Globally, including in Brazil, a decline in startup investments is leading venture capital fund managers to exercise caution.
They see no quick recovery due to economic uncertainties and global financial instability. Distrito, an innovation platform, conducted a survey that highlights this cautious mood.
It found that 75% of managers with more than three funds view the market pessimistically. However, those with fewer funds are more optimistic.
Eduardo Fuentes, Distrito’s research leader, shares to local media that 66.7% of these managers have hope for an eventual end to the crisis.
The report also indicates that about 60% of managers believe a sector rebound will take over 18 months.
This outlook points to ongoing challenges into 2024. Moreover, 56.26% of entrepreneurs still feel the crisis is ongoing, while 45.24% of investors think it has passed.
Fund managers are now focusing on adjusting and rebalancing. About 35.7% have seen their operations affected by the crisis.
Yet, 11.1% have found positive outcomes, like buying assets at lower prices. Investment trends show some positive signs.
In the third quarter of 2023, startups in Latin America received $883 million, a 22% increase.
Brazil alone saw a rise of 18%, receiving $596.7 million. However, 32.8% of companies had to reduce their workforce, and 36.8% cut down on marketing spending.
These moves show the broad impact of the current situation. Fuentes notes that high global interest rates could delay recovery.
Still, managers with less experience remain optimistic. They believe in the power of available funds and new technologies for a solid recovery.
In November, Latin America’s investment volume slightly decreased to $233 million.
This was a 1% drop from the previous year and a 43% fall from the previous month. Brazil led with 54% of these investments.
Brazil led in transactions, followed by Colombia and Chile
The funding landscape showed 66 rounds, a 10% decrease from last year but a 16% increase from October. Brazil led in transactions, followed by Colombia and Chile.
An anonymous investor told Bloomberg Línea about Brazil’s potential consolidation of venture capital funds.
Many funds are struggling to raise new capital. They also need to maintain cash flow for a long time to see returns from their investments.
Carlos Naupari, CEO of fintech Velvet, commented on the market downturn. He mentioned that it led to lower valuations of unicorns, startups worth over $1 billion.
This decline has heavily impacted the secondary market shares of Latin American companies. Naupari receives frequent inquiries about secondary market opportunities.
However, due to low demand, Velvet has shifted its focus to generating returns for investors, highlighting the evolving venture capital landscape.