RIO DE JANEIRO, BRAZIL – The rise of Brazilian “unicorns” such as Nubank, Pagseguro, Loft, Quinto Andar, iFood, and many more have created a virtuous effect in the market. The more success these companies achieve, the more investment the other startups receive.
This has encouraged the creation of new funds and the arrival of international groups to explore this universe, which – despite Delta, Omicron, and all the future villains – is constantly growing.
Between 2020 and 2021, the number of investors that put money in startups in Brazil rose 34%, from 404 to 544 – the biggest absolute growth since 2007, according to the innovation platform Distrito.
This is a market in full expansion and with business opportunities. Currently, the country has 21 “unicorns” (companies with a market value over US$1 billion) and dozens of other candidates to join the select group of multi-billion startups in the coming years.
These promises and the possibility of pocketing a few million reais fill the eyes of investors and revitalize this market. In 2021 alone, venture capital funds that invest in startups set an investment record.
Until November, the amount invested in the Brazilian market was almost 200% higher than the entire year of 2020: US$ 8.8 billion (almost R$50 billion), against US$3 billion (R$17 billion).
“This year was phenomenal. From the fundraising that the funds are having, 2022 has the same growth trend as this year,” says Gustavo Araujo, cofounder and president of the District.
In his evaluation, one of the highlights of 2021 was the mega-investment rounds, over US$100 million. On one side, the companies are more mature and have a greater need for capital. On the other hander, there are well-capitalized managers with an appetite for Brazilian assets, highlights Araujo.
FOCUS ON THE REGION
The Nubank effect, which debuted in the New York and São Paulo Stock Exchanges at the beginning of the month, should help to attract even more international investors.
Besides the giant Softbank, which is preparing a new fund for Latin America, other key players in the investment world such as Tiger Global, Warburg Pimco and Andreessen Horowitz have also turned their attention to the region.
The entrepreneur Paulo Veras, one of the founders of the first Brazilian “unicorn”, 99, says that the market is experiencing a relevant geographical change.
He says investments were migrating to Southwest Asia ten years ago, and Latin America was practically excluded from this movement. Today, the region has become the epicenter of venture capital investments.
In his evaluation, several factors increase the attractiveness of Brazilian assets. Besides the new “unicorns”, the fact that most of the population has a smartphone and access to data and broadband infrastructure raises the bar and the prospects for success of a business in the country.
Another point of attention for investors is the level of unbanked people in Brazil, which means potential markets to be explored.
Veras also says that national management companies are also being created – or have recently been launched – to enter the market.
Among them is Headline, from Buscapé founder Romero Rodrigues; NVA Capital, from former XP Marcelo Maisonnave; and Niu Ventures, from Americans Paul Bragiel and Reinaldo Normand.
According to data from the Emerging Venture Capital Fellows platform, part of these portfolios should go to startups that are just beginning – about 75% of current investments are concentrated in the initial rounds called Pre-seed, Seed, and Series.
NEW INVESTMENTS
The new cycle of Selic high has not worried the investment managers in startups. For them, those who invest in this market are looking at the long term and will not stop investing in these assets to go to fixed income.
“It is a path with no return. Nubank has set the bar high. A lot of people made money and this feeds back into the ecosystem,” says Renato Valente, partner of the asset management company Iporanga.
In his evaluation, entrepreneurship has never been so good. This year, the company invested in ten startups and plans to raise a new fund in the first quarter of next year. Despite the increase in interest rates, he believes that liquidity in the market will continue.
A third of Iporanga’s portfolio is currently allocated to fintechs and something in education. For 2022s Valente, the manager will keep an eye on finance startups. “With the advance of open banking and PIX, many opportunities will arise. But we will also look at startups focused on cryptocurrencies and agribusiness, a market that has yet to emerge, despite the potential.”
At Astella Investimentos, partner Daniel Chalfon also does not believe in a change of trend now because of the rise in interest rates. He points out that the previous drop in the Selic rate had a positive effect, which was to bring investors who didn’t know this market. “They are professionals who put resources in assets in the long term and are not looking for fixed income.”
The year 2021, says the executive, yielded good liquidity for the fund, with the sale of RD Station to Totvs – the manager had a stake in the company. Astella has already raised four funds and has an active investment in 27 companies.
Next year, Chalfon says, it is possible that a new portfolio will be assembled. “2022 starts with a very good outlook, after a year in which all metrics broke records.”
District cofounder and president Gustavo Araujo says the market is growing in all dimensions, whether in investments or in the number of funds and new startups.
According to him, from now on the segment will begin to experience the second wave of venture capital funds, which are those more specialized in certain areas, such as education, finance, and retail.
A good part of this capital will still come from abroad, but the Brazilian market is changing, with more investors getting to know this segment.
With information of Estadão