LatAm Tech Weekly
#65 - Powered by Nasdaq: Web Summit, CB Insights Q3 Tech Valuation Report, MELI's results, deals of the week, and much more!
Happy Sunday!
To start off - I want to thank all the positive feedback and support I got with my new initiative “Startups to Watch”. I thought it was going to be a good idea - but I was truly surprised by the engagement. If you are a startup and want to be featured - please make sure you fall into the categories (very early stage, off the radar, and not raising proceeds). If you want to be considered, just send over an email with a one-pager following exactly the format of the first issue with Closecare (link above). After taking a look at your information, I will reach out if you make it. Good luck!
This week was full: good reports came out, Web Summit 2022 happened in Lisbon, and some interesting deals occured. To make sure I cover everything, I will start with the usual market overview including the summary of selected reports, go to the day-to-day news, and finally in the “What did I learn from readers” section include a summary of what happened in this year’s Web Summit! I was not able to attend the event, but I read everything that happened and a special reader became my official correspondent. I was also able to get exclusive intel sent by a Brazilian startup founder on “The Gathering” a startups’ only side event . Yes, I do have eyes everywhere :) Check out below!
Follow me on LinkedIn , Instagram or Twitter for daily updates!
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.
I have mentioned here before that global dry powder is at ~USD290bn as of September end according to The Information. Indeed, I also saw an interesting data point this week on the theme: VC funds raised USD 151bn in the first three months of 2022, more than the total raised in 2021. Despite market turbulence, numbers indicate that investors are still bullish when it comes to VC.
According to Pitchbook, VC-backed companies raised nearly USD 195 bn as of Q3, marking the second-highest annual total for capital investment after 2021. However, on the exit front, only USD 63.4 bn in exit value was generated across ~1,092 exit events. This means that there were around 15 funding deals for every exit as of Q3 2022. Analysts say this trend is unsustainable in the long term. While the IPO market has been nonexistent this year, acquisitions have always been a common exit route for VC-backed companies. While M&A activity has slowed too, the number of closed exits via acquisition in 2022 is also higher than any year prior to 2021. This shows that the jump in deal-to-exit ratio has much to do with the high number of rounds being completed in this market.
Such factors are likely to add pressure on late-stage startups to return to equity markets for additional financing and to accept investment at lower valuations compared with previous rounds. This assumption was already seen in the data from CB Insights Tech Valuation Q3 2022 released this week.
CB insights showed that median tech valuations fell across all stages except Series A during Q3. The decline was felt most strongly at the late stage — Series D+, as valuations dropped by 27% QoQ. Moreover, median late-stage deal size also dropped, falling by 50% to USD 50mm. Even though these deals were in fact smaller, a greater share included capped or full liquidation participation rights, reflecting investors’ increased ability to negotiate stronger downside protection - a trend I have been discussing here for a while now.
Women Update:
Pitchbook released its All In Report showing that female founders remain strong amid economic pressures. US VC deal value for female founders reached USD32.4 bn through the third quarter of 2022, already more capital than any year prior to 2021, which saw record highs. The bad news is that check-writing authority and decision-making at investment firms remain largely male-dominated. But, we are working on it. Check out the recently launched Terasa Collective!
Helping the LatAm Tech Ecosystem:
As IPOs remain stalled and companies opt to stay private for longer, founders, employees, and investors are increasingly open to sell part of their equity to address more immediate liquidity needs. Velvet is the first company to address this phenomenon in LatAm by offering liquidity solutions to partner startups via secondaries and financing solutions. They are conducting a survey with investors to better understand their appetite for such unicorn startups so that it can offer them interesting investment opportunities. Let’s help out? Click here!
Rappi announced the arrival of Argentine Martin Martorell as VP of global corporate affairs. The executive will be responsible for leading the company's overall strategy in this area and leading the local public policy teams.
BeerOrCoffee, Brazilian coworking startup just went through a rebranding. Now the company is called Woba, which also marks a turning point in the company's business model: from a platform that connects professionals and companies to an ecosystem of office solutions. With more than 1,500 spaces in 200 cities across the country, the platform wants to facilitate flexible and on-demand access to workspaces for different uses, such as offices, spaces for events or meetings.
Ecuador marked a step forward on entrepreneurship and fintech regulation, following its LatAm counterparts such as Brazil, Chile and Mexico with their “Ley Fintech” bill. It defines more flexible rules for payments and lending for startups. It also restricts incubents of investing in startups in order to diminish the risk of monopolisation.
Pet's Table, Mexican pet food subscription company that produces human-grade and freshly made meals with real ingredients, tailoring them to each pet's individual nutritional needs and delivering them directly to homes around Mexico, raised a USD 2.1mm round with Left Lane capital.
Credix Finance, a decentralized credit marketplace, unveiled a USD 150mm stablecoin credit pool to Clave, a digital lending platform, to originate loans to businesses and consumers in Latin America. The credit facility is set to open in 2023, with the debt being denominated in the dollar-pegged stablecoin USDC. As with all Credix credit pools, the Clave debt pool will be split up into various smaller funds called “tranches” to offer investment opportunities for institutional investors with different return-on-risk profiles.
Looqbox, Brazilian startup that uses artificial intelligence to query data to simplify and streamline decision-making processes in large companies raised a seed round of USD 2.9mm from DGF Investimentos, HiPartners and Locaweb.
Kraft Heinz and NotCo are introducing their first lactose-free vegan cheese, Not Cheese, to the market. The product is currently being tested in markets in Cleveland, Ohio, and is expected to launch in all regions of the United States by the end of the year.
Nubank opens a new office and emphasizes its “Nu Way of Working" in which employees will have 2 months of home office for 1 week in person.
Brazilian healthtech Beep Saúde, announced its Series C co-led by Chan Zuckenberg Initiative, Fund owned by Mark Zuckenberg, and Bradesco Saúde. Existing shareholders such as DNA Capital and Valor also participated in the round.
Pedro Zinner, former Eneva, is appointed Stone’s CEO as former leader Thiago Piau transitions to the board.
Brazilian antitrust agency approved JV Techfin between Itaú and TOTVS (company). CADE has approved without restrictions the joint venture between TOTVS and Itaú. The Brazilian Central Bank approval is still pending.
Quinio, Mexican startup that acquires and builds e-commerce brands in Latin America offering brand introduction, brand analysis, brand development strategy, and growth performance analysis raised a USD 60mm Series A round composed of equity (USD20mm) and debt (USD 40mm) with investors such as Achimia, AlleyCorp and Cometa Ventures.
MercadoLibre reported positive Q3 figures, surpassing analysts’ estimates again. Overall, the earnings dynamics were very similar to those of the previous quarter. The company sustained the strong operating momentum in both divisions, through: i) continuity of the monetization trend and solid market share gains in Commerce; and ii) sustained profitability gains in its higher-margin business, Mercado Pago, despite macro headwinds.
In Commerce, its Brazilian division reported 20% YoY GMV growth. Ad revenue continued to be the main driver for platform monetization, reaching 1.3% of GMV (from 0.9% in 3Q21). In fintech, the NPL ratio deteriorated to 37% (up 560 bps QoQ) as expected. IMAL improved by 350 bps QoQ, reflecting the mismatch between revenue recognition and provisioning, as well as good revenue dynamics. Overall solid figures in both divisions translated into 45% net revenue growth.
The former COO of Hash launched Fiinco, a new Brazilian financial infrastructure builder.
Kapital, Mexican startup that offers a B2B treasury and credit platform announced a USD 100mm debt round by Sivo.
Brazilian listed tech company Sinqia announced it has 10 different M&A targets in the pipeline, which demonstrates that the company is seeking to implement its consolidation strategy
What did I learn from readers?
In this section today I invited Luiza Nolasco, partner and Head of Partnerships & Communications at fintech NG.CASH, who attended Web Summit this week, to share key takeaways. This is the biggest tech event in the world - take a look at these figures:
Web Summit in numbers
• +70.000 participants
• +1.000 speakers
• +2.300 startups
• +1.100 investors
1. Web 3, Crypto and Metaverse
The main focus of the event was Crypto, Web3 and Metaverse. Naomi Gleit, product leader at Meta, rejected the idea that the Metaverse would be controlled by Meta, as many others are also investing in it, and, like the internet today, no single entity controls it.
Sebastien, Fonder of Sandbox, showed how brands, such as Gucci and HBSC are investing in his platform, and he also asked everybody to create and to be part of the biggest change on the web. On the other hand, Berners-Lee the computer scientist who invented the World Wide Web, said he doesn’t believe that blockchain is a viable solution for building the future of the internet. He proposed a new type of web called Solid, that give users the control of the storage and use of their personal data.
Nicolas Cary, CEO of blockchain.com said that this is his 5th crypto winter, he believes that this crises won't last long and this is a great opportunity to buy crypto. However, he emphasis that it is very important to educate the investors as this is a long term bet.
2. Venture Capital
In the wake of the global financial crisis there were a lot of optimists about the future of Venture Capital. The mayor of Lisboa, Calos Moedas, presented the unicorn factory, a set of initiatives to improve the startup ecosystem in the country. Tim Draper affirmed that in the middle of the crisis is when the best companies are created, because they will use the money more efficiently, will be able to hire great employees amidst lower competition. The word "profitability" is once again gaining prominence in the VC world. No longer does the prevailing logic seem to be growth at all costs. Draper also noted the change in industry sentiment, telling the attendees that startups needed to "get profitable" and focus on their customers.
Even when being realistic about rising inflation, slower dealmaking and valuation haircuts, speakers were often keen to put a positive spin on things: "Embrace it," said Techstars CEO Maelle Gavet when asked about startups facing the prospect of a down round. "The reality is that a down round means there are still people out there who want to invest in you."
3. Focus on GenZ
There were lots of panels on GenZ. People want to know who these new investors are and what they are looking for, especially when talking about crypto opportunities and neobanks. Anne Boden, Founder and CEO of Starling Bank, affirmed that it is completely different the relationship they have with clients, she affirmed that old banks will have to change their culture to attract these new costomers. There were also discussions about how these young people are consuming media, and particularly how they are avoiding news media and instead trusting their friends for information - as creators gain even more power. It is important to notice that companies are now looking for established creator economy talent to hire. Sir Martin Sorrell, CEO of S4, affirmed that digital is expected to reach 75% of global ad spend in 2025 in publicity, and companies will spend more on activations and performance marketing because of GenZ.
4. International Fintechs
There was a relevant presence of international fintechs with dedicated agendas for Africa, LatAm and India. Many optimists for the Latam region and a lot of expectations for new future unicorns coming soon in Africa, as the fintechs are booming in this region.
Ricardo Schafer partner at Target Global confirmed that investments they made in fintech in Africa these last few years are paying back a great result for the company.
5. Russia - Ukraine War
The surprise speech of the wife of the President of Ukraine marked the opening of the Web Summit. The First Lady, Olena Zelenska, told the participants that “Russia has put technology at the service of terror” as it is also a “technological war”. Microsoft president, Brad Smith, announced a further USD 100 mm aid package to support tech in Ukraine through 2023 during the summit.
What am I reading?
Exclusive Web Summit intel on “The Gathering Event” by Felipe Spina, Cofounder and CEO @ Maestro ABM. This is an event restricted and exclusive for early stage startups. (PT only)
The Information: How Money-Losing Tech Firms Redefine Profits
What did I listen/watch?
JOB POST:
If you want your jobs posted here, just follow the steps:
1. Create your Account - It is 100% free;
2. Sign-in and open a "new project";
3. Complete the "job Description" (Will help you be more effective);
NEW JOBS:
Project Manager - MC1 (Mexico)
Business Development Director - Confidential Company (United States)
VP of Engineering - Confidential Company (United States)
Sr Director Global Enterprise Project Management - Confidential Company (United States)
JOBS (Still open):
Innovation Manager - AlEn USA (United States)
Credit, Collections & Litigations Manager - Abbe Leasing (United States)
Head of Marketing North America - Confidential Company (United States)
Director of Engineering - Zero Hash
Product Director Market Place - Confidential Company
Quote of the week:
“The fragile wants tranquility, the antifragile grows from disorder, and the robust doesn’t care too much.” Nassim Taleb