Venture investing turns the corner – or does it?
Venture investing turns the corner – or does it?
#076: Binance faces dire allegations in Brazil.
Hola technopolists,
Change is afoot.
We’ve been looking for signals that the market is ready to shift into a new gear, and this week brought new signs that might support the optimist’s cause. Venture investment in Q3 might have turned the corner; IPO markets are open (if risky); foreign investors are inching their way back towards LatAm; and, as usual, Nubank’s finding a reason to smile.
Yet all that optimism isn’t quite unfettered. Big Brazilian business (maybe that’s what B3 stands for?) is under existential threat, with challenges confronting Neon, PagSeguro, Stone, and Binance — for very different reasons.
Aside: I’ll be speaking at the LatAm Tech Content Creators panel in CDMX on October 24th for Mexico Tech Week. Registration is available here — all are welcome and spots are filling up fast, so secure yours ASAP to avoid missing out. Hope to see you there.
What’s Hot
📊 Q3 VC activity. LatAm venture investment in Q3 posted its strongest quarter of the year, with some calling it the early signals of a turnaround. Total investment climbed to $1.2bn — the same size as Q1 and Q2 combined — delivering a boon to the ecosystem. The harsh truth is that 2023 is still the slowest year on record in over 5 years while the number of deals completed fell for a 4th consecutive quarter — but for the first time in over a year, total quarterly investment did not decline year-on-year; the bleeding might be stopped. The tone from investors is clear: we’re ready to invest, but we’re still picky as hell. More in the Stat. (CB Insights)
🤝 Ares arises. Ares Management, the American alternative asset manager with $378bn under management, announced a $100mn partnership with Brazil-born Vinci Partners to invest across Latin America. It’s a simple idea: Ares brings boatloads of cash, while Vinci brings local know-how. Vinci’s notable tech investments in the region include Gympass, Hotmart, and QuintoAndar, though the firm isn’t afraid of old-school assets like Burger King. It begs the question: is Ares’ partnership a sign that tourist capital is back? (Yahoo)
☕ Velez spills the tea. Nubank’s on a PR push, and its head honcho is leading the charge. Aside from re-telling the origin story that took him from General Atlantic to Sequoia to Nubank, CEO David Velez is talking up one big thing: crypto. Nu is bullish on blockchain, with Velez putting his full weight behind Bitcoin and stablecoins’ value as investment vehicles (even if he thinks ‘98% of cryptocurrencies aren’t fit for investment’), while also talking up Nu’s participation in Brazil’s CBDC programme, Drex. Elsewhere, in Mexico, Nu’s marketing team staged a PR stunt, completing the first underwater transaction 20 meters under the ocean. (Fortune, Tekios, Contxto)
What’s Not
📉 Brazilian paytechs falter. It’s a tough time to be a big Brazilian fintech that’s not Nubank. After being downgraded by Itaú’s analysts, shares in StoneCo and PagSeguro both fell -5% in a single day of trading last week – the latest slide for two stocks that are already near historic lows. The investment bank’s analysts believe that falling interest rates and increased competition are squeezing profits for most of the industry, especially as defaults rise and lending appetite stagnates. To boot, neobank Neon made its second round of mass layoffs in less than a year, axing 5% of its workforce last week for ‘strategic reasons’ and bringing total 2023 layoffs to 14%. (Brazil Journal, Startups Brasil)
🕵🏽♂️ Binance’s Brazilian case. In a unanimously approved and meticulously argued 500+ page report, Brazil’s public investigation body alleged that Binance is the common denominator behind a spate of pyramid schemes estimated to have defrauded investors out of $20bn. The report deals a savage blow to the crypto exchange’s reputation, individually naming CEO Changpeng ‘CZ’ Zhao amongst 44 other individuals responsible for crimes ranging from fraudulent management, offering securities without proper authorisation, operating an unauthorised financial institution, and tax evasion to the tune of $80mn. While the body doesn’t have the authority to launch legal proceedings, its report has been referred to federal authorities for prosecution. Brazil is one of Binance’s top markets, and analysts estimate that the exchange is responsible for 60-70% of crypto transaction volume in the country. (Brazil Crypto Report)
Stat of the Week
Investment in Q3 maybe – just maybe – signalled a turned corner. Or, at least it revealed some light at the end of the tunnel.
But investors are proving they’re ready to invest, selective as they may be. Which investors have been the most active in 2023?