LatAm Tech Weekly
#69 - Powered by Nasdaq: Latitud LatAm Tech Report, will Arco go private?, Pago leads in Mexico, deals of the week and much more!
Happy Sunday!
I read several good reports this week - ranging from the new Venture Growth analyst note released by Pitchbook to Latitud’s LatAm Tech Report. On the latter, I am well aware that there are 384 pages - so I decided to help out all of you by including a TL;DR summary on the section “What did I learn from readers”. Why this section? I recieved the report from 12 different people!!! On the first, the highlights of the different reports will come in my intro. Hope you like it :)
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PitchBook's Emerging Tech Indicator, which tracks seed and early-stage investment at the world's top-15 most successful VC firms, is a good read for those interested on what sectors are catching investors’ eyes. The analysis is also a good proxy for the industry sentiment as a whole. As for segments, Web3 and DeFi topped the rank again, with USD 879 mm invested. Fintech and biotech followed close behind, while segments like insurtech and mobility gained little traction. The total amount invested by these firms fell for the third consecutive quarter, a 52% decrease from Q4 2021's record of USD 9.8 bn across 275 deals. On the bright side (always an optimist), median size for early-stage deals reversed course in Q3, hitting an all-time peak of ~USD28mm.
On to late stage - Pitchbook released its note on Venture Growth. In the past decade, more capital has been invested in venture capital annually than multiple years before combined. Deal count has increased across the board, but a large majority has come from the late stage. As an example, during 2021, USD 237.2 bn was invested in late stage rounds in the US, roughly 110% higher than what was seen one year before. The figure accounts for 2/3 of the total capital invested in the industry for the year. The note shows that VC has outperformed other private investment strategies since the global financial crisis , with 7 of the past 10 fund vintage years leading all other private strategies. As a consequence, allocators have increased their investment in private markets to participate in these returns, thus allowing companies to engage in further growth while remaining private. A significant amount of capital has come from nontraditional investors such as corporate venture capital groups, hedge funds, and SWFs. Globally, ~1,300 private companies currently have a valuation of USD 1 bn or more. Note that just 18 held that valuation at the end of 2008. Finally, the average public listing valuation for global tech companies surpassed USD 3.0 bn in 2021, 14.5x the average valuation in 2008.
Fast forward to 2022, with equity investors more hesitant and public markets frozen over, startups that need to raise money are short of options. According to a briefing by The Information, investors are now chasing debt deals during this downturn. For example, Coatue, Viking Global Investors and Owl Rock have already done several smaller deals with startups that had to postpone their IPO plans this year. The specific lending arrangements may vary, but all are structured financing that blends equity and debt. For startups, it’s an alternative to raising equity at a sharply lower valuation. For investors, it is a big opportunity as it has equity-like returns but with more of the downside debt protection.
In Brazil, online retail had the worst Black Friday in its history, with a decline in the number of orders and in the amount spent per purchase. There was a 28% decline YoY. This accounts for a delta of BRL 1.2bn compared to 2021.
Banco Inter launches a new way to transfer money between accounts from different entities without using PIX due to the new possibilities brought by Open Finance. The transfer, called “Trazer Dinheiro”, allows users to transfer money from other financial institutions to their Inter account without leaving the app.
Mexico-based digital auto retailer Kavak is facing a difficult 2023, with significant spending cuts and staff layoffs. A company-wide email sent by CEO Carlos Garcia cited that “complex macroeconomic context that projects a challenging 2023”, and that the company will need to focus on “fewer things better” while focusing in its path to profitability.
Klavi, Brazilian startup that provides an open banking platform specialized in data processing and intelligence, raised a USD 1.7mm Series A round with RX Ventures.
Global software developer Globant acquired Sydney-based eWave, a digital commerce consultancy with expertise in Adobe and Salesforce commerce solutions for an undisclosed sum. With the acquisition, Globant aims to reinforce its global strength in digital and cognitive transformation and expands into Australia and several Asian countries.
Brazil’s Chamber of Deputies approved the bill that regulates the cryptocurrency sector in the country. It establishes that a “digital asset” is now considered a digital representation of value that can be traded or transferred electronically, used to make payments or for investment purposes. It also states that crypto exchanges can only operate if licensed by the Brazilian Central Bank.
Nubank announced that its CEO and founding shareholder, David Vélez, will relinquish his 2% stock-price-based option plan. This was the CEO’s only plan besides his existing ~21% stake in the bank. This will reduce expenses by USD 356 mm until 2029.
BR Media — Brazilian startup that helps brands run marketing campaigns with digital influencers — has just raised BRL 105 mm in a round led by Bridgeone.
Mercado Pago leads the way in Mexico: great read in Simon Rodrigues’ Technopoly newsletter. The fintech is winning Mexico and surpassing the country’s big banks too:
General Atlantic and Dragoneer Investment proposed to take Arco Platform private as shares of the Brazilian tech-education company trade near all-time lows. The stock jumped as much as 25%.
Brazilian unicorn Wildlife slashes 20% of its staff. People familiar with the discussions mentioned layoffs were not triggered by cash, as the company has enough money for ~ 8 years.
Destacame, personal financial management platform from Chile, raised USD 10mm in a Series B round with Banco Santander, Fen Ventures, and Kayyak Ventures.
In order to help out the tech ecosystem, Brazilian startup Kamino launched Kamino Resource Hub, a platform that will bring together technical manuals, such as an offshore maintenance guide, with tax, accounting and legal obligations, and tools such as the Employee SOPs Simulator, a calculator to guide the stock plan options that many early-stage companies offer employees as a benefit.
Patria Investments one of the leaders in alternative asset management in Latin America, with 10 global offices, acquired the Brazilian VC firm Igah Ventures, founded by Pedro Melzer. Details of the deal were not disclosed but sigals that Patria is serious in entering the asset class as the announcement comes right after bringing former Pedro Faria’s Kamoroopin to the firm to lead their growth strategy.
VTEX announced a strong November performance, which certainly embeds a better-than-expected Black Friday. Both the 27% YoY FXN growth and the 33% YoY growth in USD terms.
MVisia, Brazilian startup that develops a vision system for industrial process control through computer vision and artificial intelligence was acquired by WEG.
Kredito, startup that provides a financial services platform for SMEs and entrepreneurs from Chile announced a seed round of USD 6mm with funds such as Amarena, Empresas Penta, and Genesis Ventures.
Brazilian VC fund Headline run by Romero Rodrigues, co-founder of Buscapé, and managed by XP announced its first investment: Smart Break. The startup is an autonomous micromarket with 400 stores in the state of São Paulo. The round totaled BRL 36mm, with Headline as the lead and followers such as UVC Investimentos.
Deloitte announced the start of Deloitte Ventures in Brazil. The idea is to invest in startups using the company’s balance sheet - not establishing a separate investment vehicle. Brazil is the fifth country to announce the initiative - after Canada, UK, Germany and Australia.
Mercado Bitcoin announces their first stablecoin, MBRL. MBRL was initially implemented on Stellar, a blockchain network that builds financial access solutions. In the future, the stablecoin will also be issued on other distributed ledger networks.
PicPay announced the launch of two additional cryptocurrencies in its trading platform. Bitcoin Cash (BCH) and Aave (AAVE) can now be purchased via the app by any user, offering more investment diversification opportunities in the crypto market. The app now has a total of 7 cryptocurrencies available.
Go Pix! Rede, acquirer owned by Itau Unibanco, announced a 193% YoY increase in PIX transactions during this year’s black friday.
New data released by the World Bank indicate that 84% of the Brazilian population has bank accounts and that 70% have a credit or debit card. According to the survey, more than 90% of users feel safe when using digital banking. Among consumers, 59% said they were "very safe" and 33% said they were "safe".
What did I learn from readers?
Of course I received several indications to read the Latitud LatAm Tech Report. First of all, congrats to the team! I will include below the key takeaways.
Latin America is a giant. Our numbers speak for themselves: we have a GDP that surpasses USD 5T, over 600 million habitants, and a territory that stretches from Tijuana to Tierra del Fuego.
The report is divided in a couple of sections: i) Future of B2C Fintech ii) Future of B2B Fintech iii) Future of E-Commerce iv) Future of SaaS v) Future of Proptech vi) Future of Healthtech vii) Future of Climate tech.
Insights:
While consumer fintech is advancing in LatAm, we still lag behind globally. LatAm’s total fintech funding hit a record USD 12.9bn across 315 deals in 2021. However, this figure only represents ~5.5% of the total global fintech funding of the year. Note that 44% of that USD 12.9bn went to B2B Fintechs.
Factors driving the apetite for B2B Fintech:
Growing mobile and internet access;
tech-inclined population;
large unbanked and underserved groups;
USD 1.2T financing gap for SMEs.
Short-term trends for e-commerce in LatAm:
Higher penetration of purchases made on mobile and digital payments;
growth in cross-border e-commerce and digital goods and services;
social commerce, inspired by our love for WhatsApp and oversharing;
loyalty as a currency to differentiate from competitors and retain valuable customers.
Venture capital funding for SaaS startups was 7x between 2020 and 2021 alone.
SaaS sectors with strong local players from LatAm: e-commerce enablers, Sales/Mkt/CX, ERP/Accounting, and Fintech.
SaaS segments that still lack strong local players are DevOps/Warehouse, Design/Product/Collab, Cloud Infrastructure, and Verticals.
Proptech is entering its 3rd wave:
Real Estate 1.0 was about bringing information and data online.
Real estate 2.0 was about the transaction. Integrating the selling and buying sides with financial products.
Real estate 3.0 will be about transforming and digitizing ownership, affordability, and tradeability, taking out the friction of property management and fractional ownership.
In Latin America, healthtechs have grown their annual funding by 4700% between 2015 and 2021, while startups, in general, have grown by 1800%. Some short-term trends for healthtechs are telemedicine; mental health; health insurance; wellness; dental solutions; and employee benefits.
Remember this: Climate investments are recession-proof. The impact of climate change can be even more severe in Latin America, as we are highly dependent on industries such as agriculture, energy, and metals/minerals. The region's potential is enormous for Climate tech: we could generate over US$ 60 billion yearly through its participation in the Carbon market.
What am I reading?
CB Insights: 187 companies transforming financial services in Latin America
From payments and digital wallets to investment platforms and challenger banks, these tech companies are reshaping the financial services industry in Latin America.
What did I listen/watch?
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