies of consequence—or exports its most capable founders to markets that do.

In small and mid-sized economies, a single high-growth company can generate tens or even hundreds of millions in enterprise value, along with high-quality employment, reinvestment cycles, and ecosystem credibility. The absence of these outcomes is often attributed to “market size” or “timing.” In reality, it is frequently a function of how early-stage risk is structured.

A System Built on the Wrong Instincts

Part of the challenge in LATAM is historical. Early-stage investing has, in many cases, inherited its instincts from disciplines designed to minimize uncertainty—commercial banking, private equity, and corporate finance.

These systems are optimized for predictability, collateral, and downside protection.

Startups offer none of these. They are, by definition, uncertain, asymmetric, and nonlinear.

Attempting to finance them with traditional frameworks produces a predictable outcome: capital becomes defensive in a domain that requires calculated exposure to upside. Founders respond accordingly, over-engineering stability and under-investing in discovery. Markets, in turn, underperform relative to their potential.

The Constraint Beneath Capital

Even when capital is deployed, another limitation emerges—one that is less visible, but equally binding.

Many early-stage companies in the Dominican Republic and across the region are not constrained solely by funding. They are constrained by the absence of structured execution.

Without clear revenue architecture, disciplined go-to-market systems, and reliable data environments, capital does not accelerate growth. It amplifies inefficiency.

In more mature ecosystems, this layer exists—often quietly—in the form of operators, embedded expertise, and repeatable frameworks that transform early-stage ambiguity into measurable progress.

In much of LATAM, that layer is still developing.

Which means that even when capital is present, outcomes remain inconsistent.

Repricing Risk—and Redesigning the System

If the issue is mispriced risk, the solution is not simply to increase funding pools. It is to redesign how risk is structured, deployed, and supported.

In functional ecosystems, pre-seed capital is deployed across portfolios, not isolated bets, allowing failure to operate as intended—contained, informative, and necessary. At the same time, early-stage companies are not left to navigate uncertainty alone. They are supported by systems that impose structure where none naturally exists—systems that define how revenue is generated, how markets are entered, and how performance is measured.

Institutions also play a different role. Rather than acting as passive sponsors of innovation, they become active participants—providing data environments, piloting solutions, and, critically, serving as early customers. This transforms startups from speculative ventures into integrated components of a broader economic system.

When these elements align, risk does not disappear. It becomes legible. And once risk is legible, it becomes investable.

From Startups to Exportable Value

The implications extend beyond venture capital.

When early-stage systems function correctly, they do not simply produce startups. They produce exportable companies and intellectual property.

This distinction is critical for economies like the Dominican Republic.

Growth driven primarily by local consumption will always face structural ceilings. Growth driven by exportable systems—software, financial infrastructure, data platforms, and operational models—can scale beyond geographic constraints.

The Dominican Republic has already demonstrated strength in sectors such as tourism, logistics, and services. The next phase of economic evolution will not come from replicating these models, but from building new ones—designed from inception to operate regionally and globally.

That process begins at pre-seed. Not with capital alone, but with correctly structured risk and the systems required to convert that risk into value.

A Quiet Realignment

Across LATAM and the Caribbean, a subtle shift is underway.

A growing number of investors, operators, and institutions are moving away from narrative-driven approaches to innovation—away from visibility, events, and isolated success stories—and toward something more deliberate: systems that can be repeated, scaled, and institutionalized.

These conversations are no longer confined to reports or policy discussions.

They are increasingly taking place in more deliberate settings, where capital, execution, and institutional strategy intersect in practical terms. Spaces such as the Digital Nomad Summit Santo Domingo are beginning to serve as early convergence points—where the underlying mechanics of risk, capital deployment, and scalable execution in the Caribbean are not just discussed, but actively pressure-tested among those shaping the next phase of the ecosystem.

For those operating within or entering the Dominican market, the signal is increasingly clear.

The next phase of innovation will not be defined by how much capital is deployed.

It will be defined by how precisely risk is understood, structured, and operationalized—and by who is positioned at the intersection of those decisions when the system begins to align.

Context sources: The information in this article is based on regional venture capital reports analyzing investment flows across Latin America, portfolio performance benchmarks from established venture funds in the United States, and economic development research on startup ecosystems in emerging markets. It also reflects ongoing discussions among operators, investors, and institutional stakeholders in the Dominican Republic and the Caribbean focused on innovation infrastructure, capital deployment, and the structural challenges of building scalable, export-oriented companies.

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Jonathan Joel Mentor is the CEO of Successment and architect of the Digital Nomad Summit™, scaling startups and challenging institutions to evolve. UN World Summit Award Nominee  & ADOEXPO National Excellence in Exportation Award Winner  www.jonathanjmentor.co | digitalnomadsummit.co