Venture Capital

LatAm Tech Weekly: AI VC Deals Ease up, Backlog of Tech IPOs

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.

Greetings as we stride into the final quarter of the year. Acknowledging the intricate geopolitical landscape, let it be known that within this newsletter, our focus remains LatAm tech and adjacent markets that intricately influence the local landscape.

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.

As per a recent PitchBook article, an unexpected shift seems to be occurring in the realm of generative AI. The initial fervor that captured the attention of VCs and the wider public, sparking a surge in VC funding, appears to be tapering off. Although investment levels remain notably high by historical standards, the sector is experiencing a diminishing level of enthusiasm. This shift is partly attributed to the considerable impact made by major tech players and a growing realization among investors that numerous generative AI applications might not be fully prepared for widespread adoption.

In Q3, the number of generative AI deals saw a decline of 29% compared to Q2, totaling 101 rounds. While the deal value also displayed a downward trend, it concluded at a higher point of $6.1 billion. This increase can be attributed to the significant blockbuster deal struck last month between Amazon and Anthropic, a provider of large language models, valued at up to $4 billion.

generative ai vc deals ease up

Shifting gears, a recent study by Sling Hub in partnership with Namari Capital sheds light on the portion of startups in Brazil that are able to secure subsequent funding rounds, identifying patterns and funding challenges in the country's innovation sector.

The research reveals that out of 999 Brazilian startups that received their initial venture capital funding between 2018 and 2020, only 8 reached a sixth investment round. The study presents five graduation funnels with different perspectives, including the inclusion of non-equity funding (debt and securitization) and examines the stages of funding and the size of the first round. It highlights the role of non-equity funding in sustaining startup growth, especially in later funding rounds. Additionally, it suggests that startups should carefully strategize their funding approach to avoid raising too much or too little capital. While I have already showed here data provided by Pitchbook or Carta for the US market, this is the first time we see granularity for Brazil.

While I have already showed here data provided by Pitchbook or Carta for the US market, this is the first time we see granularity for Brazil.

To wrap up, while we continue to follow closely the recent tech IPOs in the U.S. such as Klaviyo and Instacart, public companies’ multiples seem to be revolving around the 5x, considerably lower than the past. While this might affect upcoming IPOs, the backlog of tech companies to be listed continues to pile up as per Pitchbook data.

low public
backlog

Lastly, CB Insights released their State of Venture for Q3 2023. Globally, there were $64.6 invested in venture, up 11% QoQ. Looking at LatAm, funding doubled!

Monday

General news:

Acquirer Cielo and fintech Matera announces a partnership. The objective is to bring more innovation to Brazilian retail.

Good Karma Partners brings to Brazil a startup that caught Bill Gates' attention by reducing emissions in livestock. Australian company Rumin8 has developed a product that replicates the effects of algae in the digestive system of cattle and is conducting its most extensive field test in the state of São Paulo.

According to CFO Michael Tannenbaum, fintech BREX founded by Brazilians but US based is looking for talent in the region.

The president of the Brazilian Central Bank, Roberto Campos revealed that Pix broke another record reaching 168 million transactions in a single day. He also said that now the project will enter a new phase in which it will be possible to schedule payments. In his view, the tool should eventually replace other modalities such as, for example, credit cards.

Rappi announces Rodrigo Vasconcelos as Head of Turbo in Brazil. The executive has previous experience with companies such as Ambev and Zé Delivery, and co-founded Nana Delivery.

StoneCo  announced that it is reorganizing its management structure to better align the Company around specific go-to-market strategies per client segment and to accelerate the integration of its software and financial solutions. Selected changes: the Financial Services reporting segment will be led by three leaders who will each be responsible for managing StoneCo’s business for a specific client category. Each will serve on the Company’s Executive Committee, and report directly to the CEO.

Deals:

Colombian Bia raises USD$16.5 million and breaks even. The round was led by Kaszek, the leading venture capital firm in the region

Zenit, a healthtech often described as the 'Netflix of Healthcare,' has just closed a fundraising round worth R$ 1.3 million. The funding was raised through crowdfunding on the Captable.

Mush, Brazilian manufacturer of microscopic structures raised $0,18M in Seed Round funding lead by Irani Ventures.

Tuesday

General news:

Warburg Pincus has closed the largest fund in its history on $17.3 billion, despite a difficult fundraising environment. However, while the fund exceeded its target, it took longer to do so than many of its peers, and the new vehicle is only about 15% larger than its predecessor.

Brazil’s instant payments network, Pix, will receive an award by the Council of the Americas called Bravo Beacon of Innovation.

QI Tech takes Pix to the next level: fintech transforms the central bank's instant payment system into a business generator with innovative solutions. The latest addition is Pix Indireto.

WinZO, a global gaming platform, has launched its app in Brazil with a portfolio of over 100 skill-based games, aiming to enhance the gaming ecosystem in the country. The company now plans to invest $25 million in technology in the next year to provide Brazilian gamers with a personalized gaming experience.

Hashdex and HMC Capital investment platform will partner to promote the distribution of crypto funds to institutional investors. Both companies are taking advantage of greater regulatory clarity in Brazil, the possibility of the first bitcoin (BTC) and ether (ETH) spot exchange-traded funds (ETFs) being approved in the United States, and the implementation of Resolution 175 by the Brazilian Securities and Exchange Commission (CVM) to attract this type of investor. 

Deals:

Brota, developer of an intelligent and autonomous indoor garden designed to make it easy for anyone to grow their own food at home, raised $0,2M in Early Stage VC.

Chilean fintech Galgo raises US$40.8 million and consolidates the sale and financing of motorcycles in Latin America. Galgo is a Chilean fintech that was born in 2019 as Migrante. In addition to raising funds, it has just acquired the Colombian fintech Crediorbe.

Wednesday

General news:

Claure Group is acquiring a significant stake in eB Capital, one of the country's leading asset managers. The funds invests in private equity, infrastructure, real estate, and climate solutions.

Vittude, a healthtech that provides an online platform for psychological counseling, announces new initiatives that reinforce its commitment to workplace health. In addition to rebranding, the startup has created the country's first mental health award, the Vittude Awards.

Deals:

Lipigas invests US$13.4 million in the Chilean startup Rocktruck and acquires 70% of the company. The project is part of Lipigas' strategy to transform, grow and diversify its business by 2030, taking advantage of all its logistics, digital and service capabilities.

Argentine startup SiloReal raises US$ 1.5 million to boost its technological silobags - “Silobags” are a comprehensive solution for crop storage.

B3 invests R$ 10 million in technology company MBO. With the investment announced this Wednesday (11), the Brazilian stock exchange acquires a minority stake in the deep tech firm founded in Porto Alegre.

Thursday

General news:

Ares Management agreed to invest $100 million in Brazil-based Vinci Partners and form a strategic partnership with the Latin America-focused alternative investment firm.

Investments in Brazilian startups total $596.7 million in the 3rd quarter, according to Distrito. The amount invested in the country represents 67.4% of the total invested in Latin America during the period.

Friday

General news:

Brazil is elected the most innovative country in Latin America in a global ranking. The Global Innovation Index assesses approximately 80 indicators to list the most innovative economies. For the first time, Brazil's national performance reached the top of the regional ranking, surpassing Chile.

Nuvini, Pierre Schurmann's startup, outlines its plans following its Nasdaq debut. The software company raised $18 million through its listing on the American stock exchange.

'Phygital' in practice: Printi is set to generate R$150 million in revenue in 2023 by selling printed materials online. The online printing company, which has become one of the largest in the country, currently serves 3,096 cities in Brazil.

In three years of operation, the Goiás-based fintech Crediblue, specializing in home equity, has closed R$ 300 million in credit contracts for micro and SMEs, leveraging cutting-edge technology.

At Frubana, $300 million open up a "credit book." The Colombian startup has created Frubana Capital to expand its business by offering credit products.

Startup LicitaLab begins expansion into Colombia. LicitaLab, a Chilean startup that has designed software specialized in the management of bidding processes in the public sector, is about to expand into Colombia.

Deals:

Fintech Payer, which consolidates all retail payment methods into a single solution, has just received a R$ 500,000 investment from Ventiur Smart Capital. In addition to the capital injection, the startup will receive support, connections, and nine months of acceleration. The investment was made by Global, one of the investor groups managed by Ventiur.

On another note

What did I learn from readers?

While I am aware that I cannot be everywhere, I do have eyes everywhere because of my dear readers! This past week, the Lavca occured in New York. While I unfortunately was not able to go, Marcella Falcao, who heads Cubo for Investors & Corporates was there and shared the main themes!

1) *Largest Lavca Week*: over 500 participants.
 
2) *Investment Highlights for 2023*:
  - 54 LatAm-focused funds have raised a staggering $4.2 billion in H1 2023.
  - There's been a return to 2019-2020 investment levels with $1 billion flowing over the last 5 quarters.
  - Kaszek's insight: 2022/2023 is considered a halftime with the next phase starting in 2024.

3) *Startup Growth in Latam**:
  - The number of VC-backed startups in Latam has doubled in the past 2.5 years.

4) *Sectoral Highlights*:
  - Fintech is leading the way, accounting for 39% of the investment dollars and 28% of deals since 2019.
  - Other emerging sectors include logistics, health tech, and cleantech with a focus on renewable energy and sustainable solutions.

5) *Investor Preferences towards 2nd time founders*:
  - A trend towards investing in repeat founders, especially in seed-stage investments: accounting for ~ 50% of seed-stage VC investments in the past 1.5 years

6) *Gender Diversity in Startups*:
  - 25% of seed and early-stage rounds have been raised by women-led startups, placing Latin America ahead of the US in gender diversity in venture reporting.

7) *Upcoming IPOs Window*:
  - Based on insights from leading growth investors, 15-20 growth-stage companies, especially in Brazil, are projected to go public in the next 12-18 months.

8) *Alternative Financing Sources*:
  - Startups are veering towards non-dilutive financing.
  - Notably, startups have secured around $2.5 billion through credit lines, predominantly from banks and FIDCs in Brazil.

9) *Geographical Diversity in the Ecosystem*:
  - Chile and Colombia emerge as the fastest-growing major markets.
  - 51% of startups have headquarters in Spanish-speaking regions.

10) *Latam selling point: Talent and Market Potential**:
  - According to Riverwood, Latin American companies generate a network effect of human capital.
  - The talent in the region possesses significant potential, characterized by entrepreneurial spirit and also hard working people.
  - Latin America boasts 650 million individuals coupled with a youthful demographic. Strong geopolitical factors also play in the region's favor.

What am I reading?

What am I watching?

Quote of the week:

"Maybe you have to lose it sometimes to get people to take you seriously." (The Morning Show)

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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Julia De Luca

Julia De Luca is part of the investment banking team focused on tech coverage at Itau BBA. With more than 10 years of experience in finance, her focus is to connect global players to the Latin American tech ecosystem – with content, intel and opportunities. Julia co-authored the book Brazil Fintech and constantly writes columns on the topics of open banking, venture capital investment, regulation and LatAm tech trends. Julia started her career as Global Investor Relations at Gávea Investimentos and also spent a couple of years at Stone Co. She holds a degree in Economics from Pontificia Universidade Católica (PUC-Rio). She is also a columnist at MIT Tech Review, ION and Inteligencia Financeira.

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