Room for Fundraising in 2020 for 59 Percent of Brazilian Startups

RIO DE JANEIRO, BRAZIL – In the midst of what is the greatest economic crisis in decades due to the pandemic, Brazilian startups hope to raise more funds for the expansion of their businesses.

In addition, most of them avoided layoffs despite uncertainties – which, concurrently, forced most of them to rethink their 2020 targets. Ultimately, the year has been challenging for many Brazilian entrepreneurs.

This is all reflected in an unprecedented study by On The Go, a research platform using virtual robots, chatbots, and the venture capital fund Bossa Nova Investments. The online survey interviewed 60 technology company founders in various stages of operation last month, from businesses with newly-launched products, to businesses in a revenue-acceleration stage – the so-called “scale-ups”.

For 59 percent of them, there is still room to raise funds in the second half of 2020. Meanwhile, a similar proportion consider the Covid-19 pandemic to have a great or extreme impact when it comes to raising money. Investor risk aversion is the main reason behind the most fearful.

While the pandemic hit revenue hard, six out of ten technology business owners interviewed reported having maintained jobs. Those who dismissed employees did so to reduce costs (reason for 77 percent of respondents in this group), or to restructure teams (44 percent), or because the pandemic rendered the staff position redundant (22 percent).

From now on, most entrepreneurs should reconsider the 2020 targets because of the uncertainties raised by the pandemic. Despite this, almost 70 percent of respondents say they are very or reasonably confident in achieving the goals set for this year.

Venture capital on the rise

Entrepreneurs’ confidence comes in the wake of a good moment for the venture capital industry in Brazil. In July, companies founded in the country received a total of R$87 million, distributed in 37 investment rounds, according to a survey conducted by Distrito innovation company on the Brazilian startups ecosystem.

The total is 81 percent less than the US$462 million received in the same month in 2019, but 117 percent more than July 2018. According to Gustavo Geirun, Distrito’s co-founder, the US$400 million contribution received by fintech Nubank in July last year explains this difference in numbers. Nubank’s F series round accounted for 86 percent of the volume invested that month.

“It was an investment outside the curve, and if we consider it separately, we realize that the total amount of contributions made in July 2020 is a significant and healthy number for the Brazilian market’s startups ecosystem,” said Geirun.

Overall, the Brazilian startups garnered R$997 million, out of a combined total of 222 rounds. Compared to the same period in 2019, there is a 49 percent drop in the total invested. Nevertheless, the number of contributions made through July this year is already the largest in the country’s history.

The survey shows that the main rounds in July involved the B series of Warren and Magnetis investment managers. On August 9th, Warren, founded in 2017 in Porto Alegre, announced having received US$22.3 million in a round led by the American QED Investors fund (Nubank, Loft).

At the end of the month, competitor Magnetis also announced it had received US$11 million in a round led by Repoint Eventures fund (Creditas, Gympass) and with the participation of Vostok Emerging Finance. Founded in 2015, the manager became known for building robot-managed investment portfolios.

In addition to these, Distrito also highlights the A series contribution received by Solfácil, a startup that finances solar energy projects. The contribution of US$4 million was led by the American Valor Capital Group fund (Stone, Gympass).

Source: Exame