In a record year for the Brazilian startup ecosystem, fintechs were the sector responsible for bringing the greatest volume in investment during 2020. This is one of the findings pointed out by the innovation platform Distrito, that disclosed total numbers for 2020 regarding the venture capital market in the country.

Overall, startups received more than US$ 3.5 billion between January and December 2020, a volume 17% higher than the US$ 2.97 billion raised in 2019. Regarding the number of venture capital deals, the year amassed 469 transactions, which represents an increase of 29% compared to the previous one.

While marked by unprecedented economic turmoil, 2020 was an important year to the startup ecosystem in Brazil, that kicked off venture capital deals with proptech Loft‘s US$ 175 million round in January to close 2020 with the fintech Creditas raising a Series E infusion of US$ 255 million less than a month ago.

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“Loft’s Series C round in early 2020 was interesting because of the speed: they moved from Series A to Series C very fast,” highlights Eduardo Fuentes, from Distrito. Before this latest round led by Andreessen Horowitz and Vulcan Capital, the Brazilian real-estate platform raised an $18 million Series A round led by Monashees in January 2018, followed by a 70 million Series B infusion from Andreessen Horowitz and Fifth Wall in March 2019, showed data from Crunchbase.

Other massive deals included Nubank‘s 11th VC round of US$ 300 million back in June and Neon‘s US$ 300 million round led by General Atlantic in September. Along with Credita’s and C6 Bank‘s deal – the latter of US$ 241 million – these were the four largest investments in the year, all of them above US$ 200 million each, disclosing once again the relevance of this sector in the Brazilian ecosystem.

For Distrito’s analyst, the US$ 225 million round raised in September by Vtex, a company that offers solutions to simplify products sales on the internet, also propelled the retail tech industry in 2020, that amassed US$ 360 million in more than 40 rounds. Vtex along with the before mentioned fintechs comprised the five largest deals of the year, accounting for US$ 1.3 billion in volume invested, more than a third of what was raised in the entire 2020.

“In terms of capital, more than US$ 1.7 billion dollars was invested in fintechs in more than 90 investment rounds during 2020, This corresponds to about 48% of the total volume invested in the year: almost half of the capital invested was in fintechs,” Fuentes points out.

But the financial technology companies were not the only sector to secure a special spot in Distrito’s study. Supply chain and proptech industries raised more than $150 million through over 20 deals each.

As expected in the year of the Covid-19 pandemic, healthtechs were also on the spotlight, securing over US$ 100 million in 49 investment rounds. According to Fuentes, this was not the record volume for the sector, since in 2017 the investment volume in health techs were pulled by a US$ 50 million Series C deal raised by Dr. Consulta.

“But in disregard of this, 2017 was weak for this industry, while in 2020 we had a booming year for health, surpassing 2019 and 2018 in terms of investment volume,” says Fuentes, who adds that when it comes to the number of contributions, health tech reached a new record, with 49 transactions. “We have never had so many deals in the sector.”

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Well capitalized funds and a greater volume in late-stage deals set the tone in 2020

Virtually any sector felt the impact of the pandemic especially in the first quarters of last year, and venture capital was no exception. But after the first months of uncertainty and a more cautious behavior that prioritized taking care of an existing portfolio of invested startups over betting on new deals, VC funds resumed the pace. The reason? Funds were well-capitalized.

“Many of the investors with an eye on Brazil raised a new round of funding in 2019, such as Kaszek, Monashees, Canary, Astella. All of them were well capitalized with the potential to invest resources in the market,” says Distrito’s expert.

As the startup ecosystem matures, investor’s appetite combined with the natural development of early to late-stage deals raised by startups set the tone of 2020’s venture capital landscape in the country. “What we had from pre-seed, seed, Series A (rounds) in 2017 to 2019, as time goes on, startups come back to the market raising Series B, C, and so on, which are much larger tickets.”

With a 77.8% share of the total number of deals, 2020 recorded 353 early-stage rounds (angel, pre-seed and seed) versus 307 in 2019. But when it comes to volume invested, these investments represented only 6% of the total amount: US$ 200 million.

As expected, the largest amount of volume is gathered by late-stage deals: Series B and up were responsible for almost all fundraisings, with US$ 2.7 billion invested over 52 rounds.

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Traditional players and startups leveraged mergers and acquisitions to a new record in the country

In over 160 transactions, startups’ mergers and acquisitions also secured a record to call its own. With a growth of 154% compared to 2019, there were 163 deals of this type in 2020 against 64 in 2019, the highest historical number in Distrito’s mapping.

As for the main transactions, Fuentes highlighted Vitta‘s acquisition by Stone, marking the entry of the fintech in a new – and quite unrelated with its core business – market. With 160 employees and headquartered in São Paulo, the healthtech startup Vitta manages corporate health plans, in addition to offering its own plans in partnership with insurance companies focused on the entrepreneurial public.

With Nubank setting foot in the investment market by acquiring Easyinvest and Santander‘s purchase of Toro Investimentos, a booming interest of banks and fintechs for brokers also led the purchase of the country’s oldest broker Magliani by the fintech Neon, back in July. “This underlines the rising strength of the startup ecosystem within the market.”

But traditional companies also had their fair share of mergers and acquisitions last year. Hub Prepaid, ComSchool and Stoq Tecnologia were three of the nine startups acquired by the retail giant Magazine Luiza in 2020.

“This is super interesting to understand the strategy that lies beneath: M&A as a tactic to bring product, enter a new market, deliver more operational efficiency.” While Locaweb acquired five companies in the year, among them, the logistics platform Melhor Envio, Via Varejo purchased another 3 startups over 2020.