The Brazilian venture capital market emerged relatively recently, as analyzed by the startup platform Distrito. According to an online publication, the first funds appeared around 2008. Since then, the sector has grown steadily in the number of deals and investment volume. In 2011, there were only 76 deals totaling $143 million. By contrast, last year, the market reached a record high of 331 deals, with a total volume of almost $3 billion.

As a reason for this record year, Distrito primarily mentions the various mega-rounds. Notable examples include the Brazilian companies Nubank, Creditas, and QuintoAndar. The fintech startup Nubank, which offers banking and financial services to consumers, announced in July 2019 that it raised $400 million in venture capital (Series F) alone. The financing was led by the growth-stage fund TCV, which has also invested in Netflix, for example.

In the case of the Brazilian credit platform Creditas and the real estate startup QuintoAndar, the Japanese group SoftBank led both rounds. As a result, Creditas received an investment of $231 million in June 2019. QuintoAndar was able to raise $250 million in September 2019. This investment finally led the company to unicorn status, according to its CEO Gabriel Braga.

Brazil is the Largest Venture Capital Market in Latin America

In line with the growth of the Brazilian market, venture investment in Latin America has also seen a significant increase in recent years. According to the latest information on investment figures in the region, published by the Latin America Venture Capital Association (LAVCA), venture capital investments increased 9x between 2016 and 2019, reaching a total of $4.6 billion in 440 transactions. Furthermore, the statistics show that venture investment more than doubled every year during this period.

Comparing different Latin American countries, Brazil is now the largest venture capital market in the region. Half of the total investments in 2019 were allocated to Brazilian startups. The growing number of new funds and venture capital investors in the country is fostering the development of its market. Recent market players, for example, include Maya Capital, Caravela Capital, Norte Ventures, and HARDS. In addition, existing investors such as Canary and Redpoint have made new capital available. According to Leaders League’s ranking of venture capital funds in Brazil, both investors are among the top eight funds in 2020.

In second place, the LAVCA survey cites Colombia with a total venture investment of $1.09 billion in 2019, followed by Mexico with $649 million. Both countries recorded significant growth in the number of Seed/Incubator deals throughout 2018, as indicated in the final report.

Will the COVID-19 Pandemic Disrupt the Steady Growth Trajectory?

Market analysts expect the COVID-19 pandemic to certainly disrupt the steady growth trajectory. “As venture investors encourage their portfolios to switch to survival mode, the era of ‘growth at all costs’ popularized in Silicon Valley and China seems to be over for now,” LAVCA analyzed.

Additionally, the association believes that innovation opportunities around healthcare, education, and logistics will be at the forefront as a response to new global realities. “The resilience and resourcefulness of Latin American entrepreneurs will be tested next year, as the need for cost-effective solutions to highly complex problems becomes more apparent.”

In this context, in Brazil, at the beginning of this year’s pandemic, the startup Endeavor observed investors acting more cautiously. Some existing funds became more critical of potential transactions. Others postponed or even froze already scheduled rounds. The goal was to reserve capital to support companies in their portfolios.

The Brazilian Venture Capital Market Appears Robust Amid the Current Crisis

Despite the obstacles, market analysis for the first six months of this year reveals that Brazil seems to follow the consolidation trend of previous years. Between January and June 2020, 167 deals were made with a transaction volume of $669 million. Excluding 2019 as an outlier—this represents a 52% increase compared to the same period in 2018, which saw only $440 million in venture investments.

In June 2020 alone, $156 million was invested, mainly in Series B stages. Important examples were venture investments in four startups:

• Tembici: A mobility startup that raised $47 million.
• Cortex: Specializing in data management, captured $22.3 million.
• Remessa Online: A fintech that announced a $20 million raise.
• Biz Capital: Provides credit to SMEs and raised $12 million.

“Some experts say the real impact of the crisis will begin to be felt in the second half of the year,” Distrito wrote in a recent blog article. But experts remain confident that even so, “there is a consensus that good deals and startups develop even more efficiently during crises, thus making their valuations even more attractive to venture capital funds.”