LatAm Tech Weekly
#66 - Powered by Nasdaq: FTX saga, MBA Brasil, B3 & Neurotech, deals of the week... and much more!
Happy Sunday!
Busy week – very relevant news (or saga?!) and many events. In the last few days I visited three different cities and was therefore able to grasp the sentiment related to tech across the board. I will go over everything here. FTX is of course the important story of the week – look for details in the “What did I learn from readers” section, as I received several articles on the theme and became rather obssed the last few days reading everything I could. Kudos for the articles on ZeroHedge.
I went to Rio de Janeiro on Tuesday and spoke at Rio Innovation Week about the importance of women founders. Massive event as the city is becoming a more important tech hub by the day. Can’t wait to participate on the Web Summit next year for the first time in Rio! I also attended the ABVCAP event and heard from private equity and venture capital leaders such as Piero Minardi from Warburg Pincus and Anderson Thees from Itau Unibanco’s venture capital arm.
Finally, I flew to Boston and attended the MBA Brazil Conference. The conference held at Harvard gathered ~300 MBA students and relevant figures such as Daniella Marques, President at Caixa Economica Federal, Celso Athayde, Brazilian activist, Paulo Passoni and Antoine Collaço, partner of Valor Capital Group. The event was organized by top MBA schools such as HBS, Stanford, Columbia, Wharton, Chicago Booth, MIT and Kellog. I was invited by Chicago Booth to be one of the panelists discussing the investment landscape in Brazil ranging from tech to crypto and alternative investments. I had the honor of moderating a conversation between Marcelo Sampaio, Co-Founder and CEO of Hashdex, André Leme, senior partner at Bain, and Helena Caldeira CFO and Banco Inter. Great conversation!
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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.
To start off with the market overview, Sling Hub (LatAm startup ecosystem data provider) released its numbers for the region for October 2022. Slow and steady: October had 111 rounds, the highest number since July 2021. However, the investment volume (USD 920mm) decreased by 25% YoY and 43% compared to last month. Early stage continues to boom – it was the month of the year with the greatest number of rounds up to USD 5mm.
Despite the macro headwinds, Latin America continues to be an attractive region for tech investors. First and foremost, the region has a large and young population that is increasingly connected to the global economy. Secondly, many Latin American countries such as Brazil, Mexico, Chile, and Colombia, have enacted favorable policies toward entrepreneurs, making it easier for new business to get off the ground. M&A is also interesting for global players as acquiring local firms is a good way to gain an exposure in the region. I remain cautiously optimistic.
From a worldwide perspective, Pitchbook data showed again that the venture market still looks stronger than any year before 2021.
The halt in public listings and recent retreat of “untraditional” investors in the venture industry are a few of the many reasons why both median and average late-stage VC valuations have taken a significant hit in 2022. Late-stage VC has seen the impact of volatility more than any other area of the market so far. The median late-stage valuation in Q3 fell to USD 71 mm, marking a 29% drop from Q1.
Speaking of these untraditional investors, a year ago, university endowments were delivering great returns - some schools exceeded 50% for fiscal year 2021.Now, they're facing their worst performance since the financial crisis: Endowments and foundations reported median losses of 7.8% for the fiscal year ended June 30, according to an estimate by Cambridge Associates. The news is not that bad – as these results beat several benchmarks for this year. Why is that? Thanks to their high exposure to private markets, endowments have been sheltered from the worst effects of the market sell-off. It will take several months, or even longer in the case of venture capital funds, for public and private asset prices to reach an equilibrium, assuming stocks and bonds remain depressed.
However, within private asset portfolios, some strategies are going way better than others. High exposure to VC helped some endowments outperform in prior years, but some of those same VC funds are now a drag on returns. With the FTX news this week, some relevant VCs marked this position down to zero – worsening this perspective. Let’s keep an eye on how everything unfolds…
Dock, Brazilian BaaS unicorn laid off 12% of its team–160 people in Brazil and 30 in Mexico. The main areas affected were the marketing, HR and legal teams.
Mexican retailer conglomerate FEMSA bought payments aggregator Netpay for an undisclosed sum – continuing their fintech strategy with Oxxo.
Brazilian CloudWalk becomes first crypto company to become a licensed payments institution in Brazil.
VC activity in mobility tech continued to decrease in Q3. Only $5.5 billion was invested in the sector, a decline of 55% quarter-over-quarter and 79% year-over-year.
Linets, Chilean startup that offer cloud computing, dedicated servers, and virtual private servers focused on the support and monitoring of e-commerce sites merged with Acid Labs. The terms of the deal were not disclosed.
THE START OF THE FTX SAGA!
ZeroHash initiates its Brazilian operation with the offering of crypto as a service. Paula Marques, previous Itau and Mercado Livre, will head compliance for the firm in Brazil.
Quona Capital closed a USD 332mm fund (originally targeting $250 million), with 75% of the firm’s existing LP base participating. The fund focuses on emerging markets that accelerate financial inclusion.
In Q3, quarterly VC investment in foodtech fell 76.9% year-over-year, with only $2.7 billion invested globally, and Latin America was no exception.
Agrolend, Brazilian credit agtech raised a Series B round of USD28mm with Lightrock. The funding comes only 10 months after a Series A done in January.
N1co, fintech from El Salvador that offers fintech services such as peer-to-peer money transfer, payment gateway, and more raised a USD 18mm seed round with undisclosed investors.
Recent interview with the co-founder of Uruguayan fintech unicorn dLocal Sergio Fogel revealed that he sees good opportunities to invest in Latin
American startups providing business software and payments services.
Liti, Brazilian healthech that offers technology and medicine that enable users to track their health raised a seed VC round of USD 4mm with investors such as Canary and Norte Ventures.
Meta laying off more than 11,000 employees (13% of its global staff). Naturally, Latin American offices were impacted.
B3, Brazilian stock exchange, acquired Neurotech – company that specializes in advanced artificial intelligence solutions for the entire decision cycle in credit and risk operations for up to R$1.1 billion (including an earn-out of up to R$500 million). Itaú BBA acted as exclusive financial advisor to Neurotech and its shareholders in the transaction.
Flavia Almeida, , president and partner at Peninsula Capital (family office of Brazilian Billionaire Abilio Diniz) predicted a wave of “down rounds” in the upcoming months.
FV Bank became Puerto Rico’s first crypto bank by rolling out its digital asset custody service.
Good news!!!! Research shows that Late-stage fintech multiples are climbing back up to 2-3x revenue.
Chilean unicorn Betterfly buys Brazilian startup SeuVale one year after landing in Brazil. SeuVale offers flexible benefit options.
Yave, Mexican fintech that grants mortgage loans to the Mexicans through an online platform raised a USD 7.5mm seed round with funds such as Better Tomorrow Ventures, DILA Capital and Goodwater Capital.
Mendel, a Mexican provider of financial management products to companies, raised a $50 million Series A extension.
Brazilian listed tech company VTEX delivered its results beating beat its own revenue guidance, it continues to deliver on margins (both gross and EBIT were better than expected). Locaweb and Clearsale also delivered solid results.
What did I learn from readers?
In this section today I will discuss a bit of the FTX Saga trying to summarize eveyrthing I read. I highly recommend reading Eduardo Vasconcellos’ newsletter for anything related to crypto (PT only). Also, as mentioned above - ZeroHedge is a great source. What happened as of now? (note that when you read this things might have evolved a bit!)
CoinDesk published a revealing report on November 2 about the crypto trading firm Alameda Research, another branch of Sam Bankman-Fried's empire - turning out that the trading firm held billions of dollars' worth of FTX's native token, FTT: "While there is nothing per se untoward or wrong about that, it shows Bankman-Fried's trading giant Alameda rests on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto."
This led to the rumors of FTX’s insolvency - and those concerns amplified later when users reported difficulties withdrawing cash funds from the exchange.
CZ, founder of Binance went further on a tweet announcing that Binance was therefore liquidating ~USD 530mm in FTT token.
One thing led to the next — FTT cratered 32%.
Binance then announced it agreed to purchase FTX (not binding), then the token rallied skyward 20%.
One day after crypto exchange Binance announced its intent to acquire competitor FTX for an undisclosed amount, the company pulled out of the deal: “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition.”
Things go south - and FTX files for Chapter 11 bankruptcy and SBF resigned his position. Possibly, serious fraud. Once golden boy SBF is now announcing he messed up big time - and also reportedly being held in the Bahamas.
Here is a list of the most prominent investors in FTX:
BlackRock
Ontario Pension Fund
Sequoia
Paradigm
Tiger Global
SoftBank
Circle
Ribbit
Alan Howard
Multicoin
VanEck
Temasek
There is more….
“Bankman-Fried started a fund FTX Ventures in January with a $2 billion personal commitment. It was one of a lengthening list of crypto startups jumping into VC with high-minded aims like advancing the global blockchain and Web3 adoption. That same month, he brought on Lightspeed Venture Partners partner Amy Wu to crank up the fund’s investments. This year, the team did about 50 deals in startups including Mysten Labs and Helium, the company behind the Helium blockchain network.”
What else? What else? Let’s wait for the next news of this saga….
For a good outline of events take a look at this Business Insider article too!
What am I reading?
· Meio & Mensagem: Key Takeaways from Web Summit 2023 (by Felipe Rama, PT only)
· Q3 2022 Mobility Tech Report
· ZeroHash Blog – Crypto in Brazil
· The information: The wave in M&A
· Whitecase: Latin America Focus in Tech
· The Information: The culture of late stage VC and what to do about it
What did I listen/watch?
· Martin Escobari - The 20 Minute VC Podcast
· Elon Musk's BRUTALLY HONEST New Interview With Ron Baron(MUST WATCH)
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Quote of the week:
“I sincerely apologize.” - SBF