LatAm Tech Weekly: When Will Tech IPOs Resume?

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.

What a dynamic week it has been, and there's more in store. I had the pleasure of attending the annual Oria Summit, which centered around the theme "Back to Basics." I also contributed as a speaker at an event hosted by Tozzini & Freire, discussing the current state of venture capital in Latin America. Next week, I am honored to be participating in G2Day on August 29th at 9:30AM, as well as a live session hosted by the Brazilian fintech company, Monkey. Both events are open to the public and will be conducted in Portuguese. If you'd like to join, you can click here and here.

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Several great reads this week. Let’s start out with Baron's Tech recently published article on an interesting survey querying when the tech IPO market is likely to open. According to top CEOs of private cloud companies, we might expect a significant number of listings in Q4, with Stripe, Databricks, Canva, Klaviyo, and Snyk earmarked as strong contenders. The success of these listings could be a barometer for 15 to 30 more IPOs in the first half of the next year. For the Latin American market, its future seems tethered to these initial outcomes.

Moving on, Tech Crunch has identified five crucial trends in VC funding (more on the What did I learn from readers section). Data sourced from Dropbox DocSend indicates a shift in the venture landscape, which now demands more scrutiny and skepticism. Whereas last year, 25% of successful fundraising campaigns were completed in less than six weeks, this year the figure has dropped to 13%. The decrease in investment for pre-seed stage startups has been particularly noteworthy, with a 50% year-over-year reduction in Q2 2023. Despite these challenges, the number of pitch decks circulating has actually increased by 16%.

Lastly, the Wilson Sonsini Entrepreneurs Report on Financing Trends for 1H 2023 shows a cautious optimism. Late-stage valuations have experienced a minor rebound, and seed and series A funding have reached all-time highs.

While there is still a high degree of uncertainty in the market, activity seems to be picking up. This week in Brazil was a good example, as more than BRL 750m was raised here (more below). However, economic terms are still more favorable to new investors. The graphs below illustrate well. The numbers of companies issuing participating preferred stock continues to rise, with the investor-friendly term employed in two-thirds of 2023 down rounds. Additionally, 1 in 10 Series B or later financings now have a pay-to-play element, indicating that many companies are facing challenges in securing follow-on capital from current investors.

Monday

General news:

• Brazilian consumers, on average, have accounts in four different banks and are familiar with at least 21 financial institutions, according to a Google study.

• 76% of influencers in Brazil prefer Instagram as their platform for content creation.

• Itaú, Bradesco, Santander, and Nubank are discussing the possibility of reducing credit card interest rates with Brazilian authorities.

• The Banco Central in Brazil admitted to a delay in the development of the digital version of its currency, Drex.

• Itau expands its ION app to non-account holders for investment opportunities.

• Kamino fintech unveils new plans, including a free tier, for financial management.

• Renato Velloso steps down as CEO but remains president of dr.consulta. New CEO is Massanori Shibata Jr.

• Mexican fintech Clara is moving 50% of its executives to Sao Paulo as part of its Brazilian expansion strategy.

• Verve Capital launches its second fund, targeting a $10 million close

Deals:

• iDeals TTR Data reports 468 M&As and 416 commercial agreements in Brazil's startup sector in Q2 2023.

• BrainLogic AI in Uruguay secures $5M in a pre-launch funding round, marking a record in Latin American AI investment.

Tuesday

General news:

• Fitch has just assigned an A- (bra) rating to the Brazilian fintech Stark Bank. With a balance sheet free of leverage or credit risk exposure, Fitch considers that the bank created by Rafael Stark has a business model that enables higher volume and profitability by focusing on medium and large enterprises.

• Binance introduces its payment arm in Brazil, allowing users to make payments using cryptocurrencies.

• Cubo Agro startups are expected to grow 64% in 2023.

• Marcela Quintella, former co-founder of edtech Education Journey, will head marketing and investor relations at Invisto.

• Nium, a real-time cross-border payment fintech founded in Singapore, has just announced its entry into Brazil. The launch here is in partnership with the OZ Câmbio brokerage. The goal is to attract small and medium-sized enterprises (SMEs).

• Cubo Agro startups expect to increase by 64% in 2023

Deals:

• Nomad, a fintech that enables Brazilians to open a digital checking account in the USA, is receiving a new investment of $61 million. The Series B funding round was led by the investment firm Tiger Global Management.

• Salars secured venture funding for its HR software that helps companies manage compensation and bonuses. The undisclosed amount of venture funding was made by Broom Ventures

• Healthtech Coala entered the market last year and has just raised BRL 12.5 million in a seed funding round. The investment was led by Owl Ventures, a global fund specialized in the edtech market

• FDC Angels, an angel investor network founded by alumni of Fundação Dom Cabral, has just announced its second investment. They invested R$ 590,000 in the Bahian startup SDW, which specializes in socio-environmental impact projects in socially vulnerable regions.

• Howdy.com acquires GeekHunter and expands its technology professionals marketplace. The brands will remain independent, with GeekHunter's co-founders leading the operation in Brazil. Source: Startupi 

• ‘A de Agro’, a data-driven startup for agribusiness, has just raised a funding round that will enable the expansion of its crop analysis solutions and entry into new segments, such as insurance. The funding of BRL 28 million was led by DXA Invest.

Wednesday

General news:

• The SEC approved new rules for private fund negotiations to increase transparency for investors.

• Chile leads the Latin American Artificial Intelligence Index (ILIA) in areas such as infrastructure, research, and governance.

• Huawei estimates a deficit of 2.5 million ICT professionals in Latin America by 2028.

• Connect Climatech Accelerator is looking for startups focused on sustainable development solutions.

• Beeok expands its Carbon Zero Program to small and medium-sized Chilean enterprises for carbon footprint management.

• To enhance the security of Pix, the Central Bank (BC) announced that police, Public Prosecutors' Offices (MPs), and other public entities with responsibilities for criminal prosecution will be able to directly access user registration data of individuals under investigation within the instant payment system.

• Payment fintech Ebanx continues to strengthen its executive leadership team. It has announced the arrival of Valério Zarro as Vice President of Governance, Risk, and Compliance. Simultaneously, it revealed that Kalecser Kurtz, the current VP of Software Engineering, will also take on the responsibilities of the Product department.

• Darwin Startups, an accelerator based in Florianópolis with over 100 startups in its portfolio, is launching an R$ 80 million fund to invest in startups. Simultaneously, the company announced the entry of the investment firm XMS Investimentos as a partner and minority investor.

• Shein aims to export from Brazil and already has 200 factories in operation. The company plans for two thousand production units and the creation of 100,000 jobs in the country by 2026

Deals:

• Gympass raised $85 million in a Series F round led by EQT, reaching a valuation of $2.4 billion.

• BTG Pactual announced the acquisition of 100% of Magnetis, a digital asset management company that employs virtual advisors to define investment strategies.

• Portuguese startup Mycareforce received R$ 4 million to expand its nurses' marketplace in Brazil. The goal is for 80% of the revenue to come from the Brazilian operation within five years.

Thursday

General news:

• Latitud has launched a document model that they believe could become the standard in the Brazilian venture capital market, similar to what happened with the Simple Agreement for Future Equity (SAFE) from Y Combinator. Called Simplified Investment Loan with Optimized Terms, or simply MISTO, the document took about 6 months to be crafted and had the support of the law firms Pinheiro Neto, BZCP, and the American firm Gunderson Dettmer. It has also been validated by the Veirano law firm and is supported by institutions like Abstartups and Sebrae. 

• Picpay reported an adjusted profit of R$ 58 million in the first half of the year, a turnaround from the loss of R$ 656 million in the same period last year. The company remains focused on profitability and scaling.

• Mercado Pago introduced a new investment mode, allowing users to acquire certificates of deposit starting from R$ 1.

• Finansystech is expanding its operations to Chile and aims for further growth in the Americas.

• inDrive, a global mobility and urban services platform, announces Alexander Akhmataev as Director of Business Development for the Urban Travel vertical in Latin America. His role will be focused on expanding the network of partners and users

• Belo, the digital wallet aiming to transform the international payments sector, introduces its web platform specially designed for businesses. With this new launch, companies from 108 countries can open a free account on Belo, enabling them to make transactions in pesos and cryptocurrencies and to send dollars to foreign accounts.

Deals:

• Picpay acquired BX Blue as part of its growth strategy.

• Sparc Group took a minority stake in Chinese e-commerce giant Shein, who in turn agreed to acquire around one-third of Sparc.

• Insurtech Azos has just signed on a new partner, 4Equity, a company that follows a model of acquiring minority stakes in startups in exchange for media exposure.

• Aivo, which provides customer service through artificial intelligence, has just been acquired by Engageware, a U.S.-based engagement solutions company founded in 1999. The acquisition amount has not been disclosed.

• Vendah, a startup that developed a reselling app to democratize e-commerce, has just secured a new round of investments and announces a R$ 12 million seed funding. The new investment round included participation from Y Combinator, as well as other

• Principia, a fintech operating in the education sector, has just raised R$ 200 million and finalized the acquisition of Provi, a specialist in credit for vocational courses. Out of the total amount, R$ 50 million is equity, and R$ 150 million is funding through an FIDC (Fundo de Investimento em Direitos Creditórios), in a round led by Valor Capital.

• Nexpon, an investment fund of NSC, the affiliate of TV Globo in Santa Catarina, announces an investment of R$ 1.48 million in the Santa Catarina-based startup Anfitriões de Aluguel. This startup is an online platform for property management listed on platforms like Airbnb and Booking.com. The investment is in the form of media for equity, involving no financial disbursement between the parties involved.

Friday

General news:

• The strategies of Uber's new leader for Latin America: Eduardo Donnelly, the executive in charge of Uber in the region, states that the company will target the bottom of the pyramid with Uber Shuttle, Uber Moto, and Uber Group Trips.

Deals:

• Prestamype raised $5 million in a round led by Alive Ventures and Oikocredit Ecumenical Development Cooperative Society to expand its digital loan and factoring services in Peru.

• Rextie received undisclosed venture funding from Citigroup for its online currency exchange platform.

What did I learn from readers?

A reader, who is also a managing partner at an early stage global fund, sent over an interesting article: Tech Crunch: 5 trends in VC funding for pre-seed startups

TL;DR version:

This week, DocSend revealed some eye-opening stats about venture capital activity over the recent months. I delved into these emerging patterns in detail for TC+ subscribers, but for my loyal newsletter readers, here's the gist:

1. The "Why now?" factor is growing increasingly significant for investors. They want to know the compelling reason to invest in your startup at this particular juncture. I've explored the importance of timing in the investment context in previous writings, so it's intriguing to see this aspect getting attention.

2. Presentation decks are becoming more concise. Whereas a successful pitch deck averaged 19 slides last year, the current average has trimmed down to 16. The message is clear: Be more efficient with your content and get straight to the point.

3. Given the current financial instability, investors are keen to see that founders have a solid plan for reaching break-even and, eventually, profitability. It's a sign of the times that basic business acumen is coming to the forefront; rapid growth is great, but not at the expense of fundamentals.

4. Speaking of financials, these are now under much closer scrutiny than before. Investors are dedicating 60% more time to the financial sections of pitch decks compared to a year ago. The takeaway here is straightforward: Make sure your numbers are solid and well-presented.

5. Finally, there's a growing skepticism around AI. If your pitch deck touts AI or machine learning capabilities, it better be for a valid reason that offers a tangible benefit for your startup. Slapping on buzzwords like AI or ML simply because they're in vogue won't cut it anymore.

What am I reading?

• Eight startups challenging Nvidia in the world of AI chips. The Information

What am I listening to? What am I watching?

• This weekend I binged on Netflix (Painkiller) and saw the latest Billions episode

Quote of the week:

“The secret of success is consistency of purpose.”- Benjamin Disraeli

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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