Brazil dominates the Latin American startup ecosystem.
With outstanding numbers in this scenario, Brazil has a total of 17.987 startups, representing 77% of the market and concentrating 70% of investments in the region, according to a report released by... Sling Hub, a startup that gathers data on innovation drivers in Latin America.
Sling Hub conducted this research in the 7 most representative countries in Latin America, such as: BrazilMexico, Chile, Colombia, Argentina, Peru, and Uruguay.
In addition to representation in absolute numbers, the Brazil It also stands out in terms of startup valuation, with 7 of the 10 most valuable emerging technology companies in the region, all valued at over US$1 billion, known as unicorns.
The study also highlights that Brazil has the startups that have received the most investment in recent years.
A total of 7 startups are Brazilian among the 10 that received investment in recent years, and Brazil accounts for 45% of Latin American investments in 2019, 61% in 2020, and 70% in 2021.
When analyzed by sector, Brazil also leads in the highest concentration of fintechs, edtechs, healthtechs, agritechs, and marketing, in that exact order.
When we talk about the Brazilian fintech company Nubank, a unicorn valued at US$30 billion, we're referring to a company that has been gaining increasing ground in the region, rivaling banking giants.
Also among the highlights in Brazil is the startup QuintoAndar, which is ranked second with a valuation of US$4 billion, followed by the Mexican company Kavak (US$4 billion) and the Colombian company Rappi (US$3,5 billion).
Rounding out the Top 5 is another Brazilian company that also stands out, Wild Life, dedicated to the development of mobile games, valued at US$3 billion.
Another prominent Brazilian example was also startup Loft, which became a unicorn in just a year and a half and received US$525 million in its Series D funding round. Currently, Loft is one of the largest platforms for buying and selling residential apartments not only in Brazil, but in the world.
The unicorn boom in Latin America
The study conducted by Sling Hub also portrays... unicorn boom in the Latin American region.
For more than a decade, Argentina was the only country in the region that had companies like Mercado Live and Decolar with a value exceeding US$1 billion.
However, in 2018, a major shift occurred, with countries like Brazil, Colombia, and Mexico joining the ranks of countries with prominent unicorns in the market.
In Latin America, technological advancement has become even more pronounced with the pandemic.
This is one of the most digitally active regions in the world, with internet usage levels even higher than China and India.
Furthermore, the market capitalization of technology in the bloc, as a percentage of GDP, is growing at 65% per year – compared to 11% in the US and 40% in China. This data was collected and published by [organization name - missing from original text].
Atlantic venture capital fund.
In Latin America, we still have numerous challenges to overcome, and at the same time, we have opportunities for the emergence of companies to meet demands in areas such as housing, finance, education, health, and others.
We still have employees in Latin America with potential and even international training, who often speak more than one language and can overcome challenges through their understanding of diverse work cultures.
Especially in Brazil, a wave of new female entrepreneurs with a distinct profile is emerging, seeking to operate outside the current parameters of the competitive Silicon Valley. All of this results in the emerging culture of entrepreneurship.
Latin American companies are able to perform very efficiently in terms of software development time, and in addition, the cost of living is lower, the quality of life is higher, and resources are abundant due to more affordable salaries.
Mexico, Brazil, and Colombia have the potential to compete with the software development power of India and China, while offering a high quality of life compared to these countries.
Other highlights in Latin America
The ranking of the most valuable startups in the region is noteworthy for the presence of three cryptocurrency companies, demonstrating the rapid growth of the cryptocurrency market among Latin American nations.
The Mexican exchange Bitso, which recently arrived in Brazil, appears in seventh place with a market valuation of US$2,2 billion and an investment of US$250 million in a Series C round with participation from giants such as Pantera Capital.
C6, a Brazilian digital bank, recently announced plans to expand its cryptocurrency investment offerings to all its customers.
Currently, OC6 Bank is a partner of the asset manager Hashdex and offers investments in the B3 cryptocurrency ETF. The bank was recently valued at US$2,1 billion.
The Brazilian startup Mercado Bitcoin, already considered the largest cryptocurrency company in Latin America and valued at US$2,1 billion, received an investment from financial giant Softbank, which acquired 10% of the company. The exchange plans to internationalize its services with this capital injection.
Brazilian cryptocurrency startups Alter, Zro Bank, and Mercado Bitcoin are featured on the '100 Startups To Watch 2021' list published by [organization name]. Small Business, Big Business Magazine.
One question that remains is whether this situation of Brazil leading the ranking is sustainable in the long term.
According to João Ventura, CEO and founder of Sling Hub, Brazil should continue to lead the ecosystem in Latin America.
“In the short term, it’s difficult to reverse the trend. We are the largest economy, with the largest population, and we have many latent problems to solve in a short period of time.” Ventura points out.
The startup ecosystem in Brazil shows no signs of slowing down anytime soon, and we can see this in many of the figures constantly reported in the media.
Currently, São Paulo alone is home to a total of 8 unicorns, which is more than Seoul, Jakarta, Amsterdam, and Hong Kong; almost as many as Berlin; and nearly the same as the cities of Austin and Miami combined.
Furthermore, the Brazilian startup ecosystem is proving that it can overcome the crisis and attract investments to ensure the growth and development of companies.
A total of US$5,2 billion was invested in Brazilian startups in the first half of 2021, according to Inside Venture Capital. company report Innovation District. Compared to the same period in 2020, the increase is 299%.
As reported by Distrito, four new unicorns also emerged this semester alone: MadeiraMadeira (invested in by venture capital), Hotmart (invested in by venture capital), C6Bank (acquired by JPMorgan), and Mercado Bitcoin (invested in by venture capital). Today, Brazil has a total of 16 unicorn startups.
In terms of investment volume, fintechs lead with a total of US$2,4 billion, followed by proptechs with US$829,4 million and retailtechs with US$416,2 million.
A total of 339 investments were made in Brazilian startups, representing 35% more rounds than in 2020.
The sectors most favored by investors were fintech, with a total of 72 investments, retailtech with 36 investments, and healthtech with 29.
The Brazilian funds that made the most investments in the first half of this year were Bossa Nova, with 27 investments. Domo Invest, 21 and Canary with a total of 12.
“We believe that by the end of the year, new unicorns should appear in Brazilian territory. Some of the main bets are Neon, CargoX, Zenvia and Petlove,” mentions Distrito in its recently published report.
Mergers and acquisitions are highlighted in the report.
Mergers and acquisitions are another highlight of the report published by Sling Hub, where a Brazilian company once again leads the ranking: Magalu, the company that made the most acquisitions, with a total of 25 companies in the technology sector.
In second place in the ranking is Linx Retail, which acquired a total of 17 companies, followed by Locaweb, with a total of 16 companies.
In summary, eight of the ten largest buyers of startups are companies with Brazilian capital.
Besides Brazil, Argentina is the only other Latin American country to feature among the largest. Accenture, from Ireland, came in seventh place in the ranking for having acquired seven startups from Latin America.
Among investors in the region, the Chilean firm Start-Up stands out as the most active: 306 companies have received funding from the firm.
The Spanish investment fund, Wayra, which has invested in a total of 213 startups, comes next.
A Brazilian Bossa Nova, a micro venture capital firm that invests in pre-seed stage startups operating throughout Brazil, is in third place with investments in 179 startups.
A total of five Brazilian companies are featured in the top 10. Together, these companies invested in a total of 584 startups, representing 2,5% of the Latin American ecosystem.
Who are the biggest investors in startups in Latin America?
When it comes to investment volume in startups, the biggest investors are foreign funds like Japan's Softbank, which has invested in 13 Latin American unicorn startups.
However, the United States is the most active country in unicorn investment; among the 15 largest investors, eight are American.
Foreign participation is greater in investments than in acquisitions.
According to Ventura from Sling Hub, this has a very logical explanation and is not difficult to understand; it makes sense to buy from a company that is nearby, has similar customers, and already understands the market and its challenges.
When we talk about investment, the reality is quite different; it doesn't matter to the investor where the company is located, what they really seek is to multiply their invested capital.
A good example of this is the strategy of the company Magalu, which buys companies in Brazil that have the same customers and whose team is based in the country, and of Softbank, a Japanese fund, which seeks only to invest in companies.
And the outlook is very good and promises growth.
While the economy shows signs of slow growth, the general opinion of experts is that next year should be a very good one for the development of startups.
The feeling is that the gloomy economic outlook shouldn't affect startups too much, especially since the Brazilian ecosystem has seen its development unfold over the past few years precisely within a context of financial crises and recession.
“The real economy will suffer, and that’s a reality, so everyone will be scrambling to improve profit margins by reducing costs overall. It’s an opportunity for companies that do more with less, and startups and technology-focused companies are a great weapon for that,” says Renato Valente of Iporanga Ventures.
According to Gilberto Sarfati, a professor at FGV, the ecosystem today is experiencing sustainable growth. "It's a process that has been underway for two decades and, more intensely, in the last five years."
