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LatAm Tech Weekly: AI Venture Capital Deals Cool Off, Tech IPO Backlog Grows

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Welcome to the last quarter of the year! While the geopolitical landscape remains complex, our focus in this newsletter continues to be on the LatAm tech and related markets that profoundly shape the local scene.

Before we dive into the latest updates, let me clarify that the opinions expressed in this article are solely mine and do not represent any individual, institution, or organization that I may or may not be associated with, unless explicitly stated.

AI VC Deals Ease up as Generative AI Faces Adoption Challenges

Generative AI, which had initially sparked a surge in venture capital funding and public interest, is now experiencing a shift. Major tech players and growing investor awareness of the limitations of widespread adoption are contributing to a decrease in enthusiasm for generative AI applications. In Q3, generative AI deals declined by 29% compared to Q2, totaling 101 rounds. However, the deal value reached $6.1 billion, driven by a blockbuster deal between Amazon and Anthropic valued at up to $4 billion.

generative ai vc deals ease up

Funding Challenges for Brazilian Startups Revealed

A recent study by Sling Hub and Namari Capital sheds light on the funding journey of Brazilian startups. Out of 999 startups that received initial venture capital funding from 2018 to 2020, only 8 managed to secure a sixth investment round. The study highlights the importance of non-equity funding in sustaining startup growth, especially in later funding rounds, and emphasizes the need for careful funding strategies to avoid raising too much or too little capital.

Brazilian startup funding challenges

Tech IPO Backlog Grows as Public Company Multiples Decrease

While we keep a close eye on recent tech IPOs in the U.S., such as Klaviyo and Instacart, public companies’ multiples have been revolving around 5x, significantly lower than in the past. This could potentially impact upcoming IPOs. According to PitchBook data, the backlog of tech companies waiting to be listed continues to grow.

Tech IPO backlog

Insights from CB Insights’ Q3 Venture Report

CB Insights’ State of Venture Report for Q3 2023 reveals that globally, $64.6 billion was invested in venture capital, marking an 11% increase compared to the previous quarter. In Latin America, funding doubled during the same period.

Key Updates from the Week

Monday

General news:

  • Acquirer Cielo and fintech Matera announce a partnership to bring more innovation to Brazilian retail.
  • Good Karma Partners brings Australian startup Rumin8, which reduces emissions in livestock, to Brazil for an extensive field test in SΓ£o Paulo.
  • Fintech BREX, founded by Brazilians but based in the U.S., is looking for talent in the region according to CFO Michael Tannenbaum.
  • President of the Brazilian Central Bank, Roberto Campos, announces a new phase for Pix, the instant payments system, allowing scheduled payments.
  • Rappi appoints Rodrigo Vasconcelos as Head of Turbo in Brazil.
  • StoneCo reorganizes its management structure to align with specific client segments and accelerate software integration.

Tuesday

General news:

  • Warburg Pincus closes its largest fund in history, raising $17.3 billion.
  • Brazil’s instant payments network, Pix, receives the Bravo Beacon of Innovation award by the Council of the Americas.
  • QI Tech launches Pix Indireto, turning the central bank’s instant payment system into a business generator.
  • Global gaming platform WinZO launches its app in Brazil, aiming to enhance the gaming ecosystem with personalized experiences.
  • Hashdex and HMC Capital partner to distribute crypto funds to institutional investors in Brazil, taking advantage of regulatory clarity and potential ETF approvals.

Wednesday

General news:

  • Claure Group acquires a stake in eB Capital, a leading asset manager in Brazil.
  • Healthtech Vittude unveils new initiatives to promote workplace mental health and launches the Vittude Awards.

Thursday

General news:

  • Ares Management invests $100 million in Brazil-based Vinci Partners and establishes a strategic partnership.
  • Investments in Brazilian startups reach $596.7 million in Q3, representing 67.4% of total investment in Latin America.

Friday

General news:

  • Brazil is ranked as the most innovative country in Latin America according to the Global Innovation Index.
  • Pierre Schurmann’s startup, Nuvini, raises $18 million through its Nasdaq debut.
  • Online printing company Printi expects to generate revenue of R$150 million in 2023.
  • Fintech Crediblue closes R$300 million in credit contracts for micro and SMEs in just three years of operation.
  • Colombian startup Frubana establishes Frubana Capital to offer credit products.
  • Chilean startup LicitaLab expands into Colombia, bringing its bidding process management software to the public sector.

Insights and Analysis

I recently learned from readers who attended the Largest Lavca Week in New York about the main themes discussed:

  • 54 LatAm-focused funds raised $4.2 billion in H1 2023, signaling a return to pre-pandemic investment levels.
  • The number of VC-backed startups in LatAm has doubled in the past 2.5 years, with fintech leading the way.
  • Investors are increasingly interested in second-time founders, particularly in seed-stage investments.
  • Latin America is ahead of the U.S. in terms of gender diversity, with 25% of seed and early-stage rounds raised by women-led startups.
  • 15-20 growth-stage companies, especially in Brazil, are projected to go public in the next 12-18 months.
  • Startups are exploring alternative financing sources, with non-dilutive financing gaining popularity.
  • Chile and Colombia are the fastest-growing major markets in the region, and Spanish-speaking regions account for 51% of startups’ headquarters.
  • Talent and market potential in Latin America make it an attractive region for investment.

For more details, you can find the original article on my Substack.

Lastly, here’s a quote of the week from The Morning Show: β€œMaybe you have to lose it sometimes to get people to take you seriously.”

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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