LatAm Tech Weekly
#135- Powered by Nasdaq: Web Summit Rio 2024, DPIs, State of Fintech, deals of the week... and much more!
Happy Sunday!
This week, the great gathering known as the Web Summit 2024 was held in Rio de Janeiro, my homeland. It took place at Riocentro, where over 34,000 people came together. More than 600 panels were delivered across various stages, discussing vital topics such as sustainability, energy solutions, cryptocurrencies, and artificial intelligence. Notably, this year's summit saw the highest proportion of startups founded by women—45%.
Itau, a major supporter, played a significant role, and I had the honor of participating in two panels. One focused on investing in technology during the growth stage alongside Kaszek and Upload Ventures, and the other explored the momentum of fintech in India and its connections to Brazil with PolicyBazaar.
The experience was joyful and enlightening. It was truly heartwarming to witness the community unite in such a powerful way in the place I call home.
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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 past week I read several good articles about the dynamics within the venture capital ecosystem. A notable piece from Pitchbook, the Q1 2024 PitchBook-NVCA Venture Monitor, highlighted that the venture capital industry is experiencing a slowdown due to the slow pace of distributions, which is subsequently stifling fundraising activities.
In the midst of a slower venture capital landscape, there are emerging signs of optimism, particularly in the realm of public listings of tech companies. In the first quarter of this year, the U.S. venture capital exit value reached $18.4 billion, significantly bolstered by the IPOs of Reddit and Astera Labs, which together contributed to about three-fourths of this total. These IPOs, which received considerable media attention, may signal a potential rejuvenation of public listings going forward.
Despite a challenging two years where the exit market has been subdued, causing difficulties for many General Partners (GPs) in converting paper gains into cash distributions, there are hopeful signs. The constraints faced by many institutional investors during a prolonged market correction are beginning to ease, though it has led to a more cautious approach, with Limited Partners (LPs) securing $9.3 billion in commitments across 100 venture funds in the first quarter.
Venture capitalists are adapting to these market conditions by refining their strategies. Many are opting to extend the timing of their next fundraising activities, focusing instead on nurturing their existing portfolios and selecting new deals with greater discernment.
The stock market has witnessed some uplifting rallies since late 2023, driven by major tech firms, a growing optimism regarding potential interest rate cuts, and a robust enthusiasm for artificial intelligence technologies. While a comprehensive market rebound is still developing, these factors are nurturing a cautiously optimistic outlook for the near future.
Interest rate dynamics play a critical role in shaping public company valuations, which are essential for startups at the late and venture-growth stages preparing for public offerings. Mergers and acquisitions (M&A) continue to be the predominant exit strategy. With an increasing need for liquidity across the venture capital spectrum, and a gradual harmonization in pricing perspectives between founders and investors, there is an anticipated rise in acquisition activities in the coming quarters. This growth is expected to be driven by strategic moves from corporations and private equity firms, as well as by favorable sector-specific trends.
Moving on, CB Insights just released its State of Fintech Q1’24 Report. Investor interest in fintech continues to evolve, with the sector experiencing a strategic shift towards more selective and potentially impactful investments. Although fintech funding saw a decrease to $7.3 billion in Q1 2024, marking the lowest quarterly level since 2017, there are positive signs of dynamic activity in the space. Notably, fintech deal volume increased for the first time in a year, rising by 15% quarter-over-quarter, highlighting a growing focus on writing smaller, more targeted checks. This approach has brought the average deal size in fintech to $11.1 million, reflecting a careful and strategic investment pattern.
Despite a decline in large-scale investments, the sector witnessed 12 significant mega-rounds, including a substantial $431 million Series I funding round for UK-based challenger bank Monzo. This round alone represented 6% of the global fintech funding total, underscoring the potential for major impact from select deals.
Investors are increasingly directing their attention towards mid- and late-stage deals, indicating a preference for startups with more established track records and proven business models. This trend is particularly evident in payments and digital lending, where mid- and late-stage deals have seen considerable growth in proportion.
Banking startups have also shown strong performance, with funding doubling to $1 billion across 38 deals in the quarter. The vitality of this segment is further exemplified by several late-stage transactions and mega-rounds, highlighting the robust potential in banking innovations.
General news:
Brazilian Open Finance gains new features, including the so-called “intelligent transfers.” Defined by experts and financial sector executives as "powerful," this feature is expected to boost adoption of the data sharing system between financial institutions.
Brazilian GetNinjas enters partnerships to expand services and resume growth. The platform aims to increase customer and service provider traffic with new services from Suppo7, Repfy, and Destrave.
WeWork and Brazilian startup Raketo invest R$ 5 million in a project to boost innovation and businesses in Brazil. The partnership aims to transform conventional offices into collaborative spaces.
Deals:
American company DataStax recently announced the acquisition of the Brazilian startup Logspace, creator of Langflow, a low-code tool for developing applications in GenAI. The value of the deal was not disclosed. However, the foreign company has announced plans to invest approximately R$100 million in Brazil.
Kamina, developer of fintech platform designed to offer a comprehensive financial evaluation from Ecuador raised $3,2M Seed Round with undisclosed investors.
EmpreX, developer of a digital lending system designed to offer fair and affordable consumer loans in Brazil, raised $7,95M in Early Stage VC funding lead by SRM Ventures.
General news:
B3 is expanding its range of technological services to support the growth of startups and small and medium-sized enterprises, aiming to contribute to the democratization of the capital market. The company has just launched a solution for tokenized assets for crowdfunding platforms, developed with the support of startup investment platforms Kria and EqSeed.
Stark Bank announced the expansion of its financial services into acquiring, targeting e-commerce and marketplaces.
Deals:
Toku, a Chilean fintech specializing in recurring payments, announces a $9.3 million Series A funding round led by Gradient Ventures. Also participating are F-Prime Capital, Clocktower, Y Combinator, Wollef, and Fundersclub, which had previously invested in the startup in earlier rounds.
Turbi raises an additional R$ 45.5 million in round extension. The vehicle rental platform had previously raised R$ 150 million earlier this year. The new round, led by Domo VC, will be used to support the migration to the asset-light model.
TecPet, Brazilian developer of an automated management platform designed to increase loyalty and productivity for companies in the pet market, raised $0,2M with Bossanova Investimentos.
General news:
Mobility startup Tembici announces it has signed a financing agreement of R$ 84.6 million with the Brazilian Development Bank (BNDES). The loan, facilitated through the BNDES Mais Inovação program, will be used to support the company's innovation plan
Claro is expanding beyond the telecommunications segment and aims to utilize customer data available in its databases to develop new solutions. The company unveiled an Open Gateway platform at Web Summit Rio, a common structure among several operators, which transforms telecommunications networks into standardized and open platforms for developers. In partnership with Embratel, Claro also launched the Conexão Claro Open Gateway for Startups program, allowing startups to use the tool for free.
Neogrid, a software company based in Santa Catarina focused on industry and supply chain, announces the arrival of two heavyweights to its executive board. Christiane Cruz Citrângulo takes on the role of Chief Marketing Strategy Officer (CMSO), while Nicolás Simone assumes the position of Chief Product and Technology Officer (CPTO).
Deals:
Kaszek will lead Brandlovrs’ R$ 35 million seed round, focusing on the digital advertising and content creation market. This marks the platform's second fundraising effort in a year, following a R$ 10 million raise with Canary — along with popstars J Balvin and will.i.am — last year, in a pre-seed round.
Techome, a smart homes startup, raises R$35 million in Series A funding with Astella. The majority of the capital will be used to establish its own factory in Americana, São Paulo's countryside.
General News:
App Day: Amazon is offering discounts of up to 50% only for mobile purchases. For the first time in the company's history, a promotional event will take place exclusively in Brazil. The strategy aims to drive more users to the app.
Brazilian Sqala is growing as a payment gateway for betting websites. The platform, which focuses on social media checkout, processes over R$ 1 billion annually.
Bossa Invest aims to invest R$ 80 million by the end of 2024. With a dry powder of R$ 23 million, the venture capital firm plans to make nearly 200 investments by the year's end.
General News:
Brazilian banks estimate investing R$ 47.4 billion in technology in 2024. The first volume of the Febraban Banking Technology Survey 2024, conducted by Deloitte, shows that the invested amount has doubled in eight years. The research also showed that client adoption of Open Finance grew by 2.5 points in one year and that more than half of banks already have generative AI.
Brazilian government bans credit card for online betting payments. Norm allows betting payments only through Pix, TED, debit cards, or prepaid cards
Nuvini, by Pierre Schurmann, intends to launch CVC later this year. After an IPO on Nasdaq, the SaaS holding company also plans to acquire four more companies in 2024.
Monica Saccarelli is the new general partner at DOMO.VC. The entrepreneur has previously been invested in by the management firm and returns to expand the portfolio and support development.
Facily, which raised over $500 million, is at risk of closing. Symbolic of the exuberance of fundraising in 2020 and 2021, the social commerce company raises $1.8 million to bolster its cash reserves as investors calculate how much the company needs to shut its doors.
NotCo changes leadership in Brazil and rethinks strategy. The Chilean startup has already changed leadership in Brazil three times since 2019 and now selects Andre Weinmann, former Nestlé executive, to reorganize the plant-based business and focus on protein-rich foods.
Deals:
Lolocar Acquires OlaCar, Expands Car Rental Services to Uruguay. Chile’s Lolocar integrates Uruguay’s OlaCar, aiming for rapid growth in peer-to-peer carsharing across Latin America.
In its second acquisition, Sólides acquires 2easy's Digital Payroll. The HRTech launches a cloud solution, with low cost and capable of processing payroll in just a few minutes. The value was not disclosed.
BBVA Spark Doubles Financing Commitment to Tuhabi to $48 Million. Tuhabi receives a significant increase in funding from BBVA Spark to boost its real estate technology operations in Mexico.
Bridgewise, an AI-based investment analysis fintech, raises $21 million. The Israeli fintech will use the funds to accelerate global expansion; currently, it operates in over 15 countries, including Brazil.
What did I learn from readers?
I received from a local PE investor a good piece by Pitchbook: Q1 2024 US PE Breakdown. The report provides a comprehensive analysis intended for stakeholders in the US private equity (PE) ecosystem, covering buyouts, add-ons, growth equity investing, exits, fundraising, fund performance, and deal valuations. Although it is focused on the U.S., we can trace some parallels to what is happening in Latin America. Below my TL;DR version coupled with an interesting graph:
Market Correction and Recovery: The industry has been correcting for two years from record levels of activity, with participants closely monitoring for signs of market recovery.
M&A and PE Buyout Market Trends:
The broader M&A market is believed to have bottomed out in Q3 2023, yet the recovery in the PE buyout market has been delayed.
The PE's share of M&A deal count and value has declined for the first time in eight years, continuing into 2024 with the share of value falling to 33% in Q1 from 40% in 2023.
Significant PE Exits:
Exits are crucial for a sustained PE recovery. Efforts to return capital to investors are intensifying, and the trend of declining exits has leveled off.
Rise of Continuation Funds:
A significant amount of capital was raised for secondaries funds in 2023 ($78.3 billion), primarily aimed at providing liquidity to buyout funds.
The first quarter saw 27 continuation fund exits, doubling the number from the same period last year and on track to exceed 100 such transactions for the year.
Resilient Fundraising:
PE fundraising remains strong, aligning with last year’s near-record levels.
Currently, ten large funds with a combined $100 billion in capital are nearing their final close in the first half of 2024, with expectations of a temporary slowdown in fundraising following these closings, yet overall totals remain robust.
What am I reading?
The Information- The Briefing
What am I listening to? What am I watching?
Random Hip-Hop songs on my runs :)
Quote of the week:
Persistence is the twin sister of excellence. One is a matter of quality; the other, a matter of time. – Marabel Morgan