LatAm Tech Weekly
#152- Powered by Nasdaq: Spectra Investment Letter, 2024 Founders Overview, deals of the week.. and much more!
Happy Sunday!
This week was a whirlwind—both on the work front and in terms of the sheer volume of great content that came out. When weeks like this hit, I often find myself feeling overwhelmed. There’s so much to do at work, and when compelling content drops, I can’t wait until the weekend to dive in (which is when I usually catch up on my reading to produce this newsletter).
So, I end up getting home late from work and still staying up to read, which means less sleep and more fatigue the next day. This week, it was the Spectra Investor Letter for July that kept me up. Despite having a mountain of tasks, I couldn’t resist reading - and it was so good that I even summarized it for my Brazilian followers.
Balancing life as a content creator and an investment banker is definitely not easy, but I wouldn’t trade it for anything. It’s all worth it in the end!
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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.
Digging right in, the recent Investor Letter by Spectra brought some very interesting data to my attention. Over the past 15 years, the venture capital industry in Brazil has undergone a remarkable transformation, evolving from a belief that successful startups could only emerge from Silicon Valley to becoming a vibrant and competitive market.
Doubling down on valuation, a key point discussed in the letter is the significant rise in startup valuations, especially in seed rounds, since 2017. In 2017, the average pre-money valuation in Brazil was R$ 14 million, which increased to R$ 67 million in 2023, a 4.7x growth. While this increase in valuations has generated extraordinary returns for VC funds, it also raises concerns about future prospects, particularly for investors who entered the market in 2023.
For example, a VC manager buying a diversified seed portfolio in 2023 would have paid 4.7 times more than in 2017, resulting in an internal rate of return (IRR) of 29% per year. Although there's a belief that returns are driven by outliers and price increases matter less, paying higher prices overall significantly impacts total expected returns. Additionally, the local VC market in Brazil has aligned more closely with U.S. startup prices, with a narrowing discount between the two markets from 55% in 2017 to 5% in 2021-2022, slightly increasing after market corrections in 2023.
When comparing VC to other asset classes such as PE and public equities, the decrease in discount vs. the U.S. is not observed. That is, the gap narrowing seen in VC is not seen in PE or public equities, on the contrary, the valuation gap versus the U.S. counterparts has increased. This could be interpreted as a market disconnect, possibly caused by the high capital inflow into VC at the expense of other asset classes.
While it is true that the Brazilian market is less competitive than the American one, it does not fully justify the high valuations when compared to market size (TAM) and the economic and political environment. Moreover, the U.S. has seen a mix of tech companies and tech-enabled ventures, while Brazilian startups have mostly been tech-enabled or replicating American models. Although there are pros and cons to investing in tech-enabled companies, the most significant drawback is that their returns tend to gradually decline over time.
With that, data shows that companies are needing to spend more to grow, facing lower capital efficiency and greater challenges in achieving high rates of return.
Moving on to another good read, the 2024 Founders Overview by Sebrae & ACE Ventures shared some some good data on the industry too. In a nutshell, the research showed that the teams are becoming smaller, increasingly spread across the country, more diverse, and primarily motivated by the possibility of solving problems and pain points of the corporate sector.
Entrepreneur Profile:
More mature founders are predominant, with most between 35 and 54 years old, often with prior corporate experience.
Diversity and Education:
Female participation increased from 23.6% to 28%, but men still make up the majority (71.4%). Most founders attended public schools, though private institutions remain predominant for higher education.
Professional Experience:
Startups founded by former corporate professionals grow faster (over 20% in the last six months) compared to those started by entrepreneurs with little prior experience.
Geographic Distribution and Sectors:
The Southeast region remains dominant, though its concentration has decreased. EdTechs lead the sectors, followed by FinTechs and RetailTechs. The growth of GreenTechs reflects a rising concern for sustainable solutions.
Business Models and Challenges:
Startups primarily operate in B2B models (54%), with B2B2C (18%) gaining prominence. The main challenge remains securing investment, with many startups opting for bootstrapping.
General news:
iFood is leveraging its extensive restaurant network to become a leading payment solution for restaurants, similar to Mercado Pago. By integrating financial services like digital wallets and credit lines, iFood aims to enhance its value proposition and solidify its position as an essential partner for restaurant businesses in Brazil. This strategy aligns with its broader goal of expanding beyond food delivery into fintech, tapping into a lucrative and growing market segment.
Skyone, a Brazilian IT scale-up, is accelerating its growth in 2024 following a R$ 60 million investment from Bewater. After acquiring FWC Cloud and forming a joint venture with Faitec, Skyone plans to close two more acquisitions this year and aims to reach R$ 400 million in revenue. The company is also launching an innovative cloud franchising model, targeting 25 operations by the end of 2024. Skyone is focusing on AI and expanding its presence in Latin America, with a specific emphasis on Mexico and Colombia.
Mercado Bitcoin has launched a new crypto-collateralized loan service, allowing users to borrow up to 30% of their invested assets. With over R$5 billion in customer custody, this product could offer more than R$1 billion in credit.
Chilean healthtech startup Keirón is expanding its AI-powered CRM platform to Colombia, aiming to enhance the patient experience through seamless integration with local clinical systems. Adapting to Colombia’s market, Keirón is focusing on omnichannel solutions and overcoming interoperability challenges. With advanced security measures and partnerships with local vendors, Keirón is positioning itself as a key player in Colombia’s digital health transformation.
Ericsson aims to expand 5G coverage in Latin America, focusing on Mexico, under new regional president Fabián Monge. The goal is to boost 5G deployment to enhance telecom business models and support new use cases, such as metaverse, IoT, and AI, while addressing global profitability challenges.
Chile's new Fintech Law, effective July 2026, emphasizes the crucial role of Certification Service Providers (CSPs) under the Open Finance System (SFA) regulations. These CSPs will set electronic signature standards to ensure transaction security and efficiency as financial data sharing expands.
Starlink, Elon Musk’s satellite internet service, is rapidly expanding in Mexico, driven by significant government contracts under President Andrés Manuel López Obrador. These contracts, totaling 3.33 billion pesos, aim to improve connectivity in underserved areas and enhance cellular coverage.
Deals:
SRM Ventures is investing BRL 40 million in two fintechs, Vetwork and Tepmed, as part of its BRL 500 million fund, of which BRL 412 million is already committed. Vetwork focuses on financial management for veterinary clinics, while Tepmed provides payment solutions for health clinics.
Serasa Experian has received approval from Brazil's antitrust regulator, Cade, to acquire the startup SalaryFits, a marketplace for benefits and payroll-deductible loans. The deal's value hasn't been disclosed. This marks Serasa's 11th acquisition since 2021, aimed at enhancing financial inclusion and fair credit in Brazil.
Recicli, a startup focused on urban mining and recycling of Complex Industrial Waste, raised R$ 1.04 million through Captable in its first market funding round.
Equity Fund Group has announced a strategic investment in Grupo Studio, a leading Brazilian consultancy in tax and business services with over 25 years in the market. João Kepler, founder of Bossa Invest, will join the board to drive innovation. Grupo Studio, operating 700 franchise units across Brazil, serves over 25,000 companies, including major brands like Ambev and Coca-Cola.
General news:
U.S. funds adapting strategies to attract Middle East investments:
· $7.6T by 2030: what Middle Eastern sovereign fund assets are projected to hit.
· Apollo Global sent 200 people to Abu Dhabi this year for local fund meetings.
· Blackstone has also been increasing relationships with Middle Eastern funds.
The second quarter of 2024 marked a historic earnings season for Brazil's major banks. The combined profits of Banco do Brasil, Bradesco, Itaú Unibanco, and Santander reached a record R$26.8 billion, surpassing the previous high of R$26.1 billion from Q2 2022. Itau Unibanco was the top performer.
Pipefy has introduced new AI-driven features to enhance process automation, offering three key tools that help teams save time, avoid errors, and speed up workflows. The no-code platform now includes AI automation for repetitive tasks, 24/7 AI agents to assist with common inquiries, and an AI copilot that provides deep insights and optimizes workflows.
Chilean tech company Sonda is solidifying its presence in Brazil, where it has invested $792M over 23 years, but now seeks expansion in the U.S., focusing on AI, cloud, and data centers.
EBANX has appointed Anirudh Dhathathri, a former executive at Wise and Visa, to lead its business expansion in India. This strategic hire underscores EBANX's commitment to scaling its operations in Asia, building on its success in Latin America, and strengthening its presence in the rapidly growing Indian market.
The Brazilian Securities and Exchange Commission (CVM) has selected two startups, Inovia and Aetos Tech, to develop AI solutions addressing its regulatory challenges.
Brazilian investors poured R$110 million (US$19.9 million) into cryptocurrencies last week, leading global investments during a period of high market volatility. This surge aligns with a broader global trend, as total crypto inflows reached US$176 million, reflecting partial recovery amid recession fears and rising interest rates.
Deals:
Costa Rican-Mexican HRtech BUO has raised $3M in a seed round led by Dila Capital, with participation from Nido Ventures, Daedalus Ventures, and Kuiper. The funds will be used to enhance BUO's AI-driven platform, focusing on predictive tools to help businesses in Latin America attract and retain top talent.
Bem Agro, an agtech specializing in AI-driven agricultural mapping, has secured R$ 15 million in a pre-Series A funding round. Major agro-industrial players Suzano Ventures, Atvos, and CNH Industrial participated in the round.
General news:
Rappi is shifting its strategy in Brazil with a "Turbo-first" approach, focusing on ultra-fast deliveries to differentiate from iFood. The latest move is the launch of "Turbo Restaurantes," offering food deliveries in as little as 15 minutes, starting with a partnership with Habib’s in São Paulo. This initiative is part of Rappi's broader plan to double its restaurant revenue by year-end, betting heavily on rapid deliveries.
In the last five years, Chile has emerged as Mercado Libre's fastest-growing market, surpassing even Brazil and Mexico. CEO Marcos Galperin highlighted that one in every two online purchases in Chile is made on Mercado Libre, making it the fourth most important market for the company.
Locaweb’s 2Q24 results aligned with expectations, showing a 7% YoY revenue growth, with a 22.5% YoY GMV expansion, exceeding estimates by 250 bps. Despite a slight miss on EBITDA margin and net income, LWSA brought a positive surprise by incorporating three subsidiaries—Tray, Etus, and Bling—creating a tax shield NPV of BRL 249 million, about 10% of its market cap.
FTD Educação, part of Grupo Marista, has launched Órbita 2, a corporate venture capital program inviting edtech startups to apply for investment. The program seeks innovative solutions for school management, learning processes, AI, adaptive learning, data intelligence, and more.
PUC Angels, a network of angel investors from PUC alumni, is set to invest R$1 million in up to five startups in 2024, offering mentorship and growth opportunities.
A new study published in JAMA Pediatrics suggests a link between early tablet use and increased tantrums in children. Research involving 315 parents indicates that children who frequently use tablets at age 3.5 are more likely to experience anger outbursts a year later.
Saudi Arabia is rapidly emerging as a global superpower in artificial intelligence, aligning its efforts with the Vision 2030 plan to diversify its economy beyond oil. The kingdom is making massive investments, including a $100 billion fund dedicated to AI and advanced technologies.
Scala Data Centers has inaugurated the second phase of its data center complex in Barueri, São Paulo, investing R$ 6.5 billion to add six new buildings. This is part of a broader R$ 32 billion investment plan aimed at transforming the region into Latin America's largest data center hub.
Deals:
Parfin, a Brazilian digital asset infrastructure startup, raised $10M in a Series A round led by ParaFi Capital to integrate blockchain and crypto assets into the traditional financial system.
Pipo Saúde has raised an additional R$35M in its Series A extension, bringing the total to R$155M. New investors include Enseada, Endeavor Scale-Up Ventures, and FJ Labs, alongside existing backers Thrive Capital, Monashees, and Kaszek.
Google has acquired Brazilian AI startup Character.AI, valued at $5 billion. Known for chatbots that mimic historical figures like Einstein and Obama, the startup, founded by ex-Googlers Daniel De Freitas and Noam Shazeer, quickly rose to prominence. Google will pay around $16.5 billion to license the technology and buy out shareholders. This move bolsters Google's AI research and raises questions about the independence of startups in the tech industry.
Mexican marketplace Veikul has raised $3M in a seed round led by First Check Ventures and angel investors, including Armando Véjar of Grupo Autofin Monterrey.
Argentinian SaaS platform Tucán, specializing in restaurant e-commerce, logistics, and marketing, raised $1M in seed funding led by Shefa, IRSA Group’s venture capital arm, with participation from local gastronomic groups.
General news:
Endeavor Brasil has appointed Anderson Thees as its new CEO, marking its first leadership change in six years. Thees, a seasoned tech veteran and former co-founder of Redpoint eventures, will drive the mission to support startups in achieving "decacorn" status—companies valued at over $10 billion. Congrats Anderson!!!
Brazil's financial market is set for a major transformation with three new Pix innovations: Pix by proximity, No Redirect Journey (JSR), and installment payments. Itaú and Rede will roll out Pix by proximity in October, ahead of the Central Bank's 2025 timeline, making everyday transactions even smoother. JSR will streamline online purchases by eliminating redirection steps, while Pix installments offer consumers flexible payment options, similar to credit cards.
Argentinian VC firm GRIDX is driving biotech innovation in Brazil by connecting scientists with entrepreneurs to build startups that address global challenges.
StoneCo posted strong Q2 2024 results, reporting a net profit of R$ 497 million, a 54% YoY increase, surpassing market expectations. The company’s growth was fueled by a 21.6% rise in total payment volume (TPV) to R$ 126.1 billion, with the micro, small, and medium-sized business segment seeing a 24.6% increase.
Legaltech Cria.AI, founded in January 2023, is transforming the legal profession by using AI to generate legal documents, potentially saving lawyers up to three hours per petition. By analyzing legislation and jurisprudence, Cria.AI offers precise legal citations, enhancing efficiency and accuracy.
Kirvano, a payment platform for infoproducers, has opened a new office in São Paulo, offering a state-of-the-art content creation hub. The 2,000 square meter space supports over 1 million registered infoproducers, providing them with high-quality production facilities.
MercadoLibre's shares have soared to a new all-time high on NASDAQ, trading above $1,980. This marks a significant milestone, surpassing its previous peak of $1,984.34 from January 2021. The company’s stock has surged 26.32% in 2024 and 13.83% in August alone.
Deals:
Pet Delícia, a Brazilian foodtech specializing in premium pet food, raised R$ 2.5M through crowdfunding on EqSeed, setting a record for the platform with 226 investors participating. This funding will help boost their annual revenue from R$ 23M to over R$ 30M, enabling expansion into new markets, including international ones.
Brazilian startup Norte Media, focused on creating brands with digital influencers, secured its first investment of R$ 1M. The funds will be used to expand its existing brand, Guday, and launch a second brand in 2024. Norte Media aims to become a "house of brands" for the creator economy, enabling influencers to build authentic and profitable businesses.
Brazilian fintech iCred has secured R$ 323 million in its latest FIDC (Receivables Investment Fund) round to advance FGTS payments, bringing its total raised to R$ 1.5 billion in FIDC for FGTS and INSS transactions.
General news:
Banks warn of the 'wrong PIX' scam, where criminals exploit the PIX refund mechanism to defraud users. The scam involves fraudsters using a victim's PIX key to make a payment and then persuading the victim to refund the money to a different account.
Fernanda Caloi, former director at Latitud, has been appointed CEO of LALA Brasil, where she will lead efforts to develop young leaders across the country. LALA, backed by global supporters like Nubank's David Vélez, aims to empower youths aged 14-20 to impact their communities positively.
SuperFrete aims to level the playing field for small businesses by significantly reducing shipping costs, offering discounts of up to 80% compared to major retailers like Magazine Luiza and Mercado Livre. Founded in 2020, the startup has grown to serve over 100,000 monthly clients and expects a 92% growth this year.
Mexican fintech unicorn Stori has launched "Stori Black," a premium credit card targeting users with strong credit histories who haven't received similar offers from traditional banks. The card offers cashback, credit lines up to 230,000 pesos, and interest-free purchase deferral for up to 12 months.
Deals:
Petz and Cobasi have signed a merger agreement to create Brazil's largest pet products and services company, with an estimated annual revenue of R$ 6.9 billion and EBITDA of R$ 464 million. Petz will hold a 52.6% stake in the new entity, while Cobasi will open its capital to incorporate Petz. This deal is expected to generate significant synergies, including up to R$ 330 million in additional EBITDA within three years. Approval from Cade is anticipated, with the merger expected to finalize in 2025.
Agroforestry Carbon raised R$1.1 million in a crowdfunding round led by Arara Seed, focusing on agroforestry projects for voluntary carbon offsetting with small farmers. The funds will be used for international expansion, enhancing their agroforestry database, and growing their marketing, sales, and tech teams.
Zapping, a Chilean streaming platform, has closed the largest crowdfunding round in Chile’s history, raising over $5.3M. This significant milestone will enable Zapping to expand its operations and continue innovating in the streaming industry.
LAVCA Tech Brasil 2024
Date: August 21
Location: Google HQ na Faria Lima
Description: LAVCA Tech Brasil is an annual meeting of LAVCA's network of Brazil-focused VCs and tech investors in São Paulo. This year's meeting will include keynote fireside chats, breakout sessions and networking opportunities designed to build meaningful relationships amongst investors active in the region.
Cloud 9 Capital: Open Cloud
Date: August 22
Location: Rosewood Hotel
***Invite only, focused on CEOs of SaaS companies
Brazil Tech Summit:
Date: August 9
Location: São Paulo
Description: This international summit features 100 global speakers and focuses on catalyzing entrepreneurial and business ecosystems in emerging markets. It includes panels on trends and opportunities in Brazil, industries of disruption, and the role of technologies like AI and blockchain.
Digitalks Expo:
Date: August 23-24
Location: São Paulo
Description: A major event that brings together professionals from various tech sectors to discuss digital transformation, innovation, and technology trends.
Colombia Tech Week:
Dates: August 26 - September 3
Location: Bogotá and CaliOverview: Colombia Tech Week 2024 is set to be a major event in the Latin American tech scene, bringing together startups, venture capitalists (VCs), accelerators, corporates, and international tech communities. The event aims to position Colombia as a hub for investment and innovation, with a focus on fostering connections and creating business opportunities across the region.
Inteligência Artificial no Agronegócio
Date: September, 12
Location: STATE Innovation Center, São Paulo.
Description: Grão Direto, the largest digital grain commerce platform in Latin America, has partnered with Microsoft, ADM, BASF, and PwC to host a super event featuring renowned market speakers, exclusively for selected participants. Pre-register here and seize the opportunity to participate in an immersive technology experience in agriculture. The event is free!Sao Paulo Tech Week
Dates: Sept 16-22
Location: São Paulo
Description: Several events focused in LatAm Tech taking place in the city. Notably, Cubo Conecta will happen on September 18.
Bossa Summit 2024
Dates: Sept 25-26
Location: São Paulo
Description: his event is a major gathering for the Venture Capital market, featuring over 400 speakers, extensive networking opportunities, and a range of workshops and mentoring sessions. It's designed to bring together more than 10,000 attendees, offering around 200 hours of content on business and innovation.
LAVCA Week 2024
Date: 8-11 de Outubro
Location: Conrad NY Downtown
Description: LAVCA Week convenes leading private capital investors from Latin America and around the globe each year for a series of meaningful discussions and private meetings covering the latest trends in private equity, venture capital and other private capital strategies. Participation at LAVCA Week is carefully curated and capped. LAVCA Members, non-member private capital investors and qualified institutional investors are invited to attend. LAVCA Members have access to special early bird rates through 29 August 2024.
#fswk24 - O Momento Atual dos VCs na Saúde
Date: November 6
Location: Rio de Janeiro
Description: This event focuses on the current landscape and opportunities for venture capital investments in the healthcare sector. Attendees will gain insights into the latest trends, challenges, and strategies for investing in health tech startups and innovative healthcare solutions.
PYMNTS Exclusive: Mercado Pago CEO on Building Brazil’s Biggest Digital Bank
Itau BBA & Sling Hub - July 2024 (overview of the LatAm Tech landscape)
BG2 Pod (Brad Gerstner & Bill Gurley) - recent episode on public market volatility
"Sometimes the best way to convince someone they are wrong is to let them follow their own path." - Unknown