The venture capital industry is going through an excellent moment globally, and in Brazil, the picture is no different: the country already has at least 316 venture capital firms, 84 of which have popped up in the last five years, showing the industry’s boom. The data were gathered by Emerging Venture Capital Fellows, a group of more than 250 VC analysts from Latin America, in partnership with Endeavor and ABVCAP.
The Radar VC report shows that São Paulo state has 55% of the VC companies in Brazil, 175 are headquartered there, followed by Rio de Janeiro, with 29 VCs, and Santa Catarina, with 15. At least 17% of them already have offices abroad.
Most Brazilian venture capital firms (60%) invest in early-stage startups, focusing on angel rounds (32), pre-Seed (75), and Seed (151) rounds. There are 102 funds that focus on Series A. The number of Brazilian funds that invest in Series B rounds onwards is small since the company needs to have a larger amount of assets under management.
When looking at the rounds’ size per stage, the Radar VC showed that in the Seed stage, the average investment is BRL 4.1 million and the maximum so far has been BRL 19.2 million; in Series A, the average investment is BRL 6.2 million and the maximum BRL 25.8 million.
Fintechs ranked first among the sectors that get the most venture capital investments in Brazil, either in the number of deals or volume of funding; followed by healthtechs and agtechs. Among the business models that most attract Brazilian VCs are B2B and SaaS models.
Radar VC also shows that Brazilian venture capital managers are still not very involved with venture debt, a form of debt financing offered to venture backed new age businesses. The model enables startups to gain traction without having to dilute equity, allowing them to delay fundraising until a more interesting moment in their journey. In the United States, venture debt accounts for 17% of investments made in startups, according to data from Pitchbook.
Anderson Thees, vice president of ABVCAP and managing partner of Redpoint eVentures, says that five years ago it was hardly possible to think of venture capital funds specialized by sector and stage in Brazil, but the ecosystem has evolved quickly. For the coming years, Thees says the Brazilian VC market can look forward to more scale and specialization. “Ideally we would have local funds, or with local allocation, at all stages,” he said.
“As ‘venture capitalists’, part of our work is to look for startups that are in line with our investment thesis. Having a single place where founders find information about how we invest is a big help in locating the best startups. As a result, entrepreneurs understand the managers’ theses better and connect with their next partners”, he said.