LatAm Weekly Tech Update Special Edition - Spectra
#44 - Spectra Private Markets Conference 2022, Deals of the week, Brazil's CBDC and more winter signs!
Happy Sunday!
This week’s newsletter was done in collaboration with Spectra Investments. The company hosted its private markets conference this past Tuesday, June 7th. I had the pleasure of attending- more details below.
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SPECTRA PRIVATE MARKETS CONFERENCE
Spectra Private Markets Conference gathered over 600 people, including investors, investment banking and M&A professionals, public equity, private equity, and venture capital funds, as well as 31 founders and other members of their companies. The conference also had the participation of Paulo Veras, founder of 99, Brazil’s first unicorn, and Brazil’s former president Michel Temer.
As part of a process to bring the investment community closer to private companies, the focus of the event was to promote networking between different players in the market who are interested in getting to know prominent privately held companies. Several sectors were represented such as: pure tech, mining, agribusiness, financial services, retail, food & beverage, cybersecurity, SaaS, Edtech, health, biotech, death care, HaaS, logistics, rental, real estate and construction, throughout the day.
Key takeaways:
1. Spectra has over 450 invested companies and to date, has divested from over 70, through IPOs, sale to strategic players, as well as private equity and venture capital funds, among others, at high returns.
2. The private capital industry is cyclical and the last four years have marked the resumption of liquidity and increase in volume and number of transactions significantly.
3. The market and economy are cyclical but independent of where in the cycle, there are many breakthrough and innovative companies in the region generating cash and growing with profitability.
4. The amount of privately held companies drastically outnumbers those that are publicly traded, especially in Latin America where capital markets are not as developed as those in more developed countries.
5. IPOs of companies invested by PE/VC funds have higher Ibovespa-adjusted returns than others in the first year after becoming public. On average, +24% higher.
On to Other Updates…..
Even though I am trying to move away from the winter in tech in order to start out in a more positive tone, the news keeps coming and I can’t ignore.
After being largely unaffected by the market turmoil set on larger tech companies, early-stage startups are beginning to feel the chill.
According to a recent Pitchbook article, over the last two or three months, seed and Series A deal valuations have dropped significantly, and early-stage investors have gotten more selective, focusing on startups that can meet more substantial revenue targets than were required in the past.
Last year, the typical best-in-class Series A deal was raising around $20 million at a post-money valuation of $120 million.But recently those round sizes and valuations have tumbled to about $10 million and $50 million, respectively. As a result, founders are accepting increased dilution of the stakes they hold in their own companies.
Now going on to Crunchbase and the scenario as a whole: Global venture funding in May 2022 reached $39 billion, marking the first month in more than a year when it dropped below $40 billion. The May figure is also well below the $70 billion peak VC funding reached in November 2021.
All in all, VC funding in May fell 14% month over month from $45 billion in April. It’s down 20% from $49 billion a year earlier in May 2021. Even though seed is starting to feel the chill, the largest pullback was in late-stage venture capital, which fell from 2021 monthly averages by close to 40%.
Now, let’s go ahead to this week’s news…. Please note the new section on what I learned from readers - continue to send interesting articles my way!
Views expressed in this newsletter belongs to me, and not to any organization, affiliates, or employees.
Revolut and N26, European fintech giants, kick start their operations in Brazil. Revolut is currently valued at USD 33bn, has over 15mm clients in 35 countries. N26 has a USD 9bn valuation with 7 mm clients across 25 countries. Even though they are full stack banks, they will start through their credit services in the country and expand products gruadually.
Modak, the Bogotá-based community for content creators, raised a $5.3 million seed round led by GGV Capital with participation from Nazca, monashees, MAYA Capital, and ONEVC. The platform offers investment advice, educational programming and experience to teens who want to pursue content creation or start a business via a web3 approach giving all members ownership in the community.
Truora, the Colombian user authentication startup, announced the acquisition of the Brazilian digital signature startup ZapSign. The amount of the transaction was not disclosed. With the integration of ZapSign, Truora will be able to offer its clients a simplified flow for onboarding customers, integrating electronic signature with biometric authentication and background checks for ‘Know Your Customer (KYC)’ requirements.
a55, a financial underwriting platform based in Brazil, announced the opening of its offices in Mexico. a55 has granted more than 100 million pesos in loans to support more than 150 Brazilian and Mexican companies.
Alice, Brazilian healthtech, launches its B2B product – health insurance for companies. In order to stand out among the existing solutions such as Bradesco Saude, Amil and SulAmérica, Alice established an annual readjustment ceiling for the values of the plans as long as the contract with the company lasts.
Itau Unibanco, leader in the credit card market in Brazil with more than 38 mm cards and almost 30% of the total TPV will launch a marketing campaign to encourage customers to adopt virtual cards and other forms of digital payments. The actual card will continue to be available to anyone who wants it, but the focus is to encourage consumers to embrace once and for all these new forms of payment, considered easier, faster and safer - and which have gained momentum in the pandemic.
Take Blip, Brazilian B2B conversational platform, announces a USD70mm round by Warburg Pincus with an undisclosed valuation.
Kushki, startup from Ecuador that offers a simple to use and secure payment processing services through APIs for merchants raises USD 100mm for LatAm expansion – including Brazil. The round had investors such as Clocktower Technology, Kaszek Ventures and Softbank. The Company became Ecuador’s first unicorn.
Mastercard establishes a partnership with Mercado Pago in the crypto segment. Mastercard will conduct cyber security procedures using its blockchain its risk analysis engine for blockchain called CiberTrace.
Inter Seguros launched a new product called “Doctor Inter” for its B2C clients which will be a 100% digital health platform with embedded telemedicine through a partnership with Conexa Saude. The product will be offered in the bank’s “super app”.
Itaú BBA coordinated the first issue of tokenized debentures using blockchain technology in the history of Brazil. The operation coordinated by the bank was launched on the Vórtx QR tokenized asset trading platform, the first in the country regulated by the local SEC (CVM).
PagSeguro reported better-than-expected 1Q22 results. Better revenues (66% YoY), driven by a higher take rate, were further boosted by operating leverage. Net income (GAAP) of BRL 350 million beat our expectation of BRL 311 million – growing at a solid 29% YoY and 16% QoQ. Guidance calls for continued net profit growth, despite lower net margins.
Headline Ventures, Corporate Venture Capital strategy of XP conducted by former RedPoint partner Romero Rodrigues raised BRL 915.7mm to invest in early stage private companies.
Kavak, the Mexican used car sales platform and unicorn worth more than USD 8bn, reported layoffs within its Brazil operations – both in Rio and in São Paulo.
Uber Eats pulled out of Brazil due to its inability of beating its rivals Rappi and Ifood, thus becoming number one.
Google has committed to invest USD 1.2 bn in Latin America over the next five years to support economic development and digital transformation in the region, where the company is present since 2005.Part of the resources will go to Pro Mujer to help women-led businesses in Guatamala, El Salvador and Honduras gain access to training and microcredit and it will also support to protect the biodiversity in the Amazon rainforest.
Eureciclo, Brazilian startup that develops a solid waste management technology designed to turn recycling into a transparent and sustainable environmental, financial and social process raised USD 20 mm in a Series B round with funds such as Oria Capital and Redpoint e.Ventures.
What did I learn from readers?
The Central Bank of Brazil described how its CBDC, also called Real Digital, will work. This CBDC will have its first tests in 2023 and will be linked to the national fiduciary payment system STR, with which the monetary authority will have greater control over the population's money once its CBDC is deployed.
Real Digital, the digital version of Brazil’s national currency, has been debated at the central bank since 2015 and will have its first tests in 2023 through nine solutions presented by private companies during the recent Lift Challenge event that was carried out by the CBB.
Through Real Digital, the central bank says it wants to enable so-called smart payments within a regulated environment. Smart payments include smart contracts, transactions with Internet of Things devices and even decentralized finance (DeFi) applications.
Source: Cointelegraph
What am I reading?
The Information: Secondary Markets Seize Up as Startup Insiders Dump Shares
Battery Ventures: The Cloud Quarterly: A Founder’s Almanac (Q1-22)
CB Insights: Market Trend Report: Delivery Management Software for Retailers
VC investment in AI startups slumped around 21% quarter-over-quarter to $23.9 billion in Q1. However, the total remained in line with quarters prior to Q4 2021, and median late-stage valuations rose more than 11% to $100 million.
What did I listen/watch?
Podcast De Carona na Carreira - Maria Helena Pessoa de Queiroz (portuguese only)
JOB POSTS
Be sure to checkout the new website Layoffs Brasil. Great initiative to help the ecosystem reallocate professionals that were dismissed from tech companies due to the recent downturn.
Here is what top tech companies are looking for…
Banking Analyst: Nomad
Head of Branding - Beep
Growth Marketing leader - CapTable
Head of Sales - Rural
*respond to this newsletter if you want to post a job or if you have interest on the openings above*
Quote of the week:
“The key difference between 2022 and previous downturns is that this contraction was anticipated for a long time, whereas the previous downturns were far more sudden.” Karl Alomar
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