LatAm Tech Weekly: AI Will Be the Main Trend for 2023

This article is part of the LatAm Tech Weekly Series, written by Julia De Luca and powered by Nasdaq. Through Nasdaq’s global network, we partner with Latin American companies to support their entire business lifecycle to elevate their brand and access the global markets. Learn more about Latin American Listings here.

Happy Sunday with the first newsletter of 2023! Quick recap: 2022 was quite a year for me – and I will do everything in my power to repeat the dose in 2023. If you follow me on other social medias, you probably know this by now. But, in numbers, last year:

• I participated in 57 events / podcasts / columns / articles

• +4000 subscribers in this newsletter

• 47 editions of Tech Weekly throughout the year

• 8 Startups to Watch editions

• ~60,000 characters written in this newsletter (for reference, a 200 page book has around 45k characters)

• +35k Instagram followers

• +8k Linkedin followers 

MY HUGE THANK YOU TO EVERYONE WHO SUPPORTED MY WORK!

But enough about 2022 and now on to 2023 because we already have lots to cover!

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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.

Going to the usual market update – of course it was the week of the release of several predictions for 2023. They were everywhere – from The Information to Scott Galloway (and to our own The Next Big Thing in LatAm 2023), one can pick and choose what to read or follow. However, a couple of things were in common in all of them – mainly the fact that it will be the year of AI. We will see in 2023 (and we already are) the explosion in generative AI. Generative AI, which broke in 2022, can be seen in image models, language models and other use cases applied to business. Enough said, ChatGPT gained 1 million users in the first five days after release. The Information reported that Microsoft is working on incorporating OpenAI's ChatGPT chatbot into the Bing search engine with a launch to possibly take place before the end of March. Of course Google is nervous. On Friday, The Wall Street Journal reported that OpenAI has entered talks to sell existing shares to venture capital firms Thrive Capital and Founders Fund.The firms would buy shares in a tender offer of USD 300mm from existing shareholders, including employees, that would value the company at USD 29 billion. A similar deal in 2021 valued the company at USD 14 billion. In the current scenario where fundraising is harder across the board - one can tell that AI is the theme for 2023.

Talking about predictions, a good read for me was the piece by Fred Wilson, managing partner at Union Square Ventures, on what he expects will happen in the VC world in 2023. “I believe that “new normal” is more or less where we were in 2015 where seed rounds were done around $10mm, A rounds were done around $15mm to $25mm, B rounds were done around $25mm to $50mm, and growth rounds had a cap at 10x revenues. This new normal will lead to many flat rounds, down rounds, inside rounds, and rounds with a lot of structure on them.” He goes on saying that he also believes that despite the adjustment, we will be at a better place in 2023 - something I have said several times here (always an optimist): “The good companies will have gotten funded, the bad ones will have shut down, and VCs will be back to competing with each other to win deals, which is where founders always want VCs to be.”

Now let’s take a look at 2022’s latest inputs to try to predict what is coming this year. In retrospect, even though the year was marked by layoffs, falling capital availability, and a closed IPO market, data shows that all in all, it was not that bad. Venture investors still deployed USD 238.3 billion. US-based VC funds raised a record USD 162.6 billion. Even though deal value declined each quarter, with Q4's figure falling back to pre-pandemic norms, deal count for the final period of the year are at just under 4,000, which is the most active quarter outside of the past two years.

“2021 was the outlier; 2022 was carried by momentum; 2023 may be the fine-tuning of the new market structure.”

To wrap up, there is no denying that 2022 was a challenging year for startups. But it wasn't equally difficult for every sector. Pitchbook analysts did an interesting exercise, looking at deal size, deal value and deal count in 11 verticals. They found that the relative laggards were Edtech, Ecommerce, Agtech and fintech. On the positive side, relative leaders include crypto and blockchain, healthtech and climate tech.

Now, let’s go to this week’s news and observe week after week what will happen in 2023!

Monday 

The news below occurred during the last week of 2022. I am placing them here because I believe they are worth mentioning:

• Brazilian fintech Méliuz and Brazilian bank BV agreed on a strategic alliance, bringing complementary strengths to Méliuz' operations. BV will purchase a minority stake of 3.85% in Méliuz, from Israel Salmen, André Amaral and Lucas Marques with a call option to purchase 100% of Méliuz's shares in 24 months. Bankly, Meliuz’s arm of BaaS was sold in its integrity to BV with an implied equity value of BRL 210mm.

• Brazilian Unifique announced the strengthening of its operation in the region of Rio Grande do Sul through the acquisition of three internet service providers (ISPs) – Rasche, MB Telecomunicações, and SRNET – with a total of ~7,500 broadband accesses. The company will disburse a total of BRL 20 million for the acquisitions, 25% in cash and the remaining 75% over 36 installments, which will be adjusted for inflation. 

Now on to what actually happened on Monday…

• Latu Seguros, LatAm insurtech specializing in business insurance, started offering a free cyber risk assessment to help other startups identify vulnerabilities in its digital assets and take measures to protect them. If you want to check it out, just register at the link: https://bit.ly/3GKeGil

• Colombia’s on-demand grocery delivery Merqueo files preliminary request for Nasdaq IPO. The delivery startup plans to list its shares for trading in the US, but the price of the offering is not yet defined.

Tuesday 

• The Brazilian SEC (CVM) changes the rules and now investment funds can invest directly in crypto currencies. The announcement points to a change in the current scenario, in which funds could only invest indirectly in crypto assets, buying shares in investment funds and contracting derivatives outside the country.

• Mexico M&A: Mergers and acquisitions activity is expected to maintain the pace of 2022 this year, in terms of the average number of deals.

• Itau, the biggest bank in Latin America, will cease the offering of DOC as a way to transfer money. The main difference between a DOC and a PIX is the fact that there is a maximum transfer amount and it is not done on the same day. Therefore, it can be cancelled if done in the correct time frame, it is not a done deal like the PIX. The reality if that with the vast adoption of PIX, the DOC is now rarely used by the population.

Wednesday 

• Brazilian startup Rocky DEM, which provides a three-dimensional (3D) discrete element modeling (DEM) program by simulating particle behavior within the materials handling system was acquired by Nasdaq listed Ansys, company that develops, markets, and supports engineering simulation software used to predict the behavior of product designs. The terms of the transaction were not disclosed.

• According to a research by Accenture, the Metaverse will be able to move USD 25 trillion by 2025.

• 5G is now available in 70+ countries worldwide. The technology can handle even data-intensive applications without breaking a sweat — creating a huge opportunity for industries like manufacturing and healthcare.

Thursday 

• The business of soccer: MGO Global, the company managing Messi’s lifestyle brand, plans to build on his World Cup success with a Nasdaq IPO - it seeks to raise about USD 7.5 mm.

• Amazon layoffs 18,000 employees as software giant Salesforce cuts 10% of its workforce, too.

• The food delivery app 99Food announced that it will no longer do the full service model for restaurants. That is, restaurants in the app will need to have their own delivery in place.

• LatAm startup Daki will change its growth strategy - instead of trying to expand its regional presence in the country, it will focus on increasing their delivery radius in cities that the company is already present.

Friday 

• MoneyGramlaunched its MoneyGram Online x-border transfer service in Brazil.

• Newly public Moolec Science (NASDAQ:MLEC) stock shot up 140% in afternoon trading Friday. Shares of Moolec opened at $4.36, climbing to $14.34 in mid-afternoon closing at $13.05. The agritech company went public through a merger with SPAC LightJump last week. Based in Argentina, Moolec uses molecular farming to create animal proteins in plants. Backers include agritech Bioceres Crop Solutions (BIOX), VC group Theo I SCSp and private equity firm Union Group.

• Brazilian startup The Coffee hits a USD 45mm valuation. The Brazilian startup that provides technology for cashier-free payment at coffee shops has raised USD 7.5 million in a round led by Monashees and CapSur Capital. 

What did I learn from readers?

I received from Caio Galvão, dear friend and reader based in NYC, the report by CB Insights on 11 trends to watch closely in 2023. I thought they were rather peculiar - to say the least. I am including below the TL;DR version - so you can reach your own conclusions! Any comments? Let me know!

1. Immortality-as-a-service. Humans have fantasized about extreme lifespans for millennia but the age-old pursuit is now attracting fresh interest from VCs and tech companies.

2. The secret invasion of super apps. The ground is being set for a massive clash of super app-level platforms vying to dominate consumers’ online life.

3. Fintech’s rapid regeneration. Fintech startups are facing the rockiest market conditions since they were founded, but many are already adapting by expanding into new spaces and catering to enterprises.

4. Bots in the house. Tech leaders and startups alike are exploring how robots can operate safely in the home — both as helpful cleaning aids and as empathetic companions.

5. Virtual power plants. Decentralized energy systems are picking up traction as the demand for renewable energy increases, grid stability concerns escalate, and communities contend with surging energy prices.

6. Healthcare’s invisibility trick. Ambient health monitoring will go beyond standard remote patient monitoring approaches to continuously collect data via devices that are more connected and less invasive than ever.

7. Smell goes digital. Digitizing scent is a complicated process, but smell tech is making significant progress that could affect industries including food, retail, healthcare, and more in the coming year.

8. Femtech turns to menopause. More startups are turning their attention to underserved issues like menopause as the women’s health space continues to expand.

9. The bio-based materials boom. Companies are transforming substances derived from natural sources like mushrooms and seaweed into next-gen materials.

10. India’s tech ascent. VCs are betting on India in the hope of capitalizing on the startup ecosystem’s next big period of growth.

11. Regenerative agtech takes root. As fashion brands and food giants turn to regenerative agriculture to slash their emissions, startups offering enabling technology are gaining momentum.

What am I reading?

• Pitchbook’s 2023 US Venture Capital Outlook.

• The Information – The Most Impactful Conversations of 2022

• Bloomberg Linea - Top Tech & Funding Stories of 2022

• Bloomberg Linea - 5 Lessons Latin American Companies Learned About Growth Last Year

• TechCrunch CES roundup - Here’s a roundup of the top AI-powered products we saw at CES 2023

Quote of the week:

“Instead of trying to change your entire life in January, the simpler strategy is to adopt a 12-month plan where you're making constant improvements.” S. J. Scott

Originally published on my Substack.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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