Corporate venture capitalists set their sights on Brazil – Corporate and Corporate Law

Latin American startups have attracted the attention of venture capitalists in recent years, particularly startups based in Brazil. In fact, the data from Statist indicates that Brazil represents the largest venture capital funding in Latin America, accounting for half of all venture capital deals in the region. And now, among investors in Brazil, an interesting trend has emerged: the increasing amount of corporate venture capital (CVC) investments coming into the country.

According to a recent article in Global Company, corporate investors now represent the majority of investments in startups in Brazil. Their data shows that CVC-backed financing rounds have so far accounted for 59% of the total investment volume in Brazil in 2023. This is despite the fact that companies are participating in far fewer transactions and this is the first time since 2018 that transactions backed by companies represent a larger share than transactions in which no company participated.

Global Corporate Venturing points out that corporate transactions in this area have so far lagged behind non-corporate venture capital financing. This increase could be due to the fact that venture capitalists have been able to weather the global economic downturn better than other investors.

Companies choose to invest in startups for several reasons, such as the ability to reach new markets, new customers, and expand their services or product offerings without having to take on the innovation efforts themselves. . Brazilian startups check many of these boxes for professional investors because they bring significant innovation to an underserved area, with millions of consumers eager to take advantage of the incredible technological advancements of Brazilian startups.

For example, fintech is a particularly attractive area for CVCs in Brazil.

CVC investors’ interest in fintech is largely because fintech startups in Brazil and Latin America are catering to a market that has been underserved and in need of the services provided by fintech startups. Fintech investing trends are something we have discussed in previous positions.

As CVC investing increasingly becomes a priority in Brazil, there are some key elements that startups need to consider when seeking to secure corporate investment versus a traditional investment from a venture capital firm .

First, when a company invests in a startup, its motivations, timing, and goals may be very different. A venture capital firm often looks for early-stage startups and disruptive technologies that will become targets for acquisition or will be favored for an IPO as possible exit strategies. Corporate investors, on the other hand, typically have a longer-term plan and seek partnerships that align with their business strategies and goals. They are more motivated to invest in companies that will allow them to grow and achieve their strategic objectives.

Startup founders should carefully consider their options and determine whether corporate investors are the right fit for their business. It depends on the founders’ ultimate goals and whether they are looking more for a partnership that could open doors to a much larger market for them or whether they are looking for M&A opportunities or an IPO as their end goal. Advisors can play a crucial role in helping startups make these decisions and determine what is the best solution.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your specific situation.