Startup investments in Brazil may generate US$29 billion in 2022

RIO DE JANEIRO, BRAZIL – Despite the impacts of the pandemic, startups had an exciting last year, marked by 10 companies reaching a valuation of US$1 billion – the new unicorns – and breaking records in venture investments. Brazil registered some US$10 billion in funding.

And 2022 is heading for the same pace, according to a specialist.

Sling Hub projected that if Brazilian startups repeat the same growth posted last year, they may close this year with an invested volume of US$29.4 billion.

“Being less optimistic, we can assume that the market will grow only half of what it did in the previous period, yet we would still close the year with a total funding higher than 2021, of US$19.7 billion,” says Sling Hub CEO João Ventura.

Companies operating in blockchain and biotech, a business model that aims to use living beings (cells and molecules, for instance) to develop products for the agricultural, pharmaceutical and food sectors, are among the specialists’ favorites.

Fuse Capital investment analyst Beatriz de Orleans e Bragança says that Brazil has experienced “unparalleled growth” in the biotech sector, “much due to its scientific maturity.”

In her opinion, the fact that Brazil has one of the largest populations in the world contributes to this. Moreover, the projection is that in 2028 the country will spend about US$333.1 billion on health, ranking among the 10 largest in the market, and should be placed 6th in the global pharmaceutical market, handling around US$39 billion in 2023.

On the other hand, Kria CEO Camila Nasser believes that blockchains, NFTs, and cryptocurrencies will take the lead. “More and more traditional niches will give room to different segments.”

She says that talking about crypto is not just about bitcoin, but about blockchain, the decentralization and disintermediation of infrastructures, “a whole evolution in technologies and tools that we have today.”

“So the range of solutions for this new ecosystem is huge. We are talking about a new way of interacting and consuming technology. NFT may be a fad or it may be here to stay, time will tell. But the technology behind it isn’t.”

Auddas angel investor and partner Julian Tonioli also agrees with Camila. He says that new technologies will accelerate investment opportunities, “especially with the advent of 5G, which will drive augmented reality, virtualization, and metaverse technologies.”

“I also believe in an increase in investment related to what is known as ‘DeFi,’ which is the digitization and decentralization of the financial system, relying on technologies such as cryptocurrencies and tokens.”

On the other hand, Distrito CEO and co-founder Gustavo Gierun says that “historically, the fintechs sector leads both in number of transactions and volume invested. The gap to the other sectors is still very relevant and it is unlikely that any other market can take this position.”

According to Sling Hub, the fintechs sector is the most funded since 2019. Last year, it raised US$3.8 billion, almost 40% of the total amount for the year, and 153% more than in 2020.

Gierun also says that funds to be invested in the next 12 to 18 months have already been raised by funds in 2020 and 2021, “so venture capital investors are looking to capture long-term market trends and movements. Therefore, they are less sensitive to the political-economic environment.”

A negative rush for the sector may come from the current interest rate hike cycle, alerts Fuse Capital investment analyst. “In a less favorable macroeconomic environment – rising interest rates and a potential recession – the venture capital scenario may become more challenging. But not in the short term.”

2021

Beatriz also says that the pandemic has prompted many businesses and people to enter the digital world, which has helped the startup market. “Be it using home delivery services, telemedicine, or the Pix itself.”

“This effect coupled with a favorable interest rate scenario and strong interest in technology, has attracted a lot of liquidity to a [Brazilian] market that was previously locked in, compared to other world regions.”

A survey by Sling Hub also pointed out that, compared to 2020, the year before experienced a growth of almost 200% in the volume of investments directed to Brazilian startups. The average round was worth US$13.7 million, a year-on-year increase of 150%.

In all, there were 760 investment rounds, and 393 Brazilian startups were financed for the first time in 2021. The companies that became unicorns were MadeiraMadeira, Mercado Bitcoin, Unico, Facily, C6 Bank, Olist, cloudwalk, hotmart, merama, frete.com.

According to Distrito, the total investment received by startups in 2021 in Brazil reached US$9.4 billion.