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Global venture funding reached USD 415.1bn in 2022, a 35% decrease from a record 2021. CB Insights State of Venture 2022 came out this week, and showed that the funding slowdown was especially severe in the second half of the year, with Q4’22 funding at USD 65.9bn — down 64% YoY to return to pre-Covid levels. The numbers were “as expected”. As mentioned here several times, data from the first half of 2022 was still affected by deals negotiated in 2021. So it is only natural that 2S21 comes worse. Again, in line with historical numbers but obviously lower than the outlier year of 2021.
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Looking to 2023, with the drop in funding rounds, extra diligence and selectiveness by VC firms and lower valuations- M&As will most likely be an important driver in the markets. A recent survey done in the U.S. showed that nearly two-thirds of companies expect M&A will be their primary growth engine this year.
Nevertheless, it is still true that VC firms are loaded with cash to invest – aka “dry powder” – even as dry powder fell across other private investment strategies. One of the main factors for this is still the heavy presence of nontraditional investors in venture deals. According to data by Pitchbook, global venture firms are sitting on USD 585.5 billion of capital raised but not allocated and VC is the only private investment strategy in which dry powder is on pace to rise from 2021 levels. Despite the stock market correction, global VC fundraising remained resilient last year. Global venture firms raised a total of USD 223.6 billion through Q3, with the bulk of capital coming from the first two quarters. At the same time, the pace of investment has slowed considerably.
However, let’s not jump to the conclusion that deals will come back at an accelerated pace because these firms need to invest. Yes, there’s a lot of dry powder in the industry – but there is also zero pressure to deploy it. As successful seed investors are planning to invest as usual, just looking for lower valuations, growth investors expect to do maybe 10% of the deals of 2021. In parallel, as of today, LPs have too much committed to venture. So, they tend to be fine if VCs slow down their investment pace. In some cases, the LPs are strongly suggesting it. Of course as markets settle, this dynamics will eventually start to change. But not until late 2023 at the earliest! Note that as I always say, companies with good fundamentals, controlled cash burn and diligent founders will continue raising capital. As for the rest, let’s wait, and see…
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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.
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Monday
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Brazilian Infracommerce announced the acquisition of Ecomsur, a Chilean full-commerce company with a footprint in Latin America, in countries such as Mexico, Colombia, Peru and Panama. With 400 employees and serving more than 70 customers, such as Samsung, Levi’s, Phillips, Pandora and Hershey’s, the company reached USD 24 million in revenue in 2022.
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Amplo, the impact investment firm based out of Colombia, acquired Velum Ventures. Velum has more than USD 38 mm in AUM, and a portfolio with startups such as Sempli, Merqueo, and Fluvip.
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According to the Brazilian Central Bank, the up and coming CBDC Real Digital should be available only for large wholesale transactions.
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Pulppo, Mexican startup that offers a real estate platform that gives brokerages performance analytics software, automatic online property listing, a valuation tool, and customer relationship management (CRM) for real estate brokerages in Latin America raised a USD 5mm seed round with investors such as 1984 Ventures and Boost Capital.
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Argentine startup Botmaker incorporated ChatGPT in its chatbot solutions for customers in Brazil which include Mercado Libre, Arcos Dourados and Adidas.
Tuesday
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Microsoft reportedly plans to invest USD 10 bn in the owner of the AI tool ChatGPT, Open AI. The company has reportedly been looking at ways of integrating OpenAI’s GPT features into Word, Outlook, and PowerPoint. What would be the impact of such deal? More info here.
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Celeri, a compliance automation platform from Argentina raised a USD 2.6 mm in a seed round led by Y Combinator, Funders Club VC, Commerce VC, Pioneer Fund, and 22 VC.
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Nuvini, Brazilian company that is a holding for several smaller startups of SaaS are reportedly in conversations for a merger with a SPAC from US asset manager Mercato Partners. The SPAC would be listed at Nasdaq.
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HiPartners, Brazilian venture capital fund focused on the retail sector, is looking to raise a new tranche of its BRL100mm fund. The fund has invested in startups such as Bornlogic and Looqbox – and believes that there are more interesting companies that help and enable tech within the retail sector out there in Brazil.
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The multifamily office from Chile Aurea Group, announced the launch of its Web3.0 venture builder and fund. The USD 1.5 mm fund will invest in 3 companies starting in March 2023. It has currently two companies in its portfolio, Chileverse and Trips3.
Wednesday
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A recent report by Open Banking Platform Prometeo from Uruguay showed that 25% of fintech companies worldwide are Latam-based. Go LatAm!
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Brazilian Transfeera, a BaaS provider, raised a USD 1.3 mm bridge to Series A round led by Honey Island with the participation of existing investors. The company has +470 clients (iFood, Vakinha, Aiqfome) and reported an estimated USD 4 mm in revenue.
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After merging in August, Casai and Nomah, startups focused on short term rentals, decided to close operations in Brazil and focus in Mexico.
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BlackRock and B3 announced the launch of six new BDRs composed by ETFs focused on megatrends. The objective of the products, available to every investor, is to offer opportunities that can help capture innovation in investment portfolios in themes that will shape the future.
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123 milhas and Max Milhas, two Brazilian OTA platforms, are reportedly in conversations to combine forces, creating the biggest OTA in the country surpassing Decolar.
Thursday
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Proptech unicorn Habi raised USD 6.3 mm in a credit line to improve its operations. The Colombian startup wants to embrace global standards for public companies. This year it will allocate more than USD 250 mm to purchase residential properties.
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Brazilian fintech Ebanx reinforces its leadership team with Fabio Scopeta, who came from management positions at Microsoft and IBM, and will take over as Chief Product & Technology Officer at the company.
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Thais Fischberg, former VP of Products at Adyen Brazil takes the lead and is now the first women to be the country manager for the company in the region.
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Brazilian Edtech Descomplica announced and extension to its Series E round of USD 6.4mm.
Friday
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Brazilian insuretech Pier layoffs around 39% of its workforce.
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Too good to be true: OpenAI signaled it’ll soon begin charging for ChatGPT. A “pro” version of the tool called ChatGPT Professional will throw in no unavailability windows, no throttling and an unlimited number of messages with ChatGPT — “at least 2x the regular daily limit.” Pricing remains up in the air.
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Universidad Uk, Mexican digital-based university that provides high school, bachelor’s, and master’s degrees online announced a USD 4 mm round with Altum Capital.
What did I learn from readers?
As mentioned above, CB Insights State of Venture 2022 is out! And, of course I recieved the link for the report from several readers. To help out, below the TL;DR version 🙂
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Global venture funding reached USD 415.1B in 2022, marking a 35% drop from a record 2021.
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US-based companies accounted for just under half (48%) of all funding and 34% of all deals in 2022.
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Global IPO count dropped by 31% in 2022 to 716. M&A deals also took a hit, dropping by 8% to 10,037. SPAC deals saw the largest drop among exits types in 2022, falling by 44% from their peak in 2021 (140) to 78.
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Unicorn births steadily declined throughout 2022, sinking to a low of 19 new unicorns in Q4’22 — an 86% drop compared to Q4’21.
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Digital health funding saw the sharpest YoY drop among sectors analyzed, falling by 57% to hit $25.9B across 2,122 deals in 2022. Digital health was the only sector where both funding and deals in 2022 dropped below 2020 levels.
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Fintech funding also continued to contract. Fintech companies raised $10.7B across 972 deals in Q4’22, marking an 18% drop QoQ and a 16-quarter low.
What am I reading?
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Itau BBA’s Investment Banking Tech Team (which I am happy to be part of!) started to release content that is worth reading. This past week, we published the new product “Know the Investor” which is an interview / profile of a top tier US based fund that looks closely to opportunities in Latin America. We were very happy to kick off with Battery Ventures! The objective of this report is to inform and foment our LatAm tech ecosystem. Do you want to recieve the first edition? Reply to this e-mail! Do you want to receive our content going forward? Just insert your e-mail here!
What am I listening to? What am I watching?
Quote of the week:
“Someone who is busier than you is running right now.” – Nike
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.
