The participation of foreign investors in funding rounds in Brazilian startups grew this year, compared to the same period in 2021, according to a survey by the innovation platform Distrito. According to the study, non-resident investors took part in 39% of the 238 funding rounds in Brazilian startups from January to April, compared to 33% in the same period last year.
The United States, Germany, and Japan are the countries with the most companies investing in startups in the country. Together, investors from these countries have joined more than 700 deals in the last ten years. Foreigners investors enter mainly in larger deals: over the past decade, they have participated in 24% of rounds up to $1 million and 90% of rounds over $50 million. When looking at the stage of entry of international investors, 94% of all foreign capital raised in 2021 was injected into Series A rounds onwards.
The survey also shows that “mixed rounds”, together with domestic funds, also grew, up 142% last year. At least two-thirds of the capital invested in the last five years came from abroad. “In the last five years, the number of new investment firms and the volume of funding available for growth-stage companies has increased, but there are still few Brazilian funds able to invest in growth-stage. The foreign funds came to supply the need for capital for more mature companies”, said Gustavo Gierun, CEO of Distrito.
Just the participation of the Japanese group SoftBank represents 28% of the US$ 9.4 billion raised by Brazilian startups last year. In 2021, the fund led five rounds that created unicorns – MadeiraMadeira, Unico, Mercado Bitcoin, Merama, and frete.com. The sectors most targeted by foreign funds are fintechs (26% of the rounds), retail techs (12%), and health techs (10%), says the survey.
The participation of foreign companies in merger and acquisition deals for startups in Brazil has also increased. Last year, 10% of M&As had foreign companies as acquirers. So far this year, about 13% of the deals involved international companies.