Special Edition: LatAm Tech Weekly goes to NY
#40 - Tech Insights from the ground, Itau BBA Tech Forum, Itau BBA Ceo Conference
Happy Sunday!
This week I am writing from Palo Alto – I am very excited to be here. It is my first time at the Brazil at Silicon Valley Conference, which happens tomorrow and Tuesday. I am sure it will be a great opportunity to learn new content from key people from the ecosystem such as Manuel Bronstein, CPO at Roblox and Anthony Lee, Managing Partner at Altos Ventures talking about metaverse. And, of course, great for one of the activities I like the most: networking 😉. I’ll share all details next week. If you are here, feel free to text me or reply to this email – I will be happy to see you.
As mentioned on my previous newsletter, this week is a special edition based on all of the events and people that I met in New York. I will go over the key themes from Itau BBA’s Tech Forum held at NYSE, highlights from our 15th Itau BBA LatAm CEO Conference and interesting insights and trends I heard coming from US venture capitalists, crossover funds and LatAm startups.
It wasn’t an easy week – I guess winter IS here after all.
P.S – This week I reached the mark of 1200 subscribers, and 900+ unique opens. The goal for 2022 is to reach the 2000 mark. Spread the word if you are liking what you are reading!
P.S2 - Please note that the views expressed in the content below belongs to me, and not to any organization, affiliates, or employees.
P.S3- Look at the job posts section and feel free to send over more opportunities.
Insights & Trends:
I met 8 venture capital funds from the U.S. that invest in LatAm. All of them big names that are setting the tone in the region. Apart from them, we had over 550 investors attending our conference – here the majority public equity funds, but also crossover funds and VCs. The points below are a summary of everything I heard.
· In the public markets, we saw another big drawdown in cloud software this week. The current median multiple is 6.2x NTM revenue. What does this number mean?
o 44% below pre-Covid levels in Feb ‘20
o 20% below the pre-Covid 5 year average (2015-2019)
o 6% below the Covid lows in March ‘20
Why? Similar to all corrections in history – it all starts with the public markets. The main argument is that we still have pain ahead of us: rates will continue to rise. Both in the US and in Latin America, thus increasing the trade off of investing in risky assets (such as software companies or startups that are not yet publicly listed). The 10Y is at 2.8% today, but will most probably rise to 5%+ by end of 2021. The same will happen in Brazil, current rates (SELIC) is at 12.75% and should continue to rise.
In general, investor confidence has been disassembled in software. For 10 years the software industry was proving that unprofitable models based on growth / market share capture in early days turns into profitability in the mature days. Obviously not for every software company out there, but for the highest quality ones it was playing out. Today, public equity investors don’t care about future profitability - It’s all about who’s generating FCF now (or in the immediate near term). The sentence I heard the most during our CEO Conference: “CASH IS KING”!
Looking at the private scenario, growth investors are more cautious. Some assume that last year’s valuations and gigantic rounds were unsustainable, and we will see down rounds and blood this year. An interesting analysis I heard is that companies will be divided in three well set tiers in Latin America: i) the excellent companies will be able to diminish the burn, continue with their operations and eventually raise a decent amount of money at a correct valuation; ii) the “medium quality” companies will struggle, but will be able to push through. They will have to use other instruments to raise capital such as venture debt – as an equity raise will be much harder as investors are more selective. Finally, there is a third group – which will either die or be acquired by a strategic investor or by the tier 1 privately held tech companies. In a nutshell – it is consensus to all that this will be the year for M&As and consolidation in Latin America. I am excited to see what will happen.
Looking at earlier stage investors, they seem to continue to be bullish. It is important to note that competition in LatAm for early stage investors has increased significantly as many players are focusing on these companies. With that, the fear and decrease in valuation has not hit the seed and pre-seed round (yet).
Fundamentally, there are no good times without bad. For smart founders looking to build valuable products, and smart investors looking to support them, there may finally be an opportunity now to get back to principles and build great things without the noise that comes with high valuations on shaky fundamentals. I have a thesis in life we should always look at the glass half full.
Mentioning about half full – a couple of notable rounds that were announced this week:
· Solfacil, the Brazilian solar financing startup, raised a $100 million series C led by QED with participation from SoftBank, VEF, and Valor Capital. The company has financed over $234 million in solar power equipment for residences, SMEs, and producers.
· Dock, the São Paulo-based payments and digital banking platform, raised a $110 million growth round, bringing its valuation to over $1.5 billion. The round was led by Lightrock and Silver Lake Waterman with participation from existing investors including Riverwood Capital, Viking Global Investors, and Sunley House Capital. Dock is the successor of three companies: Conductor, Dock, and Muxi, which combined to offer end-to-end payments technology to over 300 clients ranging from fintechs to retailers, banks, and tech companies.
The Fintech Boom in Brazil:
Another relevant topic that was brought up by many investors that I met is the growing number of fintechs in Brazil. Coincidently, this week a Fintech Report for 2022 done by local firm Distrito came out. There are currently 1289 fintech companies in Brazil. The graphs below are interesting and you can also find the complete research in this link. The general take is that even if there are still a lot of problems to solve in financial services in Brazil, it seems that the space is overcrowded. The Brazilian central bank regulation (Open Banking & fueling competition) also contributes to this scenario. Anyways, investors pointed out that consolidation will certainly occur and that they need to be overly cautious with the sector as CAC is going up significantly and the delinquency rates are starting to rise.
Another point that was discussed and questioned is Softbank’s activity in the region. It is public information that Tiger Global and Softbank will cut back on investments this fiscal year. After SB’s results and the regions’ teams restructuring this is should be true. SoftBank said it may cut investments into startups by more than a half in its upcoming fiscal year.
Itau BBA Tech Forum @NYSE
The main goal for this event was to kick start the week in NY – bringing out of the box ideas from the industries’ best to investors and entrepreneurs that attended the event. We had over 100 people watching. Namely, we had the honor of having Chubb’s Chief Digital Business Officer Sean Ringsted and also Snowflake’s Head of Financial Services Matt Glickman – apart from other panels that included Brazil’s Take Blip and crossover funds such as Manhattan Venture Partners. Finally, the day ended in an exciting way with a literal fire side chat (no topics or previous alignment done – seriously) between Paulo Passoni and Marcelo Sampaio, CEO of Hashdex. Some key takeaways below:
- Chubb is the world’s largest publicly traded property and casualty insurer with a gross written premiums of USD 46.8bn in 2021. The Company is present in 54 countries. In Latin America alone, it has more than 85 offices, Gross Written Premiums of USD 3.0bn and more than 5000 employees. It has partnerships with companies such as Rappi and Betterfly – offering all of the backend and APIs necessary for the insurance offering. Being, therefore, a white label solution for digital insurance. The market is expected to grow significantly in Brazil as Open Finance (which includes Open Insurance) starts to consolidate in the region.
- Snowflake focuses on the power of artificial intelligence and cloud computing. It is a ~USD50bn company. Its single data platform, Snowpark, enables users to code with the language of choice, and execute pipelines, ML workflows, and data apps faster and more securely. Snowflake also helps a data marketplace, addressing the main bottleneck of AI which is data ingestion. The Company brings data governance and controls into the data science workflow.
- Take Blip is a conversational platform that uses different applications such as whatsapp to offer better customer service from companies to end consumers. The key theme here is that consumers are tired of trying to resolve their problems on the phone talking with an individual or with a machine– with whatsapp, for example, the companies are able to have a history with the end consumer and therefore make the conversation and problem resolution more effective – apart from saving significant costs for the company.
- The beauty of crypto is composability. Which is, essentially, that you can build on top of someone else’s code and therefore build just an amendment or improvement to the already existing code. Composability leads inevitably toward more choice, and better user experiences, because there are no obstacles to someone taking an existing idea and making it easier to use, or adapting it to new use cases. With that, time to market decreases significantly and the learning from other’s mistakes / inefficiencies is constant.
Itau BBA 15th LatAm CEO Conference
This event is mainly focused on publicly traded companies and investors. All of the meetings (apart from the big group sessions) occur privately.This year we had 147 presenting companies out of which ~90% were represented by CEOs and Board Members. We hosted ~1500 small group and 1:1 meetings. It was quite impressive. I have mentioned above the takeaways from the interactions I had with investors in general. As for the conference itself, given that companies’ meetings are done with closed doors, the highlight for me was the key note speaker Mark Allen, triathlete and six time Ironman World Champignon. The conversation was done between him, and also triathlete Alexandre Birman, who is CEO at Arezzo and Flavio Canto, Brazilian judoka. It was a breathtaking conversation in which we were able to grasp the power of our mind in each and every activity – not only in sports. Once you are disciplined, driven, and able to control your thoughts and your mind to its optimal state- you can virtually do anything.
**This week Itau Unibanco also celebrated its 25th listing anniversary!
What am I reading?
11FS’ primer on How web3 is shaping the future of finance. All you need to know, from the basics of web3, to its technologies, concepts, use cases and more.
128 Latam Women Founded Startups Raised $4B+ in 2021. Read Harlem Capital’s inaugural 2021 Latin American Women Founders Fundraising Report. On this topic, Itau BBA held a woman’s event in NY! Hope to be the first of many! (picture below).
What did I listen/watch?
Podcast Acquired: Interview with Brad Gerstner (Altimeter)
The Morning Show (on the plane)
JOB POSTS - NEW SECTION!!!
Here is what top tech companies are looking for…
VP of People - Pipefy
Content Analyst- Education Journey
Head of Sales - Marvin
FP&A - Conexa Saúde
Corp Dev/ Head of M&A - Arquivei
Head of Branding - Beep
*respond to this newsletter if you want to post a job or if you have interest on the openings above*
Quote of the week:
“Those who succeed have a clear, focused picture of their success. The level of success they attain matches the expansiveness of their dreams” – Mark Allen
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