The Lessons from Investors and Founders After the Squeeze on Startups in 2022

The year was marked by falling venture capital investments, layoffs, and lower valuations of some of the largest private equity firms

Venture capital investment accumulated to November 2022 in Brazil was $4.48 billion, half that of 2021
December 29, 2022 | 11:51 AM

Bloomberg Línea — The year 2022 was a challenging one for startups and investors. When interest rates rose and made investors more risk averse, startups and big techs had to review their plans, laying off people and freezing hiring. It was a year of corrections and the “end of the free lunch”.

With a higher cost of capital, investors started to demand the end of the strategy of growth at any cost. It was up to the entrepreneurs to think about the operation costs and prepare for a time of scarcer capital.

Some relevant down rounds (investment rounds with valuations below the previous fundings) reflected the retraction of the venture capital sector. This was the case with the US-based payment processing company Stripe, which saw its valuation cut by 28%.

Swedish company Klarna, which operates on the Buy Now, Pay Later model, saw its valuation plummet 86%; and US delivery application Instacart had its value cut by almost 75% from the price investors paid at the beginning of 2021, from $39 billion to $10 billion, according to The Information.


In Brazil, although there has been no relevant public down rounds so far, there have been moves by unicorns with large layoffs such as Ebanx, Loft, QuintoAndar, and Dock, in addition to a Creditas round that was “flat”, that is, at the same valuation as the previous round.

According to the StartSe platform, global venture capital investment fell from $172 billion in Q3 2021 to $81 billion in Q3 this year. The Q3 2022 outlook is still higher than the same period in 2019 when $68 billion was invested.

According to the data platform Pitchbook, looking at the share of private equity assets under management in 2022 (to September 30) worldwide, 36.5% is allocated to private equity and 25.1% to venture capital.


PitchBook expects a further slowdown in global venture capital in 2023. But it’s not all a gloomy outlook, as US venture capital fundraising with pension funds, endowments, or family offices has reached a new high in 2022, surpassing 2021 in just three quarters.

Thus, the Pitchbook considers that the funds still have plenty of “dry powder”, i.e. money to invest. In 2022, Kaszek was the company that participated most in rounds in Brazil, with 24 transactions. 90% of Kaszek’s Limited Partners (investors who have their assets managed by Hernán Kazah’s company) are from the United States, Europe, or Asia.

See what investors and founders say about 2022:

Renato Valente, Managing Partner at Iporanga Ventures, said 2022 started with a strong first quarter, but investors already knew the correction was coming. “There was a greater euphoria due to the excess liquidity that governments put into economies. That money seeks returns, and with interest rates low around the world [during the pandemic], you end up taking more risk. And riskier assets end up attracting more capital. Venture Capital got a lot more money than it needed.”


For Iporanga, 2022 was a year of reviewing plans and looking at the portfolio, although the company did make some investments in early-stage startups. According to Valente, the market has cooled because no one wants to take the risk. “If one fund doesn’t want to invest, the other doesn’t invest either, there’s a bit of a lack of competition between funds, which makes it take longer for deals to come to fruition.”

Jonathan Kim, a partner at RGS Partners, said he believed an important lesson from 2022 was to be prepared for various scenarios (both macroeconomic and company) and be able to change course when necessary. “In a year of fewer resources available and lower risk appetite, startups needed to consider other alternatives to sustain themselves, such as mergers and acquisitions,” he said.

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For Junior Borneli, CEO of StartSe, the big lesson for companies in 2022 was to seek self-sustainability. “It was necessary to grow, but also survive with own resources. That is, making a profit is back in fashion, as obvious as it may seem. In recent years, many companies left this concern aside because there was plenty of money available in the venture capital market. Now, that resource has dried up and startups have had to adapt to stand on their own.”


According to Borneli, the companies that prospered in 2022 were those that made correct readings of the market signals and understood the movement by making assertive decisions, but many companies bet on “pandemic mirages” when the distortions were huge.

Mariano García-Valiño, CEO of healthtech Axenya, meanwhile, said the changing market has forced startups to have a technological DNA.

“Today there is no room for inexperienced semi-tech companies. Within that, the distinction between incremental and disruptive innovation is key. There is nothing wrong with incremental innovation, but it requires a different strategy than disruption. It is also worth differentiating whether the innovation is focused on strategy, product, or both,” he said.

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For Bernardo Ribeiro, co-founder of insurtech Azos, “if before the pressure to generate a positive cash flow was offset by future promises of even greater cash generation, today we see that projects that have a solid plan to deliver positive cash flow in a short period are getting stronger”.


Márcio Tabatchnik Trigueiro, a partner at Igah Ventures, considers that the year 2022 left a lesson of having a less volatile pace of investments. “Those who invested too fast in the bonanza may find themselves without capital in the lean season when some of the best opportunities appear.”

“Also, it became clear that nothing replaces knowing founders well and that there are no shortcuts - the work takes time and opens conversations. Well trained, a founder can make a great impression in an hour of Zoom, but that’s not enough,” he said.

For entrepreneurs, Trigueiro said he considers they have learned that knowing who you do business with is as important as knowing what the business is. “It is in a hard time that you know who is with you. High valuation on paper strokes the ego, however, it can sow the seeds of management that are not compatible with the high volatility - not just of venture capital but of the Brazilian economy as a whole.”


“To win the game, you first have to be alive, and some entrepreneurs confused a heated market - where there was ease when raising funds - with the real strength and potential of the business they set up.”

Bernardo Brites, CEO of Trace Finance, said he considered that one of the lessons of 2022 was to avoid mass hiring thinking only of growth and increasing the user base, without a logic of seeking profitability and revenue.

The investments in 2022 for Brazilian startups

Most of the investments in Brazil in 2022 were directed to banking and lending fintechs.


And 13 companies listed on the Brazilian stock exchange launched corporate venture capital (CVC) vehicles in the first half of the year.

Leo Monte, head of Torq and chief innovation officer at Sinqia, said that in 2022 corporations moved even closer to startups through corporate venture capital programs, learning to join forces with companies with technological DNA to leverage innovation.

“We ended the year with a more mature market. Our startup ecosystem is one of the most advanced in the world and we have evolved very fast on many issues in recent years. However, there is still a lot of room for growth. Consistent businesses with good entrepreneurs will always have room”, said the executive.


Miguel Armaza, co-founder and General Partner at Gilgamesh Ventures, told Bloomberg Línea that at the pre-seed and seed levels, revenue multiples are not paramount as these companies are often pre-revenue - instead, investors focus on the potential of the team and the company.

“Growth and late-stage investors did look at revenue multiples in 2021, but in our experience, today investors are less focused on revenue multiples and instead there’s now a focus on unit economics and operating margins,” he said.

A recent Morgan Stanley report showed a stark contrast between the top 10 publicly traded fintechs in 2021 and 2022. In November 2021, 6 of the 10 had negative operating margins. In December 2022, all 10 have a positive operating margin.


According to the innovation platform Distrito, venture capital investment accumulated until November 2022 in Brazil was $4.48 billion, while in the same period of 2021 it had reached $8.9 billion. In the closed year 2021, there was $9.8 billion invested.

Until November 2022, Brazil had 617 venture capital transactions with an average cumulative ticket in the year of $9.4 million. According to the Distrito, for the calculation of the average ticket, the rounds with no disclosed value are not considered.

Money still flowed to Brazilian companies. Most of the deals were for companies in the early stages (early stage), in which investors were able to pay less for a larger part of the company. For the seed stage (which represents angel, pre-seed, equity crowdfunding, and Seed), there were 466 deals in the year 2022 through November, with an average value of $1.4 million.

For the early stage (which represents Series A and B) there were 117 rounds, with an average value of $18.9 million. In the Late-Stage (which considers Series C to Private Equity rounds) there were 34 transactions, with an average ticket of $68.4 million.

The sector with the highest accumulated investment volume in the year to November 2022 was fintech (42.2%) According to data from the Distrito for venture capital and mergers and acquisitions (M&A) in November 2022, US$279.7 million were invested in 31 rounds and 13 M&As.

Data for November

For the seed stage, there were 22 transactions in November, with an average ticket size of $1.2 million. For the early stage, there were five rounds, with an average ticket value of US$33.9 million. And, for the late stage, there were four contributions with an average ticket of $61.8 million.

According to Distrito, to calculate the number of deals all the transactions made in the month were taken into account, but to calculate the average, only the investments were considered. The data is up to November 30, 2022.

It was a drop of 66.5% compared to November last year when $835.9 million was invested in 62 transactions.

In November 2022, the largest sectors by investment in Brazil were retail tech (retail) raising $115.8 million in two contributions, regtech (legal startups) raising $100 million in one contribution, fintech (financial), with $28 million in six rounds, and healthtech with $16.1 million in seven transactions.

There was a US$5.7 million transaction for a mobility startup and two transactions totaling US$4.8 million for the real estate sector. Foodtech received $3.3 million in four investments in November and a media and entertainment company received $2 million in one transaction.

An agtech (agro startup) received $1.9 million, and an edtech (education startup), $1.3 million. This month’s highlight fundraisers were Agrolend and Alias Tecnologia. The M&A highlight of the month, according to the District, was Neurotech, bought by B3.

The largest investments in November, according to Distrito:

  • CantuStore (RetailTech) - private equity - L Catterton: $112M
  • Alias (Regtech) - Series B - undisclosed investor - $100M
  • Agrolend (Fintech) - Series B - Lightrock, Mago Capital, Valor Capital Group, SP Ventures and Yara Growth Ventures - $27M
  • Hi Technologies (Healthtech) - Series C - undisclosed investors - $11.5M
  • Flapper (Mobility) - Series A with DXA and Arien Invest - $5.7M
  • Liti Saúde (Healthtech) - Seed with Monashees, Canary, GrãoVC, Eclipseon Ventures, Newtopia VC, The fund and Latitud Capital - $4.1M
  • Approva Fácil (Real Estate) - Seed - Terracotta Ventures - $4M
  • Zerezes (Retail) - Seed - Shift Capital and Order: $3.8M
  • Pink Farms (Foodtech) - Series A with SLC Ventures - $2.8M
  • Aoca Game Lab (Media and Entertainment) - Seed round with Google - $2M