Latam Tech Weekly #168

Happy Sunday!

It’s hard to believe, but here we are—two weeks into 2024, and the year is officially in the books! Part of me feels like it flew by in the blink of an eye, but another part is buzzing with excitement about what 2025 has in store.

If you’ve been following along, you know one of my favorite traditions is asking people I admire to share their predictions for the year ahead. Back in 2022, I turned this personal exercise into something public with a fantastic collaboration alongside Lucas Abreu, The Next Big Thing LatAm.

This year’s edition? It’s shaping up to be the best one yet! I can’t wait to share it with you all on December 18th. Mark your calendars, and if you want to be the first to receive it, make sure you’re subscribed here. Trust me—you won’t want to miss it!

To give a tase of what’s in store, take a look at this prediction by Ricardo Kanitz from Spectra.

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.

Jumping right to this week’s market update - Rex Woodbury’s posts on ‘Charts that are Changing the World’ are always a great read for me - and several new insights come to mind after going over the material.

Last year, U.S. venture firms returned just $26 billion to their limited partners—the smallest amount since 2011. Meanwhile, these firms invested $60 billion more than they distributed, marking the largest deficit in PitchBook’s data 26-year history. Unsurprisingly, limited partners are growing increasingly frustrated as they wait for meaningful distributions.

One of the key reasons the fundraising market has been so challenging is that LPs need returns before they can reinvest in new funds. According to PitchBook, the number of active VC firms has dropped by more than 25% year-over-year, and 2024 is shaping up to be the second consecutive year where VC fundraising is less than half of what it was in 2021 or 2022. The venture ecosystem is clearly resetting—some firms will wind down, while others will emerge to take their place. Not to worry - this is all part of the game. Survival of the fittest, as Darwin puts it.

A critical metric to watch is the distributions-to-net-asset-value (D/NAV) rate. Over the past decade, this averaged 17.1% for U.S. venture firms, surging to 35% during 2020 and 2021. Today, it’s just 5%.

There’s hope for a turnaround in 2025. The IPO market is expected to reopen next year. ServiceTitan, with $772M in implied ARR growing at 24% YoY, just went public, popping 41% in the first day of trading. Thus sparking conversations that the IPO window might already be cracking open. But ServiceTitan is a unique case: the company faces a compounding IPO ratchet from its November 2022 Series H round. Starting in May 2024—the 18-month mark from the Series H—the hurdle price began rising 11% annually.

While ServiceTitan’s situation is indeed unique, 2025 is likely to bring a wave of high-profile IPOs. There are currently over 1,400 unicorns—startups valued at $1B or more—waiting to deliver returns to investors. We’re now three years into a tough market for venture—a distribution drought. But the signs suggest that 2025 could finally bring a much-needed shift, unlocking liquidity and restoring optimism.

Finally, let’s talk about venture’s power law. Only a small number of companies drive the lion’s share of returns. DST’s Cole Rotman recently crunched some fascinating numbers, looking at Series A rounds for startups that eventually achieved $5B+ valuations. Unsurprisingly, firms like Sequoia, Benchmark, Index, and a16z dominate this list… Power law at its fullest.

Moving on to a consistent theme here, according to Industry Ventures, the global market for secondary transactions in venture was valued at $25 billion in 2012. A decade later, that number skyrocketed to $105 billion—a 4.2x increase. This remarkable growth underscores how rapidly this segment of the venture asset class has expanded, highlighting the immense opportunity it presents for both buyers and sellers. This trend is not only clearly seen in the U.S. - but LatAm is also having its share. An acceleration of deals like Warburg Pincus buying Kaszek’s stake in Contabilizei should occur in the coming years.

Structural changes in the market have been a major driver of this growth. Between 2012 and 2021, the annual capital raised by venture funds surged from $58 billion to $240 billion—an impressive 4.1x increase. With significantly larger funds, venture firms have been able to support startups with greater funding for longer periods, extending their time as private companies and delaying their entry into public markets. Thus, also pushing the market for secondaries.

In a recent analyst note, PitchBook dove deep into the data and forecasted that the secondaries market will grow to a $700 billion industry by 2028, up from $500 billion in 2022. Specifically, GP-led secondaries are projected to become a $70 billion market in the base-case scenario, assuming a 10% market share, which equates to a 5.8% CAGR from 2022 to 2028. In the bull-case scenario, with a 15% market share, GP-led secondaries could reach $105 billion, growing at an impressive 13.2% CAGR. But how did PitchBook arrive at these projections? Let’s dig into the data.

The latest monetary tightening cycle from 2022 to 2024 significantly impacted valuations, leading to a sharper slowdown in exits compared to deals. PE-backed public listings all but disappeared, sponsor-to-sponsor acquisitions became more costly due to rising borrowing rates, and corporates faced tighter cash flows because of lower valuations and higher financing expenses. As a result, PE sponsors turned to secondaries as an alternative solution for exit liquidity. Within the secondaries market, it’s important to differentiate between LP-led and GP-led transactions.

A GP-led secondary is a liquidity event initiated by the GP, designed to create a win-win scenario when executed well. In these transactions, one or more assets are rolled into a newly formed continuation fund, with the GP setting the asset price. LPs are given three options:

1. Sell their stake and exit,
2. Roll their stake into the new fund, or
3. Roll their stake while committing additional capital to avoid dilution.

For GPs, the assets selected for these transactions are often “trophy assets” they wish to retain. However, the original fund may need to wind down and return capital to LPs, making a continuation fund the optimal solution. Alternatively, the GP may anticipate a market rebound and aim to capture future upside by holding onto the asset longer. In some cases, the GP might also sell a portion of its stake in the process.

The value of GP-led secondary exits has more than doubled over the past five years, with the number of transactions climbing even more dramatically—from just 16 in 2020 to 89 so far in 2024. Over the past two years, rising discount rates have driven portfolio company valuation multiples down by 20% to 30%. This has made GPs increasingly reluctant to sell their most prized assets. Instead, they’ve opted to hold onto these assets by rolling them into continuation vehicles (CVs).

As a result, GP-led secondaries are on track to set a record for exit activity in 2024, with total exit value expected to land between $50 billion and $60 billion.

Over the past five years, the B2B sector has led the way in GP-led secondaries, accounting for 32.2% of all exits, followed by IT at 24.1% and B2C at 16.6%. In 2024, IT GP-led transactions have surged, with 20 exits year-to-date—a record for the sector. As tech valuations begin to recover after two challenging years of higher interest rates, GPs are understandably reluctant to sell these assets at discounted valuations. Instead, many are opting to roll them into continuation vehicles (CVs) to preserve their potential upside.

General news:

• The Central Bank of Brazil closed its public consultation on new rules for credit card chargebacks. The proposals, which include changes to risk management and liability timelines, sparked debate among banks and payment networks regarding fraud prevention and financial risk allocation.
• Viper expands its emergency management software into Ecuador and Mexico. The platform integrates communication channels to improve response times and coordination during crises, aiming to enhance safety and streamline crisis management processes in Latin America.
• GS1 Brasil launches its first Corporate Venture Capital (CVC), GS1 Brasil Venture, targeting startups in retailtech, logtech, foodtech, fintech, and edtech. The fund will support startups enhancing supply chain efficiency, offering mentorship and market integration to drive innovation.
• RD Station welcomes Vicente Rezende as its new CMO. With experience at Creditas and L’Oréal, Rezende will lead the company’s multiproduct strategy, enhance education initiatives, and expand into e-commerce, supporting over 50,000 clients globally.
• Nuvemshop appoints Tiago Winter as its new Customer Success Director. With 14+ years of experience, Winter will focus on Nuvemshop Next, supporting brands earning over R$100k and strengthening the platform's retail presence in Brazil.
• AWS highlights Brazil as a key market for startup partnerships in Latin America. Through programs like Activate and CTO Fellowship, AWS offers cloud credits, technical support, and connections to empower startups to create scalable, impactful ventures.

Deals:

• Transfero has acquired venture capital firm Fuse Capital to expand its financial product offerings. The combined entity will operate under the Fuse Capital name, focusing on DeFi and blockchain-based solutions. This positions Transfero to enhance asset management and integrate with Drex, Brazil's upcoming digital currency, while building on their joint venture, BRX Finance.
• Nintx raised $10M to develop medicines from native biodiversity. Backed by Pitanga Fund and others, the funds will expand its Campinas lab and advance eight projects targeting infectious and neurodegenerative diseases, with global licensing deals planned by 2026.
• DGF Investimentos secured R$200M for its 8th VC fund, with a target of R$300M by 2025. The fund focuses on software and AI-driven companies with recurring revenue and global potential. Initial checks range from $2M–$3M, with follow-on investments reserved.
• Prima, a Mexican startup, secured $23M in funding, bringing its total to $42.5M. The funds will expand U.S. operations and support partnerships with 150+ companies across key industries, boosting Mexico's industrial competitiveness.
• Omnicom Group is acquiring Interpublic Group in a $13B all-stock deal, creating the world’s largest advertising conglomerate with over $25B in annual revenue. Synergies are estimated at $750M annually, with the transaction expected to close in 2025.

General news:

• Kamina and Mastercard have partnered to tackle over-indebtedness and boost financial inclusion in Latin America, starting in Ecuador. Using AI-powered insights, the initiative aims to reduce delinquency and improve decision-making, setting the stage for regional growth.
• The "Garotas de Ouro" project, developed by EQL in partnership with PlayNest and Banco do Brasil, engaged over 800 participants to create finance-related content, reaching 11.2M views. Winners will be announced at B3 on December 17th.
• Tecspal, a Uruguayan startup, transforms remote hardware logistics for employees in 90+ countries with its digital platform. Offering fast delivery (3.5 days avg) and sustainability through its "Buyback" program, Tecspal aims to double operations by 2025.
• GovTechs are driving public sector innovation in Brazil, with 39% concentrated in the Northeast, according to Sebrae’s report. Key areas include education (14%), health (13%), and sustainability (11%), showcasing potential in transforming public administration.
• UberHub cements Uberlândia as a tech innovation hub in Brazil, impacting 350+ startups and earning "Best Startup Community" at the 2024 Startup Awards. Key sectors include agribusiness, logistics, health, and fintech.
• Unimed Brasil plans to invest over R$100M in startups by 2024 and launch a national CVC fund in 2025. Its innovation efforts include AI expansion, digital governance, and a venture builder to drive healthcare breakthroughs.
• The Brazilian Senate has approved Gabriel Galípolo and Ailton Aquino as new directors of the Central Bank, marking a strategic shift under President Lula’s administration to align fiscal and monetary efforts for growth.

Deals:

• Speak has become a unicorn with a $1B valuation after raising $78M in a Series C led by Accel, with backing from OpenAI and others. The language-learning startup has expanded to 20+ countries, including Brazil, aiming to make fluency more accessible.
• Fully Ecosystem secured R$200M from Prudential to redefine life insurance through wellness. Serving 60K users in Brazil and Argentina, the startup plans expansion to Ecuador and Chile, targeting 500K users by 2027.
• Creditas raised $60M in a bond issuance on Nasdaq Stockholm at a 10.5% annual rate, maturing in 2028. The deal, partially repurchasing $22.5M of its 2022 bond, emphasizes non-dilutive financing and includes an IPO-linked equity kicker.
• Evertec has acquired Grandata, a U.S.-based firm specializing in AI-driven credit risk analysis for the unbanked. This acquisition diversifies Evertec's offerings and enhances its AI capabilities.

General News:

• OpenAI experienced an outage, disrupting users’ access to ChatGPT. OpenAI acknowledged the issue and is working to restore functionality, highlighting the challenges of maintaining reliability in large-scale AI services.
• Gustavo Caetano returns as CEO of Samba, leading its pivot to AI with SambAI. Focused on automating 70% of repetitive tasks, SambAI has 26 clients and targets 25% growth by 2025.
• Funcional Health Tech welcomes Marilia Rocca as its new CEO. With experience at Santander and TOTVS, she aims to drive innovation and expand through M&As, strengthening connectivity in healthcare.
• PicPay appoints Renata Greco as EVP of Financial Services for Businesses. With 30+ years in payments, Greco will lead business segment growth, leveraging PicPay’s acquiring platform, which reached a TPV of R$27B YTD, up 32%.
• Brazil's Agribusiness faces challenges that technology can address. Ana Paula Trudo of Everymind emphasizes the role of AI in enhancing strategic management, where only 19% of businesses use tech effectively.
• Mercado Pago introduces contactless Pix payments on its POS devices, allowing customers to pay via NFC technology. This feature aims to streamline and secure the checkout process for merchants and consumers.
• Brazilian Senate has approved the AI Legal Framework, defining AI risk levels and excluding social media algorithms from high-risk categories. Key provisions on generative AI will take effect within six months.
• Google challenges Microsoft’s exclusive cloud deal with OpenAI, urging the FTC to investigate. OpenAI is reportedly exploring ways to end the exclusivity clause, potentially broadening partnerships.

Deals:

• Numia, an Argentine startup, secured $3.5M in funding led by Cometa to transform customer experience with AI. It plans to expand in Mexico and Colombia, aiming to surpass 400 corporate clients in 2024.
• SpaceX reached a $350B valuation after a recent funding round at $150 per share, solidifying its dominance in space exploration and satellite tech as the world’s most valuable private company.
• ServiceTitan priced its IPO at $71 per share, offering 8.8M shares of Class A common stock. The stock will begin trading on Nasdaq under the symbol "TTAN" on December 12, 2024.
• Sign-Speak secured $2.7M in funding for its AI-powered tools bridging communication gaps between deaf and hearing individuals. Its real-time API translates between ASL and English, with global expansion plans.

General news:

• Brazil's M&A Activity in the Southeast fell 9% in Q3 2024, with 285 deals compared to 313 a year ago. Nationally, M&A activity rose 5% YoY, driven by tech and finance sectors, with 65% of tech deals involving VC or private equity.
• Gávea Angels names Alessandra Dabul as president for the next two years. With nearly 30 years of M&A expertise, Dabul will focus on exits and strengthening partnerships in 2025. The group aims to expand its 108-member network and support its 40 portfolio companies.
• Grupo OLX appoints Camila Leães as VP of Products and Rafael Carvalho as Director of Advertising. These leadership moves aim to strengthen OLX’s market position and drive innovation in 2025, focusing on AdTech and retail media.
• BossaBox has reached breakeven and tripled its revenue in 2024. The squad management startup restructured operations and plans to integrate AI tools in 2025, focusing on sustainable growth and enhancing value delivery.
• Mercado Diferente will cease operations on December 21 after three years. Despite raising $8M and serving 70,000 customers, the startup struggled to secure new funding or an M&A deal. Efforts now focus on supporting employees and selling its tech assets.
• Cubo Itáu launched a new energy transformation vertical with Copa Energia to accelerate the sector’s decarbonization. The initiative will grow its startup community from seven to 28 within a year, focusing on energy efficiency and sustainable mobility.
• Mexican Senate has passed a reform granting social security and labor rights to delivery drivers on platforms like Uber and DiDi. Implementation begins in 180 days, creating a regulatory framework for digital platform workers.

Deals:

• Terradot raised R$353M ($53M) in a Series A round led by Google and Microsoft. Its ERW technology captures CO₂ using silicate rock dust in agricultural soils, with partnerships like EMBRAPA driving scalability.
• Gigs secured $73M in Series B funding to help businesses launch mobile services globally. Backed by Ribbit Capital, Gigs plans to expand its partnerships with Vodafone, T-Mobile, and AT&T, streamlining telecom operations with automation.
• Sofía secured $13.5M to expand its AI-driven healthcare platform in Mexico. Backed by Leadwind and Kaszek, Sofía offers SMEs proactive care and no-deductible plans, doubling its growth in 2024.
• Archer Aviation raised $430M from Stellantis, United Airlines, and others, boosting its eVTOL development. The company, valued at $3.1B, focuses on advanced aerospace technologies, including a military hybrid aircraft project.
• Trinus.Co secured R$43M in a Series B extension from Bewater to enhance tech development and expand market share through M&As. The holding connects real estate to finance with a focus on regional entrepreneurs.

General news:

• Whoosh reintroduces electric scooters to São Paulo, investing R$50M. Starting with 1,000 scooters in neighborhoods like Pinheiros, the company plans to expand to 3,500 units and transform urban mobility with a service certified by local authorities.
• Mattos Filho aims to be a one-stop shop for startups and VCs, supporting companies from early stages to IPOs. Its Venture Capital practice, launched in 2022, grew 25% in 2023, focusing on tailored strategies and VC-backed exits.
• Google launched Agentspace, an AI-powered virtual agent for businesses. It integrates with tools like Google Drive and Jira, enhancing productivity through AI-driven task automation. Early access is now available for registration.
• The Shunji Nishimura Foundation has accredited its Innovation Center as part of São Paulo’s Innovation System. Offering labs and incubation services, it aims to boost regional competitiveness through partnerships with Jacto and Senai.
• Broadcom joined the trillion-dollar market cap club, driven by a 220% annual surge in AI revenue to $12.2B. The company projects $14.6B in revenue for Q1 2025, reflecting strong demand for its AI solutions.
• CIX Capital shifts strategy with a $100M investment in Miami’s multifamily real estate market. The firm, led by the Zogbi family, aims to capitalize on Miami’s rising rental market, which has seen a 48% increase over the past decade.
• China has established a 41-member AI standards committee, including Baidu and top universities. This initiative aims to regulate and foster AI innovation, balancing development with risk management.
• Brazil’s ICMS Tax on international online purchases will increase from 17% to 20% in April 2025, raising total taxes to nearly 50%. The measure could discourage cross-border shopping on platforms like Shopee and AliExpress.

Deals:

• Natura Ventures made its first investment in Abbiamo, a logistics startup optimizing last-mile delivery. Backed by R$50M for early-stage startups, Natura Ventures supports eco-friendly logistics and will expand Abbiamo’s operations to Chile.

Tech Events Radar

Gear up for 2025!!!!

Itau BBA has already released the date of its Fifth Annual Tech Summit in New York. Save the Date: May 13 2025.

On the first edition of 2025 this section will be full of upcoming events and back to the usual format. Any tips or suggestions? Send them my way!

What am I reading?

• Open Source Companies that Become Proprietary: A Timeline (Tech Crunch)
• Service Titan S-1 Breakout (Meritech)

What am I listening to? What am I watching?

• Atras do Retorno with Fersen Lambranho

Quote of the week

"The development of technologies tends to follow an S-Curve: they improve slowly, then quickly, and then slowly again. And at that last stage, they’re really, really good. Everything has been optimized and worked out and understood, and they’re fast, cheap and reliable.”

— Benedict Evans, The Best is Last