LatAm Tech Weekly: The Tech IPOs & Changes in VC

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.

Brazil Tech Week is underway! As we discussed last week, in the upcoming days, a variety of events will take place in São Paulo, all dedicated to technology. From social gatherings organized by prominent funds to full-scale events hosted by banks – we've got a diverse range of activities. Interested in what's on the agenda? You can access the complete schedule right here! If you happen to spot me at one of these functions, please don't hesitate to come over and say hello. I genuinely enjoy meeting new people 😊

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Approximately 18 months have passed since the Federal Reserve began raising the federal funds rate. Although these rate hikes were substantial, they appear to have largely achieved their intended goals: slowing down the rapid pace of economic growth and addressing inflation concerns without triggering a severe economic downturn. Public markets have started to bounce back, with most stock indexes showing positive gains year-to-date. Additionally, as inflation gradually inches closer to the Federal Reserve's 2% target and further interest rate hikes become less certain, the concept of a "soft landing" for the economy gains credibility.

However, the venture capital market is facing its own set of challenges, primarily a scarcity of available capital. In the United States, more than 51,000 private companies are backed by venture capital, representing a significant demand for funding that investors are currently reluctant to fulfill. While having a large number of companies seeking investment may not appear problematic on the surface, the notable increase in this figure, doubling since 2016, underscores the issue. This problem is exacerbated at a time when many investors are holding onto their resources.

One of the primary obstacles faced by the venture capital industry is the exit market, particularly the lack of opportunities for companies to go public. In 2021, the market witnessed over $660 billion in exit value generated through initial public offerings (IPOs) and deSPAC mergers. Each of these events contributed to the thriving venture capital ecosystem, which set records in terms of deals, exits, and fundraising during that year. After a period of slow activity, now we are finally seeing increased listing activity, there is cautious optimism that the market for VC-backed IPOs could turn around. This week we will take a look at these recent IPOs and how they are preforming. Why is this all important for LatAm Tech? The U.S. capital market sets the trend - if things continue to improve, the general sentiment gets better. Thus, private markets are affected at every stage, finally affecting our region. Let’s dig in!

Just because you see red - it does not mean that things are not improving. Remember that as mentioned last week, there is a considerable overgang on VC backed companies as these funds need liquidity.

Let's delve into the case of Instacart: When the company went public, it was valued at $10 billion on a fully diluted basis. This valuation represents a significant drop of over 70% compared to its previous private valuation, which stood at $39 billion after a funding round in 2021 that raised $265 million. However, the fact that the company raised the upper end of its IPO price range, as it did last week, suggests a growing appetite for technology IPOs.

If we consider a share price of $30, this equates to a valuation that's approximately 3.9 times its sales from the previous year. This places it slightly higher than its peers that are already listed publicly, trading at roughly three times their 2023 sales. Notably, Instacart is already generating profits. Could this indicate a new trend or a significant signal for technology IPOs moving forward? For sure! In line with what I have been speaking in the last couple of months that growth at all costs is “so last season” - investors now want profit.

On this note, the most recently listed Klavyio achieved profitability in the first half of 2023, a rare feat among both 2021 IPOs and upcoming Cloud 100 companies. Klaviyo reported a 51% revenue growth in the latest quarter, reaching $164.6 million. They swung to profitability, with a net income of $10.9 million compared to a $11.7 million loss the previous year.

Their IPO on September 20, 2023, raised $576 million. They offered 19.2 million shares at $30 per share, valuing the company at $7.56 billion. The stock closed at $32.76, a 9.2% rise from the IPO price, despite declining from its opening price of $36.75.

In conclusion, despite the lower valuation vis-à-vis 2021 terms, the fact that tech companies are now listing is a good sign. Again, 2021 was off the charts, and valuations were not reasonable. What we are seeing now is the “correction stage.” Companies should not be afraid of down rounds. Let’s keep the IPOs coming so the market in general can bounce back!

Monday

General news:

• SoftBank plans to invest in OpenAI.

• Foodology, the Colombian startup that creates and operates restaurant brands exclusively for delivery, has now launched the burger joint Nobru Burger in Brazil. This announcement comes less than a month after receiving a $17 million investment in a funding round.

• Ebanx, a global payment platform founded in Brazil, has announced its expansion into India. With this move, the company adds a new region to its operations, already covering 18 countries in Latin America and Africa.

  The platform will enable global merchants to offer Indian customers local payment methods, starting with the real-time payment system, UPI (Unified Payments Interface), and cards. Ebanx is beginning its expansion into Asia, citing India's "immense potential for digital payment solutions." The country's digital commerce sector is projected to grow by 35% by 2025, according to Statista, with a market value exceeding $100 billion and a potential user base of 400 million people.

Tuesday

General news:

• With the aim of expanding its white-label foreign exchange solutions, Transferbank, a fintech specializing in international payments and receipts, announces a new platform dedicated to currency brokers and, especially, independent investment agents' offices, such as XP and BTG Pactual.

• JoomPro, the European platform for importing products from China, is expanding its operations to Brazil. The company is entering the competition in the country's import market and will have investments of up to $50 million over the next five years.

• Chilean Zentynel's plans to double down on biotechnology in Brazil:

  The management firm has already invested in three Brazilian startups (Harmony, ISA Lab, and Autem Medical) and plans to make

• Yuno Brings Former Executives from Rappi and Cielo on Board as Advisors in Brazil. Eduardo Gouveia and Sérgio Saraiva are set to assist in implementing the company's growth plan in the country.

• The initial purchase and sale operations of fictional Federal Public Bonds (TPFfs) on the Drex platform were faster than usual due to programmability, according to Inter and BV banks. Thus, advantages associated with blockchain technology are emerging in the pilot program conducted by the Brazilian Central Bank (BC).

Deals:

• Edenred, a French company known for owning Ticket and operating in the payments sector, is expanding into the freight management market for carriers and truckers. They recently acquired 70% of PagBem, a younger player in the industry that holds the third-largest market share. This move solidifies Edenred's position as the market leader, alongside its acquisition of Repom a decade ago. The transaction details were undisclosed, and no cash payment was involved. Edenred sees Repom and PagBem as complementary, not overlapping in their offerings.

• Zig acquires Superticket and enters the ticket-selling market. The company, backed by Edgard and Diogo Corona from the SmartFit gym network and Ricardo Goldfarb from the Marisa family, will now have a focus on ticket sales.

Wednesday

General news:

• Shopper, a 100% online supermarket, has announced its first specialized store within its platform. It's the Pet.Shopper, their first store entirely focused on serving the pet audience, the result of a R$ 10 million investment by the startup.

• Frete.com invests R$ 250 million and incorporates artificial intelligence into its operations Through Fretebras, one of the holding's brands, the company is developing tools to reduce losses due to cargo theft.

• Uruguay, Chile, and Argentina, the three countries with the "best digital quality of life" in Latin America. Surfshark's annual study ranks 121 countries based on their digital well-being across five fundamental pillars.

Deals:

• Yooga, developer of management platform intended to provide business operations solutions, raised $2,3M in Later Stage VC funding lead by SaaSholic.

• Starbem, operator of a telemedicine platform intended for simple and easy-to-use video call care, raised $1,02M in Seed Round funding lead by Neder Previdelli.

• Fast Delivery: Daki receives its second $50 million check in less than 10 months. The investment was led by Convivialité Ventures, the investment arm of Pernod Ricard, the well-known French spirits and wines group.

• Mission Brasil raises R$ 6.8 million to expand in the B2B sector. With investments from DOMO and Headline, the startup aims to strengthen its platform in Brazil and prepare for future international expansion.

• Blind Creator raises MX $10 million in pre-seed round to boost its influencer management platform. With the capital from this investment, the startup expects to consolidate its business model in Mexico and the rest of the region.

Thursday

General news:

• New Fund: 040 Ventures, whose managing partners include Allievo Capital founders has launched a new US$ 20 mm Early-stage VC Fund, focused in LATAM. The fund already invested in two companies Falco and Purple Metrics.

• Belvo and Mibanco form alliance to expand access to credit. Through the Belvo platform, Mibanco customers can securely share daily financial data with digital wallets and other banks.

• Itaú Uruguay uses low-code technology to integrate a payment app into its digital ecosystem.

Deals:

• Volpe and Renner are investing in the American company Connectly, which combines WhatsApp, AI, and marketing. The plan is to further expand throughout Brazil, where the startup already has 120 clients.

• Rocket.Chat raises an additional R$ 50 million in series.A bridge funding. The open-source chat startup will invest in research and development while boosting its commercial expansion.

• Arqgen, a generative AI startup applied to architecture projects, has closed its first fundraising round in three years of operation. The R$ 6.2 million seed round was co-led by Terracotta Ventures and ABSeed, with the participation of BR Angels and Smart Money Ventures.

• Bondy, an HR process automation platform with a focus on employee experience, has secured a funding of R$ 3.7 million. The seed round was led by Smart Money Ventures, with participation from Investidores.vc and Incubate Fund.

Friday

General news:

• After two years of preparations, Labi Exames and Alice have officially launched their partnership this week. Labi Exames initially focused on providing healthcare access to individuals without health insurance. However, they later realized that their value proposition, which includes quality healthcare services, affordable prices, and a robust digital platform, also appeals to healthcare providers. They now serve 35 healthcare providers, including major players in the market, offering a growing range of services such as in-clinic tests, home tests, vaccinations, and home infusions.

• A group of Brazilian companies that previously listed on U.S. stock exchanges is now looking to return to Brazil due to a lack of investor interest. Two educational sector companies, Vitru and Arco, have already begun the process to delist from Nasdaq. Vitru plans to move to the B3 exchange in Brazil, while Arco intends to go private. Other companies are also considering similar moves, either going private or exploring the possibility of a future initial public offering (IPO) or exchange migration. Liquidity concerns and costs are key factors in their decision-making process.

What did I learn from readers?

An avid reader sent over the following piece: How VC is changing — and investors can keep up | Sifted. Worth the read! Below you can find some of interesting points:

General takeaway:

For funds to really stand the test of time, investors need to generate insights. 

Going further:

• In recent years, VC has been an exercise in accruing data, creating as much information asymmetry as possible between you and your peers. This was largely possible due to the steady consistency of enterprise SaaS businesses able to complete the fabled path to the IPO promised land, giving far greater visibility on what consistent and top-decile SaaS performance looks like. 

• However, the combination of shuttered public markets and the seismic recent developments in applied AI has caused considerable soul searching in VC. 

Some changes:

• One huge differentiation in this era is the number of founders who are coming from academia rather than industry. This is a wave of deeply technical people who are raising significant sums of capital, which has left 2021’s obsession with second-time founders looking quickly antiquated. The volume of academic founders hasn’t been seen for the last decade, and if I were to draw a historical parallel, it would be the early days of Google. 

•  If this is the new era of lean startups, it means an era of lean funds likely beckons. 

What am I reading?

• 2023 Quantative Perspectives: Turbulence on the Approach

• Unicorn Market Cap 2023: Rise of AI

• a16Z on Instacart

What am I listening to? What am I watching?

• Capital Allocators: Two & Twenty - an insiders’ take on private equity

Quote of the week:

"If you are not embarrassed by the first version of your product, you’ve launched too late." - Reid Hoffman

This article was 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.

Other Topics

IPOs Venture Capital