XP and Headline launch a BRL 915 million fund to invest in startups in Brazil

Called Headline XP, the fund attracted almost 12,500 investors; the idea is to invest in 25 startups over the next four years

Brazilian XP and VC firm Headline join to launch new venture capital fund
Guilherme Benchimol, XP's board president, Romero Rodrigues, Headline managing partner, and Thiago Maffra, CEO at XP. Photo: Courtesy
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Headline XP, a venture capital fund launched in partnership between the Brazilian investment platform XP and Headline, a global venture capital firm led in Brazil by Romero Rodrigues, announced today that it has raised BRL 915 million to back startups with high scale potential. The fundraising surpassed its original target of BRL 834 million and attracted about 12,500 investors, making Headline XP the largest equity fund in number of investors.

Headline XP fund will last for 10 years. In the first four years, it will allocate half of the fund’s capital to build a portfolio of about 25 startups, in which it will have minority stakes of up to 20%. The other half will be used in the next four years for participating in subsequent rounds, avoiding dilution in the good companies. In the last two remaining years, the idea is to exit and return the capital to the shareholders.

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Headline XP fund has already identified 700 business opportunities, but it expects, according to Romero, to assess 1,500 to 2,000 startups and invest in an average of eight of them annually. The fund looks for early-stage startups from sectors such as software, e-commerce, education, healthcare, mobility, ESG, and blockchain, among others.

“It is a very careful selection. A scenario of rising interest rates and inflation and less favorable macro indicators is perfect for good startups to stand out and develop. The business models that emerge are more capital-efficient, and can stand out in the face of competitors,” explained Rodrigues.

Besides the capital injection, the Headline XP will focus on the same strategy as Redpoint Eventures 1 and Redpoint Eventures 2, funds previously managed by Rodrigues, which included mentoring and networking for the investees. Created in 2012, the $130 million fund 1 invested in 30 companies, including four unicorns. The $175 million fund 2 was launched in 2018, and rounded out its portfolio of 26 companies early last year. According to Rodrigues, both funds are delivering returns above the expected target for the class, which is 25% per year.

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The partnership between XP and Headline was announced in February this year. According to Rodrigues, while Headline brings together a completely independent management team with experience investing in startups, XP adds “capillarity” to the formula with its network of more than 10,000 investment advisors.

This capillarity was a key element in the fundraising phase, according to Bruno Castro, CEO of XP Asset. “Venture capital investment is something seen as inaccessible to the common investor. We used XP’s reach and expertise to democratize this type of investment. We were more than satisfied with the result”, he said.

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