Bloomberg Línea — Startups that raise money for the first time can be a good indicator to understand whether the market is willing to agree to funding terms and how likely investors are to pursue high-risk deals, according to Sling Hub, a data provider for the startup ecosystem in Latin America.
According to Sling Hub, around 3,000 startups in Latin America raised their first funding between 2018 and 2022. But in the last year, rounds of less than $1 million have dropped by 20% in the region. This type of contribution went from 71% of all deals in 2018 to just over 39% in 2022.
Last year, the number of rounds under $50 million fell for the first time since 2018 in Latin America. In Brazil alone, the drop was 41% year on year.
For later stages, the scenario is even more difficult, however.
A recent study by Kamaroopin, a growth equity manager backed by Patria Investimentos, shows that there is greater demand than capital available for investment in Series B startups onwards. Kamaroopin estimates that demand will be around $6.1 billion annually, but capital availability per year for this asset class will be $3.7 billion, which will create a $2.4 billion annual gap between supply and demand for this type of investment.
This has favored consolidation, with large companies (called incumbents) buying startups that see the window for more difficult funding. One case in point is fintech startup Pismo, where Mastercard and Visa are negotiating to buy the company, as reported by Bloomberg News.
While fewer rounds are being completed at each stage, data from Carta, a financial platform for managing funds and companies, shows that median seed stage pre-money (before receiving funding) valuations in the US increased 37.9% in the last quarter of 2022 compared to the first quarter of 2021, while Series A is almost tied with the first quarter of 2021 numbers.
But for every stage beyond Series A, the picture is a 14% drop for Series B, a 44.7% drop in Series C, and for Series D, the median valuation has almost halved compared to the first quarter of 2021.
With the disappearance of the mega-roads for Latin American startups, the early-stage sector is the one that has still shown activity in the region. This week, startups Pacto, TraderPal, Aravita, Toku, Inspectral, Jobecam, and Qlub received funding.
Pacto, a Mexican point-of-sale and payment platform for bars and restaurants in Mexico, received $4 million in funding led by DILA Capital.
The round also saw participation from FEMSA Ventures, the venture capital arm of FEMSA, which owns Oxxo; 500 Global, August Hill, Polymath Ventures, and Georgetown Angel Investor Network, as well as angel investors from Mexico such as Francisco Medina of Grupo Fame and investors from the hospitality and entertainment sector, including Grupo Gigante president Ángel Losada.
Pact was founded in 2021 by Ryan Croft, Rodrigo Kuri and Gordon Whitehouse. With its cloud-based software, the fintech promises to help medium-sized establishments manage their operations. In April last year, Pacto received $2 million in a pre-seed and in October announced a partnership with Getnet in Mexico.
Founded by Central American entrepreneurs in 2021, fintech TraderPal has received its first round of external investment of $10 million with a group of Latin American family offices through TEK INNOVATION.
The company’s platform allows access to US exchanges with investments in stocks, ETFs and cryptocurrencies.
Part of the funds raised will be used to strengthen the company’s operations in Mexico, Chile, Peru, Costa Rica, Panama, and the Dominican Republic. Another part of the money will be used to create a digital bank in Brazil, integrated with the solutions of Dock (formerly Conductor), which provides banking solutions for businesses.
“We are ready to start with our bank in Brazil, and we will go hand-in-hand with Dock Brazil, which will provide us with all core banking, such as Banking-as-a-Service. We plan to be ready to enter the Brazilian market in six months’ time with some key products, such as account opening, credit cards, payments, credit, insurance, investments, and the whole business of payment terminals and machines, under our own bank brand,” said Lester Pereira, founder and CEO of TraderPal, in a press release.
Aravita, a Brazilian startup that uses artificial intelligence to manage retail fresh food operations, has received more than 12 million reais ($2.3 million) in funding.
The main investors are Qualcomm Ventures, the investment arm of Qualcomm, and 17Sigma, a fund owned by Pierpaolo Barbieri, founder, and CEO of Argentine fintech Ualá. Other institutional investors are Bridge, DGF Investimentos, Alexia Ventures, BigBets, and Norte Capital.
Among the angel investors are Bernardo Lustosa, partner and CEO of ClearSale, and Flávio Jansen, former CEO of Locaweb and Submarino.
The company intends to help retailers optimize the management of fresh food, such as fruit, vegetables and greens, reducing waste and increasing the availability of demanded items through the adoption of artificial intelligence. The startup says its solution optimizes purchasing, reducing food leftovers and lost sales.
The company is developing a platform that will include features such as inventory control and integration with point-of-sale systems, and in the medium term, artificial intelligence and computer vision for process automation.
At the beginning of this year, Aravita started a pilot project in a chain with dozens of shops in the São Paulo region.
“We started the implementation focused on fruits, vegetables and greens, and envision expanding the scope to other supermarket departments with similar challenges, such as bakery, confectionery, cold cuts, fishmonger and butcher,” said CEO Marco Perlman in a press release.
The Brazilian startup AgriAcordo, a platform for wholesale commercial negotiations of agricultural inputs between companies, has completed a $1.6 million investment round. The investment included the participation of funds and companies focused on technology and agribusiness. The largest participation was from Venture Capital Xperiment and funds such as Primary Ventures and Pampa Star.
The startup, founded in 2021, is the Brazilian subsidiary of Argentine company AgriRed, a marketplace managed by US-based Ag inputs Trading. With the investment, the company plans to accelerate its growth in Brazil.
The startup is developing a platform for biological and special products so that companies can share technical information and research data. The product should be launched in four months’ time.
“It is a developing sector and some organic and specialty companies do not have communication channels, and AgriAcordo will be able to supply this demand,” said Gabriel Vidal, CEO of Argentina’s AgriRed, of which the Brazilian startup is a subsidiary.
AgriAcordo says it has 500 companies registered. In the state of São Paulo, 30% of the companies that sell agricultural inputs are registered on the platform. Current balance sheets show an accumulated gross volume of goods of 13.5 million reais transacted within the platform. Now, with the new investment, the goal is to reach 2.5 million reais in monthly transactions.
Chilean fintech Toku, which specializes in recurring payments, received a $7 million seed round led by US venture capital fund F-prime Capital, together with Curitiba fund Honey Island, which has Ebanx founders as shareholders, and Mexican Wollef.
Already invested funds such as FundersClub and Clocktower also followed the round, as well as individual investors such as Matías Muchnik (NotCo), Sebastián Kreis (Xepelin), Santiago Lira (Buk), and Daniel Guajardo (HealthAtom).
The money will be used to consolidate the Chilean startup’s operations in Mexico, invest in growth and expand into new Latin American markets.
Payment solutions startup Toku was founded in 2021 by Cristina Etcheberry (CEO), Francisca Noguera (CRO), and Enzo Tamburini (CTO). Last year, the company said its revenue grew more than sevenfold and that total payments processed grew 25 fold. The fintech has 60 employees.
Qlub, launched at the end of 2021 in the United Arab Emirates, received a gigantic seed injection: $25 million, part of which will be used to expand operations in Brazil.
The company offers a payment solution in restaurants, nightclubs, cafés and hotels. Besides the United Arab Emirates, the company operates in Australia, India, Singapore, Saudi Arabia and, since last year, Brazil.
“We are very excited about our expansion plans for Brazil, the country chosen to start our operations in Latin America. It is a market with a lot of potential, with a high adoption rate of digital payments, where our solution has been super well accepted,” said Oscar Bedoya, co-founder of Qlub, in a press release.
Today Qlub operates only in the state of São Paulo, but with the new investment, the fintech company will redirect part of the investment received to grow to other states and cities, including Rio de Janeiro, Salvador, Florianópolis and Curitiba.
Inspectral, a startup for environmental, forestry, water resources, and agribusiness monitoring, received its first private investment of approximately 2 million reais ($395,035) from the angel investment group BR Angels.
The software startup had Aegea Saneamento e Participações as one of its first clients, for which it developed a pilot project of the solution in Piracicaba, in São Paulo, before moving on to other business units in states such as Mato Grosso do Sul, Rio Grande do Sul and Rio de Janeiro.
Other companies that it has assisted include Jirau Energia, CPFL Renováveis, Minas PCH and Ambev, for which Inspectral is applying its technology outside the country for the first time.
“The case with Ambev is very interesting. Before, there was only one parameter of water quality, which guided the decisions about the characteristics of water, which is the main raw material of the company. With Inspectral, it was possible to deliver nine water quality parameters, a number that tends to grow with the construction of new models,” Inspectral co-founder and CEO Alisson do Carmo stated in a press release.
“Even considering that in the traditional method, there is a gap of about a week for the semi-annual laboratory results to be ready and that in Inspectral the results are obtained monthly in real time, and our solution presents a cost of less than half,” she added.
Human resources startup Jobecam received a seed round of around 4 million reais ($789,862), led by economists Armínio Fraga (former president of the Central Bank) and Daniel Gleizer, former director of International Affairs of Brazil’s central bank.
The funds raised will be directed to investments in technology, product development, and marketing strategies of the startup.
Jobecam connects recruiters through video and selection with anonymous, pre-recorded or live interviews.
“We opened this round because we know that the time is right for the market to understand the need for our video technology since remote interview processes are increasingly necessary to generate efficiency for all involved, as well as the urgency of companies to strengthen and practice the diversity agenda,” said founder Cammila Yochabell in a statement.