What happened to VC funding in January?

#042: Carnaval is here. Are there reasons to cheer?

Feb 21, 2023

Olá technopolists,

Millions of revellers are descending upon Brazil this week to celebrate Carnaval, the first full-strength rendition since the pre-pandemic era. A particular Brazilian neobank will certainly be celebrating after its barnstorming Q4 results (more on this later).

What does a festival have to do with tech? More than you might think.

Crypto maximalists may want to check out Bloco Chain, the Salvador-inspired beach party that’s accepting bitcoin as payment tender.

Partygoers can optimise their rabble-rousing with greater precision than ever thanks to Manda a Loc, an app that live-tracks the samba-driven roving street parties (blocos). You can even plan your route in advance with its in-app calendar and order an Uber to your there with one click.

What’s Hot

🤑 Nubank reports record profits…again. The Brazil-based, Buffett-backed neobank moved from strength to strength as profits surged 137% to $578mn against $1.5bn in revenues during Q4 last year. The company added 4.2mn customers in the quarter and 20.7mn in 2022, closing the year with nearly 75mn customers globally. Average revenue per active customer increased 37% to $8.2 as customers shifted towards its credit products, and despite macroeconomic pressures, Nu’s credit portfolio still outperformed market rates of non-performing loans (NPLs) by a factor of 2x. Investors are proving to be a tough nut to crack: share price bounced 7% following the announcement before slipping to settle flat at market close on Friday. (Reuters)

💰 Globant announces best year yet. Not to be outdone by Nubank, the Argentina-based software conglomerate reported quarterly sales of $491mn, beating consensus estimates and boosting 2022 revenue 37% year-on-year to $1.8bn. Most of Globant’s scale has come from abroad, with North America contributing 62% of revenue compared to Latin America’s 23%. The twist? The earnings announcement was delivered by an AI-generated avatar mimicking CEO Martín Migoya – a dovish kind of deepfake. (Bloomberg Linea)

🇦🇷 Argentina tops charts for remote working. Global HR platform Deel released its latest Global Recruiting Report, ranking La Albiceleste top in LatAm and third in the world – only trailing the US and Philippines – in attractiveness for remote work. A dynamic duo of currency devaluation and a highly educated talent base has made remote recruiting particularly attractive. Software developers, translators, and psychologists were the most common roles for remote work. Regionally, LatAm still lags Asia Pacific in its remote working, but amongst cities, Buenos Aires ranked third most attractive, only behind London and Toronto. (Bloomberg Linea)

What’s Not

👮🏽 Crypto company raided for suspected $300mn pyramid scheme. Braiscompany’s offices were searched by Brazilian federal police last week while authorities issued arrest warrants issued for co-founders Antonio Neto Eis and Fabricia Campos. Authorities had previously frozen nearly $10mn of company assets, including 26 luxury cars in the company’s name, as suspicion mounted surrounding the company’s “crypto asset rental service” that promised risk-free returns of 8% per month. Both co-founders are still at large, with social media posts suggesting they are hiding in Argentina. Braiscompany is the latest in a series of Brazilian companies under investigation for pyramid scheme fraud – a growing list that includes GAS Consultoria, Rental Coins, Atlas Quantum, Trust Investing, and BlueBenx. (Portal do Bitcoin)

🔻 One-third of LatAm startups are weighing up layoffs. New data from LAVCA’s startup founder survey paints a picture of war-time founders focusing on cost efficiency and struggling with fundraising. According to the study, 34% of companies are considering mass layoffs, while 28% are considering hiring freezes and 18% mull pay cuts. In terms of fundraising, 92% of seed-stage companies are still looking for investment, though 82% admit facing considerably delayed timelines. Meanwhile, only 33% of late-stage companies are in the fundraising market at all — a clear attempt to avoid down-rounds. (Bloomberg Linea)

Stat of the Week

Tech titans Nubank and Globant posted record financial results that fly in the face of recessionary macro indicators. Does that success extend to venture?

So what? Winter is definitely still here. Funding is down 30-50% depending on your metric, and rounds are getting smaller as the compound impact of (a) lower valuations and (b) fewer growth/late-stage rounds.

Here’s how last month compares to January 2022:

Total funding is down -53% ($674mn v. $1.3bn)
Deal count is down -32% (71 deals v. 108 deals) — the lowest deal count in any month going back to 2021
Average round size is down -21% ($9.5mn v. $12mn)

This shouldn’t come as a surprise. One short year ago, we were accelerating into the top of the market. As I’ve written, we’re still in the thick of the nadir; it’s not looking good for another 9-12 months.

One data point for the optimists: January’s funding was up +38% compared to December, a surprise since January is less active based on historical seasonal trends.

Smart Links

7 of 10 new LatAm unicorns are fintechs (CoinTelegraph)

Equity crowdfunding in Brazil grows 61% to $110mn in 2022 (Startupi)

Software company TOTVS announces record-breaking revenues nearing $1bn (Startupi)

Brazilian central bank president states digital real pilot starts ‘now’ (Bitcoin.com)

Neobank Neon lays off 9% of staff (Brazil Journal)

HRtech Atlas launches in Brazil, aims to expand borderless talent culture (Forbes)

Vexi raises $8mn to offer young Mexicans credit cards (TechCrunch)

FEMSA sells its shares of Heineken in Mexico (Bloomberg Linea)

Deals (February 14-20 , 2023)

M&A

🇧🇷 Celcoin, a banking-as-a-service fintech, acquired 🇧🇷 Finansytech, an open finance platform. The deal values Finansytech at $16.4mn (pre-money), with Celcoin making a $2.9mn initial investment and additional payments tied to future financial results.

🇲🇽 Flat.mx, a real estate marketplace, acquired 🇲🇽 Intelimétrica, a data analytics platform for the real estate sector. Financial details were not disclosed.

Startup fundraises

🇲🇽 Vexi, a credit card provider and neobank-hopeful, raised an $8mn Series A led by Magma Partners with participation from Alpha4Ventures, Noa Capital, Pomona Impact, Redwood Ventures, and Rebalance Capital.

🇧🇷 Estoca, a last-mile delivery company for e-commerce, raised a $6mn round led by Astella Investments with participation from FJ Labs, Irongrey, Canary, and Marathon Ventures.

🇨🇴 Vaas, a software provider for private debt servicing, raised a $5mn seed led by a16z with participation from Nazca, Maya Capital, Latitud, Marathon Ventures, ClockTower Ventures, Sebastián Mejía (Rappi), Andres Bilbao (Rappi), Daniel Bilbao (Truora), and Brynne McNulty Rojas (Habi).

🇺🇸 Comun, a digital bank for Latinos in the US, raised a $4.5mn seed led by Costanoa Ventures with participation from South Park Commons and FJ Labs.

🇺🇸 Quash.ai, a credit risk assessment platform serving clients in Mexico and Brazil, raised a $3.7mn seed led by HTwenty, G2 Momentum, and Q Capital with participation from angels.

🇧🇷 77Sol, a B2B marketplace for solar panels, raised a $2.7mn seed led by Crescera Capital and EDP Brasil.

Debt financing

🇧🇷 Ulend, an alternative financier for medium-sized enterprises, raised a $7.8mn investment from Sollis Investimentos through its Credit Rights Investment Fund (FIDC).

🇦🇷 MONI, a digital wallet and consumer lender, raised a $1.6mn investment of short-term debt through the public offering of a seventh financial trust.

Venture funds

🇧🇷 The Bank of Brasilia (BRB) announced the launch of its new corporate VC fund, BRB Venture Capital Fundo de Investimento em Participações – Capital Semente. The fund will be led by Bossanova Investimentos and will invest $10mn into early-stage startups.

Did I miss any deals? Let me know!