LatAm Tech Weekly: CVC Cpdated Numbers for Q3 and Takeaways From Money 2020

This article is part of the LatAm Tech Weekly Series, written by Julia De Luca and powered by Nasdaq. Through Nasdaq’s global network, we partner with Latin American companies to support their entire business lifecycle to elevate their brand and access the global markets. Learn more about Latin American Listings here.

Yes – I know I will not be the center of attentions today – even more so if you are Brazilian. Anyways, here we are. Tech is still tech. Look out because I will launch a new series next week, out on Wednesdays – due to the multiple requests I have been recieveing. Surprise, surprise!

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To start off, as you all know, we are here to help the ecosystem out. In that effect, Anderson Thees and Manoel Lemos from the soon-to-be venture capital strategy of Itaú Unibanco / Cubo are conducting a survey to better understand the moment of LatAm startups  So if you are a founder, please take a few minutes and fill out the survey in this LINK. Good news is that I soon as they get the results, I will share them here! So, let’s give back and help others out by participating.

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This week Pitchbook released its Q3 2022 Global M&A report – which showed a similar downtrend as the VC dollars invested and number of deals mentioned last week. Global M&A activity that had peaked to record-high deal count and values at the end of 2021 and then dropped in the new year, fell further in Q3, 29.8% down from the Q4 2021 peak. Macro factors such as climbing inflation, rising interest rates, and pressure on tech stocks all negatively affected M&A deals. However, looking at the data, multiples in M&A are steady: Public companies’ trading multiples have decreased from a median multiple of 3.3x revenue in 2021 to 2.3x at the end of Q3, while M&A deal multiples have held firm at 2x during the same span.

Pitchbook also released its PitchBook-NVCA Venture Monitor, showing that Venture-backed companies raised ~USD43bn during Q3. The figure is below of what was seen in 2021 and early 2022 but above historical averages—representing a durable, positive trend in the industry. On the exit front, there have been just 59 public listings so far this year, compared with 303 in 2021 and 145 in 2020.

Also a great read this week was Coatue’s team  (Michael Gilroy, Chase Packard, and Leslie Wang) interesting white paper  –  Fintech and the Pursuit of the Prize: Who Stands to Win Over the Next Decade? In a 56 page presentation, the authors outline how the financial services space created USD 5 trillion in market value, surpassing any other industry sector (namely – software, e-commerce, healthcare and others). It also shows that it attracted more venture dollars than the others – rising from less than 5% in 2011 to more than 22% in 2021. Nevertheless, fintech is relatively new – so it represented today just 2% of the financial services market cap within publicly listed companies. This leads us to believe that there is a substantial IPO backlog – and that we should be excited over the next years.

The report also introduces an interesting “Rule of 200”, similar to SaaS’ rule of 40, which “posits that fintechs should be targeting net retention rate, revenue growth, gross margin, and operating margin above 200%.”

The past has taught some lessons – and the fund believes that the next generation of enduring fintech requires a focus on owning the balance sheet, re-bundling, B2B lean, crypto, and that emerging markets present the opportunity for growth (GO LATAM!).

Monday

• MB Asset, investment management arm of Brazilian crypto holding 2TM (owner of crypto exchange Mercado Bitcoin) achieved the milestone of BRL 1bn in assets under management.
• iFood, Brazilian food delivery unicorn, announced that it will close its Colombian operations and cut 210 employees in November after failing to win significant share in the country.
• Nubank surpasses Santander in number of customers in Brazil. In the first 9 months of the year, Nu acquired 14.9mm customers – reaching a total of 64.8 million clients.
• Lara, Mexican HR Tech focused on boosting companies’ productivity and detecting disengaged employees before it’s too late raised a USD 1.1mm seed round with funds such as FJ Labs.
• Minerva Foods invested USD 5mm in Brazilian foodtech LivUp as an extension of its Series D round.
• Brazilian ID tech Unico fired around 50 people of the sales department, but strengthened its tech development team.
• Méliuz announced that it is performing studies for a strategic decision about its Banking-as-a-Service unit, Bankly. The conclusion, to be announced in 60 days, could be a strategic sale, an eventual listing, or that the business remains fully owned by Méliuz. The key takeaway here is that the businesses can be seen by investors as two separate entities as well – and not necessarily combined.

Tuesday

• Faster, Brazilian digital marketing startup, raised BRL 8mm in a seed round led by Domo Invest.
• Space tech is on track for another record year of venture investments as startups with offerings such as commercial space launch services, geospatial intelligence and satellite communications—drive commercial opportunities across the space industry. So far in 2022, VC funding for global space-tech companies has reached USD 6.2 bn across 112 deals, roughly on par with the record capital raised in 2021.

Wednesday

• Cortex, Brazilian startup that develops  a growth intelligence platform for the marketing and sales journey and recently announced a USD 48mm round led by Lightrock, announced the acquisition of Geofusion. Geofusion is a marketing company that offers solutions in the areas of market intelligence, expansion, marketing, sales, and others. The terms of the transaction were not disclosed.
• Panama is proving to be an interesting tech hub – the local network is nurturing local entrepreneurs through Panama Startups, organization launched in 2015 in response to the need for guidance and support for people who are looking to start a new business. To date, the community of entrepreneurs has 25,000 people enrolled and more than 80,000 followers on social media.
• Franq Open Banking, a fintech that connects customers and companies to financial products through self-employed bankers (called personal bankers), raised an additional USD 12 mm, in an extension of a series A round – of USD 20 mm made in June of the year past – now led by Quona Capital. The funding involved the participation of Globo Ventures and Broadhaven Capital Partners, in addition to Valor Capital Group, which led the last investment in 2021.

Thursday

• Saque e Pague, Brazilian fintech of financial solutions and payment terminals has already set aside its budget to intensify its expansion plans in Latin America. The company plans to invest US$ 50 million over the next few years, focusing on Colombia as a market of interest. It intends to install 2,000 of its self-service terminals in the Colombian market in the next 4 years. With more than 2,500 service points in Brazil, Saque e Pague ended 2021 with revenues of approximately BRL 185 mm, an increase of almost 26% over the previous year. The goal for 2022 is to reach BRL 230 mm, an increase of 25% when compared to 2021.
• CB Insights released its State of CVC Q3 Report for Q3 showing that backed funding and deals dropped significantly last quarter — falling 34% and 14% respectively. Important point is that 3 out of every 5 deals are early-stage, a share on track to be the largest in a decade. In Brazil, a book of Corporate Venture Capital was also launched – as the country reaches the 100 mark of active CVCs.

Friday

• Techtools, Brazilian holding known for its investments in healthtechs (first fund invested BRL 100mm in 8 startups and was completely divested in 2021 with a 14x return) is now planning to raise a USD5bn fund to invest in Real Estate and also do provide credit (apart from the VC initiatives).

What did I learn from readers?

Many of you attended Money 2020 – and I heard great things about it from you! I will try to attend next year for sure. In this section today, I will share a piece from the newsletter This Week in Fintech sharing key takeaways from the event.

1.    The conference was dominated by B2B. Past years felt much more consumer-oriented in terms of product offerings, but with many consumer valuations flagging (Robinhood, Affirm, MoneyLion), embedded finance providers spent lavishly on booths to attract potential clients. Conference spend is usually a bit of a lagging indicator, so I expect B2B competition will enable a new wave of consumer fintech innovation in the coming years.

2.    There was a much greater presence of international fintech than prior years, with dedicated agendas for Africa, LatAm, Asia, etc. As you’ll see below, in dollar terms, there is still a lot of opportunity here.

3.    There was product convergence between many larger competitors, such as Adyen, Marqeta, and Synctera all launching banking-as-service products. It will be interesting to see the wave of consumer innovation that fiercer embedded finance competition inspires; my impression, if Fiserv and FIS are any indication, is that this is far from a winner-take-all market.

4.    US CFPB Director Rohit Chopra’s remarks were important (read them here). In the wake of the global financial crisis, a small part of US financial legislation, Dodd Frank §1033, affirmed that financial data is owned by the consumer, not the institution. This concept of self-sovereign data ownership is the fundamental underpinning of PSD2, GDPR, cryptocurrencies, and many of the exploitation- and censorship-resistant tech movements of the past decade. I personally spent years in DC with FDATA (as well as MX’s Jane Barratt, Plaid’s John Pitts, and others), talking with politicians and regulators about the importance of letting people own and leverage their own financial data. Seeing the CFPB redefine data ownership from a negative right to a positive one is an important step forward in the development of better financial products.

What am I reading?

·         I am now writing a column for ÍON, Itau Unibanco’s investing app, called Tête-à- Tech. It will be on a monthly basis and in Portuguese – if you are interested, download the app and look at the news section!

·         Pitchbook: Global M&A Report

·         Old but gold: The founder of the world’s largest hedge fund played a key role in helping McDonald’s launch the McNugget

What did I listen/watch?

·         Brazil Journal Podcast with Martin Escobari

Quote of the week:

“Should I just stop trying and give up?  But then, that’s exactly what they’re waiting for me to do.” – Tupac Shakur

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.