LatAm Tech Weekly: LatAm VC Numbers for 2022 And New Deals in 2023

This article is part of the LatAm Tech Weekly Series, written by Julia De Luca and powered by Nasdaq. Through Nasdaq’s global network, we partner with Latin American companies to support their entire business lifecycle to elevate their brand and access the global markets. Learn more about Latin American Listings here.

For those who are new, quick note: please feel free to send feedbacks and articles / themes I should be covering here! My “old” readers already know that I really like this, and therefore they constantly send me things. In fact, in this edition there are 2 reports and 3 pieces of news that came directly from you. Also, next week I will be out on vacations – so no standard newsletter then. But, I did a long one this week to make up for it.

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As for vacations: Again, if you are a subscriber for long enough, you know that I always end up writing something – let’s see if this time around I read something interesting during my time off and am able to send over a special edition.

Now, let’s go to this week’s market overview and news… 

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Opinions expressed here are solely my own and does not represent those of people, institutions, organizations that I may or may not be associated with in any capacity, unless explicitly stated.

This week I read a very interesting report put together by AngelList on the State of Early Stage Venture and Startups. Even though the piece is focused on the U.S. – it reflects directly what happens in LatAm. I have already mentioned this before, but apart from the fact that most of the capital invested locally still comes from the U.S., there is also the point that the region is “behind” the United States in terms of development of the ecosystem. Therefore, it is only natural that we look after them as an inspiration, and as an example as for what makes sense (or not) in the world of tech. In a nutshell, early-stage venture performed reasonably well relative to the broader market in 2022.

The report shows that early-stage venture performance saw a slow, and then sudden, decline in 2022. While the funding outlook for startups is becoming less favorable, valuations at the close of 2022 indicate a more buyer-friendly market in 2023. Fintech continues to represent the largest share of investment activity and capital deployed when looking at the AngelList base. As mentioned last week, even though 2022 showed a decline across the board when compared to 2021, it was still a positive year when we look historically. As an example, 4Q22 was nearly identical to 2Q20. Moreover, looking at the pre-money valuations by round, year-over-year, average valuations increased at all stages in 2022. While reports indicate VCs are scaling back round sizes as capital becomes more expensive, this factor does not yet appear to have materialized in the valuation data. Compared to 2021, pre-seed valuations grew by 18.8% in 2022 to $11M. Seed-stage valuations grew by 43.7% to $30.6M, Series A valuations grew by 21.3% to $104.3M, and Series B valuations grew by 9.7% to $340.SM.

Average pre-money valuation by round

Focusing on Latin America only, Itau BBA released this past week a very interesting report in partnership with Sling Hub wrapping up what happened in 2022 in the venture world in the region. In big numbers, 2022 saw 1.251 funding rounds, with USD 12bn in volume of investments. The average round size was USD 12.4 – and there were 299 M&As. In line with what we saw globally, after the outlier 2021, 2022 saw higher interest rates and inflation impacting liquidity and thus more constrained valuations, longer due diligence processes and an overall sense of caution. Note that last year the volume invested in the region was of USD 18.4bn. We did have the lowest number of rounds up to USD1m – but the early stage startups that were already with a proved product or service market fit saw an increase in funding. The same occurred for the ones raising from USD 10mm- USD50mm. Again, the late stage startups suffered the most especially due to the diminished exit routes. With a harsher environment, options such as debt saw a significant increase in round sizes – 2x in LatAm and 5x in Brazil. In line with what we saw globally, fintech was still the leading sector here with USD5.5bn invested, 45% of the total. While many say that the golden age for fintechs are done, the numbers (at least this past year) do not show this yet. Second place in volume went to proptech USD871mm – significant difference compared to the fintech sector.

Even though according to data fintech is still the leader, the State of Fintech 2022 Report by CB Insights that was released this week shows that things are in fact cooling off in the sector. Global funding dropped 46% from 2021’s record, to USD75.2 bn. However, the figure is still up 52% when compared to 2020. Banking startups were hit the most, as the figure fell back to pre-Covid levels last year, a 63% decrease from 2021’s record high. This steady decline was in line with movement seen in the industry as a whole. Let’s see what happens in 2023!

Speaking of 2023, and talking once again about the “dry powder” theme I have mentioned here several times, The Economist published a very interesting article this week. Venture Capital’s 300bn question answers the question as to why aren’t venture capitalists spending their cash. First – it is important to explain for those who don’t know, that even though LPs commit their capital to the funds, this cash is not sitting around in the funds’ bank account. Therefore, before each investment, a capital call needs to be done. Also, LPs are over allocated in the industry, so if the fund indeed tries to invest more rapidly – it will certainly be harder to raise another fund in the near future. With that, on the one hand, LPs are in no rush. On the other, VCs need to maintain a good relationship with their LPs – so they are not in rush either. As the article puts it: “venture capitalists are listening, Harry Neils, a parter at Accel, speculates that cash which might have taken a year to spend during the market boom will now be made to last around three times long”. In conclusion, as mentioned last week – there is dry powder, but this does not mean that it will be spent this year.

To wrap up, I also saw an interesting graph by Carta this week. It is no news that growth rounds were hit the hardest – in fact, they were down 80% or more in 2022. But, when we look at USD 100mm rounds, the situation was in fact, worse. Q4, for example, was inferior than any other quarter in 2019, 2020 and obviously 2021. From what I can recall, this is the only piece of data that I saw until now that shows a detraction even when comparing to historical levels. The only quarter that came close was the “Covid Quarter” of Q1’20, but even when we look there, there were 19 $100m+ rounds – versus 12 this past quarter.

The disappearing $100 million venture round

Monday

  • British biotechnology company Multus announced it has raised a £7.9 million funding round for the “first-of-its-kind” facility to produce food-safe, animal-free growth media for the cultivated meat industry. The round was led by Mandi Ventures (Brazilian VC founded by Antonio Sales and Julio Benetti) and included Big Idea Ventures, SynBioVen, and Asahi Kasei.

  • Brazilian CERC, online platform for factoring deals, and also acting as an alternative to notaries, to help the owners of the receivables use them as collateral to get credit, reached a very important milestone. The company reached the BRL 1 trillion mark in volume that has gone through the platform since its inception in June 2021.

  • Brazilian startup NG. CASH, fintech focused on Gen Z, chose also Brazilian Pismo as their technology partner to provide a complete processing platform for core banking and payments services, cloud-native and microservices-based. The new infrastructure will allow the personalisation of resources on NG. CASH’s app, services and investment options to support Generation Z’s demands, besides cashback and discounts.

  • Sequoia Capital has lowered management fees in its two recently-launched venture funds.The changes in fee structure, communicated to investors in December, allow limited partners (LPs) who committed capital to Sequoia’s crypto and ecosystem funds launched early last year to pay management fees based on capital deployed, rather than the common model of capital under management that applies to other Sequoia funds.

  • Itau Unibanco announced it will sponsor two major tech events as part of its innovation strategy: SXSW and Web Summit in Rio.

  • PagSeguro layoffs around 500 people, which represents around 7% of the total staff. The adjustment was made in the PagBank (fintech) strategy.

  • Acumen, startup from El Salvador that builds a DeFi solution to provide fair access to capital for small to medium-sized enterprises (SMEs) globally by offering a microfinance solution bridging digital crypto assets with real-world microloans, raised a round with Blizzard Fund, from Singapore. The amount was not disclosed.

  • Brazilian VC fund Shift Capital, with BRL 315mm in AUM and a portfolio with companies such as Kovi, The Coffee and Blue Fit , aims to invest BRL60mm in 2023 in more traditional sectors through its first established fund – Shift Alpha1.

Tuesday

  • After landing in Mexico, the Benvi platform, owned by the Brazilian proptech unicorn QuintoAndar, decided to reinforce its strategy of digitizing and making the rental housing market in the country more efficient, by appointing André Penha, one of its founders, the head of the project in Mexico. The firm seeks to replicate its achievement in Brazil, where the proptech has more than 175,000 current lease contracts and manages assets more than BRL 90mm.

  • The cryptocurrency market cap returned to the $ 1 trillion mark this week. The figure had not been seen since the beginning of November last year. Even if some altcoins have jumped up to 70%, as was the case with Solana, the highlight is Bitcoin. According to data from CoinMarketCap, BTC’s 41% dominance is the highest in the past six months. Ethereum, the second largest in the market, also showed good gains. Since January 1, ETH has increased by 30%.

  • Microsoft is giving more people — or at least more customers — access to OpenAI’s technologies, including ChatGPT. The tech giant has announced that it’s now making the Azure OpenAI Service generally available after giving a limited number of enterprise customers access to it when it debuted in November 2021.

  • Brazilian fintech Parfin, that provides crypto market infrastructure, raised a US$ 15 million. The round was led by Framework Ventures and the use of proceeds will be to develop products and launch new solutions. Valor Capital and Alexia Ventures also participated in the round.

Wednesday

  • Pipo, digital platform that sells and manages health benefits for companies (from health insurance to meditation-in-company) acquired Convenia’s Health Brokerage business unit . It offers financial and insurance brokerage services such as payroll management and more. The M&A that brings around 11,000 new lives to their base.

  • Brazilian travel management platform focused on B2B, Portao3, raised a seed round of USD 3.7mm led by Better Tomorrow Ventures – and with the participation of other funds such as Endeavor ScaleUp Growth and Pareto Ventures.

  • As per Mercado Libre’s request, Brazil’s local authority initiated an administrative investigation to check alleged practices of abuse of a dominant position in the market for distribution of applications for devices with the iOS system by Apple. The company is supposedly abusing its dominant position in the distribution of applications for iOS devices, by imposing on developers of digital goods and services applications, such as video streaming, a series of restrictions on in-app purchases which have the purpose and/or effect of preventing or limiting the entry of Apple’s competitors into these markets. In response, Apple informed, among other points, that it does not have the capacity to implement, and has not implemented, any practice that had as its object or could potentially prevent Mercado Libre’s activities or harm competition in the market. Brazil.

Thursday

  • Warburg Pincus invested USD40mm in Scanntech, Uruguain Provider of a software as a service (SaaS) based point of sale platform for retailers in emerging markets. The company’s platform allows retailers such as grocery stores to process transactions, run inventory management, and sell financial services. It also allows retailers to connect with providers including financial and telecommunications companies as well as with government services. This enables stores to offer products and services including card payments, mobile top up, and social assistance benefits.

  • Bamboo, Brazilian platform that allows investors to receive and digest company data, organize on-demand roadshows, and use data engineering to rapidly find the most suitable and highest caliber private credit opportunities in a single place, making the entire investment process more efficient, has raised USD 4mm in a seed round led by GFC. Bamboo’s initial efforts are directed to Debt Capital Markets (DCM) — which makes the structuring and distribution of debt securities to companies.

  • More M&A: startup Finantech founded in Chile, that provides solutions for the wealth management and asset management industry, was acquired by First Rate, US company that wants to initiate operations in Latin America.

  • Blackstone raised over $22B for world’s biggest secondaries fund. Blackstone Strategic Partners’ record fund close underscores investors’ growing need for alternative liquidity opportunities. The secondary market has come into vogue as investors and GPs navigate a difficult exit environment.

  • In line with financial education trends – Mercado Pago launched a new initiative to help its users save money. The so-called “Reserva Programada” helps users to set a data, time and amount to be automatically “saved” every month.

  • Former XP CIO e cofounder at Vitreo becomes Brazilian Vortx’s new CPTO. Vórtx is staurtup invested by FTV that deals with corporate trusts, fund trusts and clearing.

  • Nubank secured a USD 150mm credit line from IFC the financial arm of the World Bank, the second credit line for the fintech since April, will be used for expansion in Latin America.

  • B Capital Growth, venture capital owned by millionaire and co-founder of Facebook Eduardo Saverin, raised USD 2.1 bn for its Growth Fund III to invest in startups globally. The firm is multistage-focused and this is its largest fund yet.

  • Colombian fintech KLYM raised USD 27mm with JP Morgan and IFC. The company provides working capital to small and midsize companies.

Friday 

  • Itau Unibanco just closed a partnership with École 42, a computer science training to educate the next generation of software engineers. Apart from the education, students will be exposed to the Bank’s culture by working on specific projects for the institution.

  • Coinext, Brazilian crypto exchange announced that it will launch its own asset manager and fund focused on crypto – Coinext Asset. The objective is to raise between USD5mm – USD25mm from their current client base.

  • MadeiraMadeira, Brazilian e-commerce platform that offers furnitures for the home and office found in 2020 the necessity of having physical stores as well. Since then, the company has opened 100 stores, and founders announced that in 2023 it intends to open 30 more.

  • To increase women’s participation in technology, local venture capital fund Astella announced a new program called AstELLAS, a mentorship program focused on developing and mentoring women founders.

What did I learn from readers?

I received a summary of CB Insights article on the 150 most promising health startups in the world from the folks from Connext Health. Good for me because I love CB Insights report, and for you too because we get a TL;DR version!

  • Only 25% of startups are in the US market, while 75% are spread across 17 countries.

  • The health techs on the list have raised approximately $5.6 billion in funding since 2017, and that includes $1.6 billion raised from 85 deals in the last year.

  • Focus on diagnostic and monitoring assistance, with 29 startups leading this area.

  • The number of unicorns dropped. The 2022 list includes just five unicorns with a valuation of $1 billion or more, about 3% of the total. The 2021 list already contained 17 unicorns.

  • 90% of the 2022 winning group did not appear on the previous list.

    To read the full summary, go to Connext Health! These guys are doing a good job in research about the health space in Brazil.

What am I reading?

What am I listening to? What am I watching?

Quote of the week:

Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. -Steve Jobs

Originally published on my Substack.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

1 Comment

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