LatAm Tech Weekly
#149 - Powered by Nasdaq: Spike in Secondaries, Carta’s recent data, deals of the week…and much more!
I’m writing to you today after completing a half marathon in São Paulo! It's not my first, but it’s the first in a couple of years and a part of my training for the full marathon I'll be running later this year. The experience was incredible, and I’m riding that “post-run high.” What better time to put together my newsletter?
This week, I had lunch with a reader and friend who shared something intriguing: he said he could tell how I’m feeling just by reading my weekly newsletter. When I’m exhausted, it shows, and when I’m excited and happy, that shines through too. It was an interesting perspective. So, I pose a question to you: can you sense how I’m feeling from my writing? I hope this week you can tell I’m excited!
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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.
On to the usual market update: I came across a good read this week in Pitchbook about the surge in secondary deals. Secondary deal value hit an all-time high in the first half of 2024, with more allocators turning to these markets for liquidity due to slow distributions from portfolio exits and higher valuations for secondary assets. The total value of secondary deals soared to $68 billion in the first half of the year, a 58% increase from the same period last year, surpassing the previous peak in 2022.
Investors continued to struggle with slow distributions from private market funds, leading many to find themselves overallocated to these asset classes. The first half of 2024 marked the third consecutive period in which capital calls from private equity funds outpaced distributions. Consequently, with secondary deal prices climbing during the past six months, investors increasingly turned to the secondary market, trading secondhand fund stakes to generate liquidity. The value of secondary transactions driven by LPs reached $40 billion in the first half of this year, up 60% from the previous year, with about 45% of LPs entering the secondary market as first-time sellers.
Additionally, driven by ongoing demand for liquidity, the value of GP-led secondary deals also rose significantly in the first half of 2024, up 56% year over year to $28 billion. Despite this rapid pace of deployment, secondary funds still have a substantial amount of unallocated capital, with $135 billion in dry powder. Including debt financing and anticipated fundraising, secondary buyers have $253 billion of total available capital for new investments.
Concurrently, several investors have been assembling new and larger secondary funds, signaling an improvement in private market sentiment and more realistic pricing from sellers. For instance, on Monday, Sequoia reportedly offered to purchase up to $861 million worth of Stripe shares from investors in its earlier funds. This move reflects the pressure from LPs to extract liquidity from aging VC funds. Sequoia indicated it would buy the shares at a $70 billion valuation, a notable increase from Stripe's last valuation of $50 billion.
It’s not just Stripe experiencing this trend. Across the board, secondary sales are seeing fewer price markdowns. The median startup valuation discount to the previous round was 46% in December 2023, but by June, it had improved to a 31% discount, according to data from the recently published Q2 2024 PitchBook-NVCA Venture Monitor.
Several buyers of venture-backed secondaries have also closed new funds recently. Industry Ventures raised $1.45 billion in September for its 10th secondaries fund and an additional $900 million in July for its hybrid fund, 20% of which will be used to purchase LP stakes in venture funds. The firm has doubled its investment pace out of secondary funds year-over-year. StepStone Group, a multistrategy firm, also joined the trend and announced the closing of a $3.3 billion fund for VC secondaries in June.
Even Lightspeed is considering becoming a registered investment adviser, as reported by the Financial Times, a move that would allow the firm to allocate more than 20% of its funds into secondary investments.
Turning to some insightful data from Carta, the "State of Startup Compensation for H1 2024" report shows that the market has stabilized regarding equity packages. These had seen sharp declines in late 2022 and 2023, but salaries and equity have now held steady. However, hiring remains sluggish, with fewer new hires this January than in any of the previous four Januaries. Additionally, the trend toward cost-cutting and leaner operations continues. Startups raising capital are operating more efficiently: those closing seed funding in the first half of this year had an average of 5.3 employees, down from 6.9 in the first half of 2021.
General news:
Itaú BBA has recruited Flavio de Picciotto from Lazard as co-head of M&A alongside Ubiratan Machado. Picciotto, who has a strong background in infrastructure, energy, and conglomerates, recently advised Auren on its acquisition of AES Brasil. He will start at Itaú in September.
Cubo Itaú has opened a new headquarters in Uruguay, marking its expansion beyond Brazil. This move aims to foster innovation and support startups in the region, providing a collaborative space for entrepreneurs and businesses. The Uruguayan location will enhance Cubo Itaú’s efforts to strengthen its network and impact in Latin America.
The Central Bank of Brazil enhances Pix security and postpones the launch of Pix Automático. Starting November 1, new rules limit transactions from unregistered devices to R$200 per transaction and R$1,000 per day to curb fraud. Participants must implement risk management solutions and provide fraud prevention guidance. The Pix Automático, set for June 16, 2025, will automate recurring payments, improving efficiency and reducing operational costs for businesses. Furthermore, new PIX limits are being introduced in Brazil. Starting in August, daily transaction limits will increase to R$ 100,000 for individuals and R$ 1 million for companies.
NG Cash has launched a customized credit card aimed at Generation Z. The new card features unique benefits tailored to the preferences and needs of younger users, focusing on digital-first experiences and financial flexibility.
After hardships, Merqueo is turning to physical stores. Following operational struggles and closure in Mexico and Brazil last year, the digital supermarket is now opening five new stores in Bogotá, Colombia. These locations focus on quick purchases, aiming for a shopping experience under four minutes with over 60 immediate-consumption items.
Ouro Preto Investimentos plans to expand its investment in FIDCs (Receivables Investment Funds) for fintechs, aiming to increase from seven to about 50 funds this year. With venture capital resources dwindling, FIDCs are becoming crucial for credit fintechs seeking immediate liquidity. The firm will offer both capital and risk analysis expertise, focusing on specialized FIDCs for sectors like construction and agribusiness.
Binance has promoted Guilherme Nazar from General Director for Brazil to Regional VP for Latin America. In this new role, Nazar will focus on advancing the cryptocurrency industry across the region, driving innovation, and boosting adoption.
Tenda is leveraging technology and data usage to drive its growth. By integrating advanced tech and data analytics into its operations, the company is enhancing efficiency and decision-making. This approach is helping Tenda to scale its business and improve its performance in the real estate market.
Deals:
Delivery Much raises R$ 4 million in Media for Equity funding from Nexpon, an investment arm of NSC Comunicação. This deal aims to expand its franchise network in Santa Catarina, targeting over 50 franchises by 2025.
Fashiontech Audaces acquires Sizebay, the leader in virtual fitting rooms. This move, which maintains both companies' independence, expands their client base to over 50 countries. Audaces, already operating in 42 countries, aims for R$1 billion in international growth by 2030. Sizebay, with operations in 59 countries, will continue under its current leadership, enhancing Audaces' technology ecosystem in the apparel sector.
Mell.ro secures a R$ 5M round. The fintech, specializing in payment guarantees for residential rentals, received investment from G2, Parceiro Ventures, GVAngels, Anjos do Brasil, Aimores, and directors from Mastercard and OLX. Founded in 2018, Mell.ro aims to empower real estate agents and landlords with digital tools and financial products, like their Guaranteed Rent plan.
Cohere raises $500M to compete with AI giants. The Canadian startup secured the funding from investors like Salesforce, Nvidia, Cisco, AMD, and Fujitsu, reaching a $5.5 billion valuation. This follows a previous $270 million round, bringing total funding to over $970 million.
General news:
Foreign VCs are increasingly eyeing Brazilian startups for more than just market scale. Brazil's maturing startup ecosystem, resilient entrepreneurs, and regulatory advancements are drawing international interest. Notable investors include GRIDX and Kamay Ventures, attracted by success stories like iFood.
Brazil and Mexico are regaining global investor interest following Biden's decision to forego trade agreements with these countries. Both nations are emerging as attractive investment destinations due to their strong economic recovery and growing markets. This shift highlights the potential for growth in Latin America, as investors seek opportunities in robust economies beyond the U.S.
Retail financial operations are becoming a crucial credit alternative for Brazil's C, D, and E classes, who make up 76% of the population but struggle with access to credit. A study by Instituto Locomotiva and PwC found 56% of Class C and 72% of Classes D and E have forgone purchases due to lack of credit. Retailers offering direct financial services can help bridge this gap, providing more purchasing power and fostering customer loyalty.
iFood is nearing 100 million orders per month and is testing shopping mall deliveries in select cities.
Doctoralia has announced Felipe Rizzo as its new CEO starting in August. With a background in health and tech, Felipe aims to drive growth and enhance doctor-patient interactions.
Zoox Smart Data, a Brazilian datatech, has achieved 1 billion connections on its data analysis platform and projects to double its revenue to R$ 100 million by 2024. Operating in over 28 countries with 1,600 clients, Zoox leverages advanced technology, Big Data, and AI for data qualification and business insights.
Franco-Brazilian startup Morfo has secured nearly R$1 million from Rio de Janeiro's city government to reforest 100 hectares in the city's West Zone using drones. This innovative project, starting in August, aims to accelerate reforestation and reduce costs.
The Government of São Paulo, through a partnership between the Secretariat of Economic Development and InvestSP, is offering the Exporta SP program to train 150 micro, small, and medium-sized enterprises, startups, and rural producers in exporting goods and services.
Paytime transacted R$ 4.5 billion and earned R$ 29 million in the first half of 2024, matching its total revenue from last year in just six months. The startup, offering Fintech as a Service with subscription-based payment solutions, saw a 300% growth in 2023. With around 50 million transactions, Paytime's market share is now 0.25% of Brazil's total transactions.
Meta’s AI is expanding across Latin America but won’t be available in Brazil due to regulatory challenges. Launching on July 23, the AI supports seven new languages and features image creation, mathematical problem-solving, and advanced research capabilities. While the AI is accessible in countries like Argentina, Chile, and Mexico, Brazil's data privacy regulations prevent its launch there. Meta is working with local authorities to resolve these issues.
Deals:
Privacy, one of the largest content monetization social networks in Latin America, has acquired My Hot Share, a platform that streamlines cross-promotion for influencers. The acquisition aims to boost influencer earnings by reducing the time needed for promotion exchanges to mere minutes.
General news:
New regulations approved by Brazil’s Monetary Council (CMN) on July 23 expand the scope for credit fintechs. Direct Credit Companies (SCDs) can now participate in programs like Pronampe and FGI, and Peer-to-Peer Lending Companies (SEPs) can finance products and services.
Japanese fintech Credit Saison enters Brazil with a R$ 500 million investment, marking its debut in Latin America. The company aims to tap into Brazil’s growing digital credit market, focusing on partnerships with local startups to expand its footprint. This move highlights Brazil’s appeal to international investors looking to leverage its tech-savvy consumer base and burgeoning fintech sector.
Mercado Bitcoin is expanding beyond crypto, positioning digital fixed income as a key growth area. The platform, which has traded over R$ 620 million in digital fixed income tokens without default issues, sees this segment as strategic.
Open Finance in Brazil faces growth challenges despite significant progress. With around 30 million unique consents, the focus is shifting to convincing businesses to share data for benefits like higher credit limits and financial management tools. Currently, there are about 264,500 unique consents from businesses, a 70% increase in one year, but this is still a small fraction of the 22 million active companies.
Startups funded by Bossa Invest achieved R$200 million in revenue and created 5,000 jobs in the first four months of 2024. Bossa Invest, a leading early-stage startup investor in Latin America, has significantly contributed to economic development and innovation across Brazil.
Athena Capital highlights undervalued potential in VTEX, citing robust growth prospects and strategic positioning in the digital commerce market. The firm believes that the market is not fully recognizing VTEX's innovative capabilities and expansion opportunities.
Faber-Castell has launched a new AI-driven startup, Jibbit, in collaboration with edtech Jovens Gênios. Jibbit is an intelligent tutoring platform designed to assist high school students with personalized study plans and test preparation.
Deals:
Santander has invested R$ 125 million to become a shareholder in Pluxee, a Brazilian company focused on employee benefits and incentives. This strategic move aims to enhance Santander’s portfolio in the employee benefit market, leveraging Pluxee's expertise and technological capabilities.
General news:
Venture Capital has surged in the last decade, but the risk has increased too, says PitchBook. According to their Venture Monitor report with NVCA, dividend distributions for LPs hit the lowest level since 2008, representing only 5.1% of net asset value in 2022. With bloated portfolios and few exits, a significant influx of IPOs is needed to alleviate market pressure.
The M&A market in Brazil's tech sector is booming, with 104 transactions in the first half of 2024, matching 60% of last year's total. This data comes from the M&A Deals Report by Questum and Sebrae Startups. Key sectors include IT, Education, and Health.
Quartzo Capital is launching a new R$500M venture capital fund to invest in Series A and B rounds for startups, with funding starting this year and first investments expected by late 2025.
Z.ro Bank and Caju have received licenses from the Central Bank of Brazil to operate as payment institutions. Z.ro Bank will issue electronic currency and participate directly in the Pix payment system, streamlining its operations and offering its payment infrastructure to other companies. The bank, now focusing on B2B services, expects to double its revenue to R$100 million in 2024. Meanwhile, Caju, a flexible benefits company, will issue electronic currency and post-paid payment instruments. There are now 157 regulated payment institutions in Brazil.
Brazilian startup ClipEscola, which animates children's drawings, is making waves internationally, gaining traction in schools from Spain to Ukraine. This innovative platform allows students to see their artwork come to life, enhancing creativity and engagement in education.
Diversitera has launched a SaaS platform for monitoring diversity, equity, and inclusion (DE&I) data in organizations. Founded in 2020 by Marcus Kerekes and Maurício Nisiyama, Diversitera aims to enhance economic and social equity in companies.
Agroforestry Carbon, a startup focused on agroforestry and regeneration, is expanding internationally with operations in the Netherlands and Portugal. After success in Brazil, impacting over 400,000 planted areas and benefiting 250 small farmers, they aim to grow globally.
The solar energy startup Evolua Energia and Trinity Energias Renováveis have announced a joint venture to serve high-voltage consumers, such as medium and large companies. This partnership aims to expand their market reach to 10,000 clients within four years.
CrowdStrike's software update caused global computer disruptions and flight cancellations. To apologize, the cybersecurity firm sent $10 Uber Eats gift cards, but many recipients had issues redeeming them. The company attributed the disruption to a verification error that released faulty code.
General news:
Skyone achieved significant growth in H1 2024 with strategic moves, including launching a franchise model, securing a R$60 million investment, and making key acquisitions. The company opened six franchise units, formed a joint venture with Faitec, and acquired FWC Inteligência em TI.
A Brazilian startup, Insect Protein, is innovating animal diets with insect protein, obtaining the first MAPA registration for insect farming and processing. Founded by Adriana Bender and Mauro Ávila, the company focuses on creating sustainable and nutritious feed solutions for non-ruminant animals using Tenebrio Molitor larvae.
OpenAI has launched SearchGPT, a new AI-powered search engine prototype, quickly dubbed a "Google Killer." Built on GPT-3.5, GPT-4, and GPT-4o models, SearchGPT aims to enhance user experience by integrating real-time web information with conversational capabilities.
Deals:
MeuTudo has acquired Parati, a financial asset from Americanas, as part of Americanas' strategy to sell assets. Founded in 2017, MeuTudo specializes in payroll loans and operates as a banking correspondent for Parati.
Grupo Duo&Co has acquired Box Martech, a Paraná-based e-commerce strategy and technology agency, for approximately R$ 1 million. This acquisition adds 20 clients to Duo&Co's portfolio, totaling 270 clients, and strengthens their digital marketing presence in Latin America.
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
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.
Running is my happy place!