This week's focal point was the Federal Reserve's latest meeting. The Fed decided to maintain current interest rates, holding them steady at 5.25%-5.50%. This decision was largely anticipated. Notably, the Federal Open Market Committee's announcement this time around didn't suggest further rate hikes are imminent, but they're also not looking at cuts just yet.
Thanks for reading Weekly Tech Update - Julia! Subscribe for free!
Fed Chair Jerome Powell pointed out that inflation remains a significant concern, indicating that a rate decrease in March is unlikely. So, why does this matter for the Latin American Tech scene? Well, it's all about economic ripples. If U.S. interest rates decreases, investment flows from traditional fixed income to more dynamic areas like equities and alternative investments (which includes venture capital) are more likely to happen. This in turn boosts investor confidence, making them more inclined to invest in riskier ventures, including tech startups in Latin America. Essentially, the economic trends in the U.S. have a notable impact on the global markets in every aspect.
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.
Moving into the tech market specifically, the topic is still secondaries. A recent Pitchbook analyst note pointed out that we're in the toughest spot for M&A and IPOs that we've seen in over a decade. This has got a lot of VC firms thinking outside the box, especially when it comes to finding ways to return capital to their Limited Partners (LPs).
With the traditional exit routes of M&A and IPOs not as viable, VCs are getting creative with secondary market solutions. One idea that's really picking up steam is continuation funds. These are cool because they offer a flexible way for existing LPs to either sell off their older investments to new folks or move them into a new fund. It's still early days, and many VCs are treading carefully before diving into these kinds of deals. But as the market adjusts and valuations become more realistic, we're likely to see more action here.
This situation is a bit like a game of valuation tug-of-war, similar to what we see in M&A or IPOs. New investors want to pay less, while current investors value their assets higher. It's all part of the negotiation dance.
Right now, secondary buyers are looking for bigger discounts than most VCs are comfortable with. But as the market starts to find its balance with valuations, there's a good chance we'll see more of these innovative deals happening. It's all about adapting and finding new ways to thrive, and that's something the VC world is pretty good at.
Now, let's zoom in on the M&A landscape. Last year, according to PitchBook’s 2023 Annual Global M&A Report, the total value of M&A deals was one of the lowest we've seen since 2013. With an estimated $3 billion, it was just a notch above the 2020 levels, which were impacted by the global lockdown. Since the high of dealmaking in 2021, there's been a 35.5% drop in global M&A activity. This downturn has been influenced by factors like higher interest rates and a mismatch in valuation expectations between buyers and sellers.
Comparing last year's figures with the pre-pandemic era, there's a slight dip. Between 2015 and 2019, the average M&A deal value hovered around $3.4 billion, which is $400 million more than what we saw in 2023. Looking at specific sectors, M&A activity has slowed down in areas like B2C businesses, healthcare, and financial services. For instance, financial services have seen a continued decline in deal values, with a 51.4% drop from its peak in Q3 2021. Similarly, healthcare M&A activity has also fallen, even dipping below the levels seen in 2020.
While these figures may seem a bit sobering, they also reflect the resilience and the dynamic nature of the M&A market, adjusting to global economic trends and sector-specific challenges. It's a cycle that often sees ebbs and flows, and these shifts can open up new opportunities for strategic growth and innovation in various sectors.
General news:
A study conducted by Itaú Unibanco indicates that, compared to 2022, the volume of transfers using PIX for the purchase of products and services increased by 99%.
Sling Hub, startup focused data intelligence services, has unveiled Startup Copilot, a new venture exclusively tailored to cater to startups. The inaugural offering is the Investor List, a tool that sifts through 11K investment rounds and 8M data points within the startup ecosystem, generating a unique and complementary list featuring up to 40 investor recommendations.
Deals:
Wihom, developer of financial operations automation platform designed for online retailers from Colombia, raised $0,7M in Seed Round funding with investors such as 500 Startups LatAm.
BRLA, Brazilian operator of a financial infrastructure platform intended to bring prosperity through crypto raised $0,2M in Seed Round funding lead by 99 Capital.
Spectra Investimentos, a secondary market-focused asset manager, has just invested R$ 156 million in two companies: Xmobots, a drone manufacturer with Embraer as a shareholder, and Unicoba, a lithium battery company that attempted an IPO in 2021.
General news:
Warren segregates the fund management division and launches a new brand. With the name Asset Management Warren, the company aims to bring funds from external channels and double AUM by the end of 2024.
Visa announced a new form of payment in Brazil, which transforms the smartphone into a terminal by using the physical card with proximity for purchases. In partnership with Ingresse, the technology will be implemented in some events of the platform next week.
Deals:
Upload Ventures’ growth pocket has just closed an investment in the startup Topsort, alongside other institutional investors. Pear VC and Quiet Capital also participated in the round, contributing approximately $25 million to Topsort.
Latitud merged with the Ballard & Associates office to launch Latitud Compliance, a new product aimed at assisting startups in managing their offshore structures. This addition will complement the suite formed by Latitud Formation, which has already facilitated the incorporation of over 100 companies in Delaware (USA) and the Cayman Islands, and Latitud Finance.
Edrone, a Polish startup specializing in CRM and marketing automation, has just announced a R$ 25 million investment round. Among the startup's investors are INventures, Mueller Medien, Atmos, and PortfoLion. The company has opened its first office in Latin America in São José dos Campos.
General news:
Latin America has reached the mark of 977 active startups in the agribusiness sector, according to data from the open innovation network Liga Ventures, in partnership with Bunge and Hub CNA Digital. According to the report 'Startup Landscape: Agtechs', Brazil has a significant advantage in terms of its representation in the sector, hosting 83% of the region's companies.
Deals:
Incognia, an identity authentication startup, has just raised $31 million in a Series B funding round. The round, which valued the company at $181 million, was led by Bessemer Venture Partners, with participation from FJ Labs. Previous investors also participated, including Point72, Prosus, Valor Capital, and Unbox.
Tenchi raised R$ 35 million in a Series A round led by Bradesco, with participation from L4 Venture, a fund of B3, and Accenture, in a rare investment by the technology consulting giant in Brazil. The capitalization also marks the formation of a board, including the founders and Rodrigo Ragazzi, a private equity executive at Bradesco.
Price Lab, startup from Peru that developed an electronic price tag platform designed to simplify price updates and optimize sales, raised $0,36M in Seed Round led by IthinkVC.
General News:
Itaú account holders can now apply for INSS payroll loans directly through WhatsApp.
Saque e Pague, one of Banco24Horas' competitors, is investing R$200 million over the next three years to transform its equipment into a 'bank' and a 'store'. The company has just launched its digital account and is advancing in the creation of a marketplace that aims to add new functions to the equipment, beyond withdrawing and depositing money.
Bitfinex Securities launched in El Salvador as First tokenized securities platform. The National Commission of Digital Assets (NCDA) supervises and regulates the digital asset ecosystem, with Bitfinex Securities commended for its regulatory standards and compliance knowledge.
Deals:
3dar, operator of a virtual reality animation studio intended for the creation of immersive content from Argentina raised $4,25M in a Seed Round.
General News:
Fuse Capital will launch its second fund focused on blockchain startups in the first quarter. The managing partner of the firm, Dan Yamamura, believes that the worst is behind us, and that investors' appetite for risk is returning, albeit cautiously.
Deals:
Dimensa, a joint venture created by Totvs with B3, reactivated its M&A (mergers and acquisitions) engine after spending 2023 in low profile mode. For the sum of R$115 million, the company acquired Quiver, a traditional software company focused on the insurance sector.
Copel made the first investment from its corporate venture capital fund, Copel Ventures I. The company invested R$3.5 million in Move, a startup specializing in software for managing intelligent electric vehicle chargers.
What did I learn from readers?
A reader sent over a very interesting blog post from Bessemer Venture Partners. The piece written by partner Adam Fisher, is called The Spark and The Flame: Why venture capitalists want to back entrepreneurs and not just founders.
Below you can find my key takeaways:
Founders and entrepreneurs are often used interchangeably, but they differ significantly. Founders are individuals who establish a company, receiving shares at inception. Entrepreneurs are characterized by a pioneering spirit, innovation, and a high tolerance for risk.
Entrepreneurs consistently adapt and innovate, embracing uncertainty and acknowledging there's no set template for startup success.
Venture capitalists often seek entrepreneurs because they can navigate and adapt to inevitable plan changes.
Entrepreneurs are proactive in reassessing strategies and seizing new opportunities, maintaining determination and excitement through changes.
Founders who aren't entrepreneurs may struggle with innovation and risk-taking post-company inception. Some founders, termed 'incidental founders,' primarily join due to connections but may contribute less actively.
Entrepreneurs exhibit traits like insatiable curiosity and prioritize success over money. They actively seek feedback for improvement, demonstrate leadership in all situations, and often have an 'owner's mindset,' focusing on realistic goals and hands-on problem-solving.
In challenging market conditions, companies discover if they're led by a true entrepreneur, capable of reinvigorating growth and making tough decisions. For long-term success, it’s crucial to have an entrepreneur’s resilience, perseverance, and innovative mindset in the team.
I participated in two podcasts that were released this week. For my English only readers, this is an opportunity to listen to my first podcasts in Ensligh!
adorei sua participação no podcast do link no final! 👏🏻👏🏻