PITCHBOOK Private Equity & Venture Capital - ABVCAP
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Private Equity & Venture Capital PITCHBOOK
Disclaimer: The content presented here was prepared by ABVCAP under the scope of the InBrazil Program.
It may be reproduced only with written authorisation from ABVCAP.
The InBrazil Private Equity & Venture The Brazilian Private Equity and The Brazilian Trade and Investment
Capital Program is a joint initiative Venture Capital Association is a non- Promotion Agency promotes Brazilian
between ABVCAP and Apex-Brasil with profit organization that promotes the products and services abroad and
the goal of informing and connecting development of private equity, venture attracts foreign investments to strategic
international investors with Brazilian fund capital and seed capital in Brazil, by sectors of the Brazilian economy. Apex-
managers and portfolio companies. The improving industry conditions and Brasil coordinates actions designed to
main goal of the Program is to inform and understandings and also fomenting attract foreign direct investment (FDI)
empower the global investor community best practices that are aligned with to Brazil, striving to allocate resources
in respect to the Brazilian PEVC international industry standards. in sectors of strategic relevance for
ecosystem and its many opportunities. endowing Brazil and its businesses with a
keener competitive edge.
CONTENTS 1. BACKGROUND FOR BRAZIL 3. NOTABLE SECTORS 1.1 Macro-economic data 3.1 Retail 1.2 Political context 3.2 Health 1.3 Regulatory environment 3.3 Education 2. PRIVATE EQUITY & VENTURE CAPITAL IN BRAZIL 3.4 Fintech 2.1 Main figures 4. CASE STUDIES 2.2 Private equity 4.1 Private equity 2.3 Infrastructure 4.2 Infrastructure 2.4 Venture capital 4.3 Venture capital 2.5 Impact investments 4.4 Impact investments
Background for Brazil
Among the world’s ten largest Ranking of Latin American economies - GDP - 2018 (US$ trillion) TOP 10 world economies 2018 (US$ trillion)
economies, and heading up Latin
America, the Brazilian economy is back United States 20.4
on the path to growth. As illustrated in
the following pages, its prospects are China 13.6
positive for the next few years. 5.0
Japan
BRAZIL
MEXICO Germany 4.0
Annual GDP of US$ 1.9 trillion United Kingdom 2.8
212 million inhabitants PERU France 2.8
Urbanisation rate of 84%
India 2.7
Among the top ten countries receiving foreign
investments in 2018
Italy 2.1
These are promising times for the Brazilian COLOMBIA BRAZIL Brazil 1.9
economy, due to the following set of circumstances:
Canada 1.7
- Well-balanced inflation that remains under target; 0 2 4 6 8 10 12 14 16 18 20 22
- Consumption and confidence ratings are Foreign Direct Investment inflows 2018 (US$ billion)
uptrending;
- Brazil’s capital market has been booming since
2017, with the IBOVESPA Index reaching new highs
CHILE United States 226
and record share volumes; and
ARGENTINA China 142
United Kingdom 122
- More than seven companies attained unicorn
status in 2018, appraised at more than US$ 1 billion. 1.5 – 2 trillion
Hong Kong 112
Singapore 77
0.5 – 1.5 trillion
Spain 70
< 0.5 trillion Netherlands 64
Australia 62
Brazil 59
India 43
0 20 40 60 80 100 120 140 160 180 200 220 240
Source: IBGE; IMF - World Economic Outlook (june 2019)
Made with
The gradual growth recovery of the GDP growth and inflation rates in Brazil FY15-FY22e (%) Exchange and Selic rates forecast FY12-FY23 (expected)
Brazilian economy is reflected in a
context of tight-leashed inflation and
GDP Growth IPCA
lower interest rates that, influenced Exchange Rate Selic Rate
by credit costs, are helping drive up
10.7
4 16
activity and employment levels. 3.5 14
3 12
2.5 10
6.3
US$/R$
With inflation close to target and solidly-rooted 2 8
%
expectations, Brazil’s monetary policy is grounded
4.1
4.0
1.5 6
3.8
3.7
3.7
on interest rate stability and indications that this
2.9
%
context will continue over the next few years.
2.6
2.6
1 4
2.5
1.5
0.5 2
1.1
1.1
Since december 2017, unemployment rates have
been dropping, while the employed population 0 0
has expanded by almost two million positions and
e
e
e
2e
1e
12
13
14
15
16
17
18
23
19
20
real incomes have recovered, increasing the actual
2
2
20
20
20
20
20
20
20
20
20
20
20
20
wage mass even more. The jobs market should
follow this uptrend.
-3.3
-3.5
2015 2016 2017 2018 2019e 2020e 2021e 2022e
GDP growth projection by country FY19e (%) Average unemployment rate forecast FY12-FY22 (expected) (%)
12.7
12.2
Japan 1.0 11.7
11.5
11.2
United Kingdom 1.2 10.6
10.2
LATAM 1.4
8.5
Russia 1.6
7.4
%
7.1
6.8
Mexico 1.6
%
Brazil 2.1
US 2.3
World 3.3
China 6.3
India 7.3
2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Source: Brazilian Central Bank; IMF; IBGE
In parallel with the economic IPO history on the Brazilian stock exchange FY08 – FY18 Exchange rate forecast FY12 – FY23e (US$/R$)
recovery, better capital market Number of IPOs Volume of IPOs - R$ billionV
conditions and the prospects of
a stable foreign exchange rate,
23.8
all point to a context that is more
20.3
appealing to foreign investors
17.3
3.9
seeking assets in Brazil. 3.8 3.8 3.9
3.7 3.7
3.5
3.3
3.2
11.2
11
11
Under a newly-elected government, market optimism
10
10
2.3
spread rapidly. A survey released by Bloomberg 2.2
US$/R$
1.9
7.5
7.2
indicated that Brazil tops the list of the emerging
countries from the investor standpoint. Brazilian
6
6
3.9
bonds were recently ranked as equivalent to those of
4
3
3
other economies rated as investment grade.
0.7
0.6
0.4
Foreign Exchange Bonds Stocks
1
1
1
This positive view of Brazilian papers has been 1 Brazilian real Brazil Brazil
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
expanding among investors, as its Government moves
12
13
14
15
16
17
18
e
e
2e
e
e
19
20
21
23
2 Mexican Peso Indonesia India
20
20
20
20
20
20
20
2
ahead with social security reform, which is considered
20
20
20
20
20
crucial for shrinking the public deficit. 3 Indonesian Rupiah Mexico Indonesia
In 2018, three companies went public on the B3 – 4 Argentinian Peso Argentina China
the Interbank and the NotreDame Intermédica and What market investors have their eye on
5 Russian Ruble South Africa South Africa
Hapvida medical aid operators – while others (such
as Stone and Arco Educação) offered their papers Foreign Exchange Bonds Stocks 6 South African Rand Russia Argentina
directly on Wall Street. Through offerings on the 1 Brazilian real Brazil Brazil 7 Polish Zloty Turkey Russia
Brazilian stock exchange, companies raised R$ 6.76
billion, while IPOs on the US stock exchange brought in 2 Mexican Peso Indonesia India 8 Indian Rupee China Mexico
US$ 4 billion. 3 Indonesian Rupiah Mexico Indonesia 9 Chinese Yuan India South Korea
With significant international reserves and a floating 4 Argentinian Peso Argentina China 10 South Korean Won Poland Poland
exchange rate, Brazil’s foreign exchange policy has 5 Russian Ruble South Africa South Africa 11 Turkish Lira South Korea Turkey
been more foreseeable and stable. The outlook for the
Brazilian real against the USD over the medium term is 6 South African Rand Russia Argentina
a positive indicator for foreign investors eyeing Brazil. Russia
7 Polish Zloty Turkey
8 In Indian
the developing
Rupeeeconomies, shares, currencies
China and government papers should outstrip their counterparts in the more developed nations during 2019, with Brazil as a favourite choice among
Mexico
investors for these three asset classes, according to a Bloomberg survey of thirty investors in December 2018.
9 Chinese Yuan India South Korea
10 South Korean Won Poland Poland
11 Turkish Lira South Korea Turkey Source: Bloomberg; Brazilian Central Bank; B3
Private capital funds (especially when
foreign) are trustworthy sources of Average annual credit lines to companies in Brazil Number of bankruptcies and judicial
financing and operational support in FY13-FY18 (# thousand) recoveries in Brazil FY12-FY18
the current context of sparse bank
credit, particularly as dry powder is Bankruptcies Decreed Deferred court recoveries
limited among local players.
1514
150.4 151.3
144.5
136.4
1215
124.2
1195
120.7
Tightly-strapped bank credit is spurring the search for
1,044
alternative sources of corporate funding, opening up a
928
930
great opportunity for private equity and venture capital
829
746
740
90
721
688
690
671
funds operating in Brazil.
618
70
Furthermore, many companies that were heavily 65
56 58
leveraged during the economic growth years are now 53 55
floundering in the wake of the recession. 2013 41 2014 2015 2016 2017 2018
38 37
2012 2013 2014 2015 2016 2017 2018
The large number of businesses declaring bankruptcy
or under court-supervised receivership hint at very
Fundraising and global investment in
Made with
Participation of sectors in corporate insolvency FY18
favourable prospects for funds investing in promising
turnaround possibilities and special situations. Emerging Markets FY14-FY18 (R$ billion)
2014 2015 2016 2017 2018
Agriculture 0.5%
Fundraising Investments Others 4.6%
90 Industry 9.3%
70
65 Made with Trade 46.1%
56 58
53 55
41
38 37
Services 39.7%
2014 2015 2016 2017 2018
Fundraising Investments
Source: Brazilian Central Bank; Serasa Experian; EMPEA; SPC Brazil
18 18 17 17
15 15 15 15 15 15 15
14 13 14 13
12 12 12 12
10 10 10 10
A record number of Brazilian start- 8 8
5
ups reached unicorn status during Rate in% of entrepreneurship according to Brazilian unicorns - 2018 | 2019*
2018, valued at over US$ 1 billion and
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
business stage - Brazil - 2002 - 2017
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
attracting attention from local and
Stablished enterpreneurs Starter enterpreneurs Total
international venture capital funds,
whether operating in Brazil or not. 40 39
36 36
35 34 with
Made
32 32
30 30
Entrepreneurship has been surging steadily 27 27
26
25
in Brazil: among each 100 Brazilians, 36 are 23 23
22
21 21
entrepreneurs, and young people between 25 and 20 20
18 18
19 20 20
17 17
34 years old were the most active in setting up 15 14 14
15 15 15 15 15 15
13 13
12 12 12 12
new businesses, with 30.5% of Brazilians in this 10 10 10 10
8 8
age bracket owning and managing start-ups.
5
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
The Census on Brazil’s startup ecosystem
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
*until October 2019
(conducted in 2017 by Startse*) found that most
Stablished enterpreneurs Starter enterpreneurs Total
start-ups had already moved beyond the initial
stage and are maturing, validating solutions and Number of entepreneurs in each stage by age (# million) Brazil’s startup ecosystem
seeking market niches for their operations. In Made with
Starters Stablished
fact, they are even being set up with an eye to
international markets, reflecting a mindset that is Average age
10.5 2016 2017
seamlessly aligned with global trends.
of start-ups were
founded between years
Most of these initiatives are now in the capital- 2016 and 2017
intense validation stage. Furthermore, the main
6.4 6.5
source of funding for 91.8% is partner capital, 6.0
thus opening up great opportunities for venture 5.2
capital funds.
4.3
3.8
4.2 5.4% 36%
Hypothesis
stage 38% Business
stage 20.6%
Validation Scale stage
1.9 stage
0.8
18 to 24 25 to 34 35 to 44 45 to 54 55 to 64
years old years old years old years old years old with participation of 779 companies and over 2,000 stakeholders (including
investors and traditional companies).
Source: SEBRAE; Public Deals; STARTSE; GEM Brazil 2017
With signs of the economic
recovery for Brazil and the M&A transactions announced in Brazil FY03-FY18 (US$ million) M&A transactions (only in december 2018) by sector
outcome of its new government,
the outlook for the next four 1.000 Education 4,00%
Health services 6,00%
years is quite positive for M&A 800 799 812
879
Chemicals 6,00%
771
transactions.
752 742 IT 29,00%
722
645 644 643 658
600 573 597 Mining 6,00%
400 415
389
Acquisitions are heading up M&A deals in Brazil, 337 Food & beverage 6,00%
particularly among companies weakened by the
recent economic meltdown. 200
Logistics 8,00%
In 2018, Brazilian investors competed with their 0
foreign counterparts for 63% of announced Other services 15,00%
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
minority purchases and acquisitions.
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Retail 10,00%
Public services 10,00%
Nevertheless, foreign investors, particularly those
in the US, continue to wager on M&A deals in
Brazil.
Made with
Top 5 sectors among announced transactions FY17-FY18 (US$ million)
In 2008, of the announced transactions, 245
involved foreign capital, with the US, France and 2017 2018
Canada accounting for 48% of deals involving
foreign capital in Brazil. 140 140
132
120
Foreign investors are expected to flock back to
Brazil, in parallel to a new surge of privatisation,
100
driving transactions and attracting the attention of
global fund players. 80
%
The Brazilian M&A market is becoming increasingly 60 57 58 57
53
more mature in the IT segment, and is already a 45
51
40 43
benchmark for transactions among ERP vendors [1] comprise mainly the consultant,
33
and on the start-ups market, encompassing mainly management, marketing sectors,
20 among others;
the consulting, administration and marketing
sectors, among others, together with public utility [2] public utilities services, such as
0
energy and aviation
services such as energy and aviation.
TI
es
ro
e
os
úd
ei
ar
ic
Sa
nc
bl
li
xi
Pú
na
de
Au
Fi
os
Source: PWC
os
os
iç
iç
iç
rv
rv
rv
Se
Se
SePrivatisations and concessions are priorities for Brazil’s new
administration during the next four years. The denationalisation PPI projects*
of Brazilian businesses may well offer investment opportunities in
sectors that are strategic for the economy, with a wide diversity Ports
2.9%
of assets available to private equity and infrastructure funds. 7.1% Highways
The Brazilian Government is forging ahead with its Investment Partnerships Programme (PPI), set up in 5.7% Railways
2016 to boost and buttresses interactions between the State and private enterprise through partnership 25.7%
Others
agreements and other State divestment steps.
5.7% Energy
This Programme is intended to underpin the expansion of high-grade infrastructure in Brazil, with
user-friendly tariffs, fostering fair competition across the board when establishing partnerships and Oil and gas
rendering services involving foreign capital in Brazil.
Mining
By year-end 2018, 105 bidding rounds had been held during the thirty months that the PPI had been Aviation
in place, 42 of which were won by foreign companies, either alone or in consortium with Brazilian
firms. Rising interest among international investors in infrastructure projects in Brazil is the outcome
of an innovations plan designed to enhance the quality, appeal and juridical security of tender
announcements and projects. 21.4%
The changes introduced include lifting the requirement for foreign companies to operate in
partnerships with Brazilian firms. Furthermore, dialogue between the public and private sectors drew *It comprises 70
contributions for fine-tuning regulations, including Law Nº 13,448/2017, which allows inflows of new 25.7% projects in progress
investments into existing concessions through anticipated extensions, and Law Nº 13,499/2017 that as of August 2019.
allows adjustments to airport concession profiles. 5.7%
Moreover, the PPI is striving to streamline financing models and mechanisms, in order to attract
international players, while ensuring that Brazilian projects are competitive with those in other
countries. The outcome reflects confidence in Brazil among international investors.
Source: Investment Partnerships Programme (PPI) - August 2019Background for Brazil
The Bolsonaro Administration charged into its first year in office with a pro-business agenda that included major
reforms, particularly the social security and tax systems.
Brazil’s new Ministry of Economy affirms that his administration will be based on four pillars:
Social Security Fewer constraints Simplified taxes Decentralisation of
reform on the economy and privatisations State and Municipal
Government funding
Brazil is eager to step up the share held by foreign trade in its GDP, rising to 30% over the next four years. To do so, it is determined to endow Brazilian
companies with a keener international edge. Aspects earmarked as high priority are privatisation and concession programmes, together with civil service
reform, pruning the administrative machine and enhancing efficiency, thus easing the weight of the State in the economy.
As reforms are approved in Brazil, significant inflows of direct and portfolio investments will appear as well. Investments of at least US$ 100 billion
are waiting only for reforms to progress.Approval of tax and social
security reforms is crucial for a 254.9of social security expenditure in Brazil FY10-FY18 (R$ billion)
Evolution Composition of primary expenditure FY17
return to fiscal balance in Brazil,
underpinning the sustainability 586.4 2.5%
2.4%
of its economic growth.
557.2 3.3%
507.9 4.2% Social security
Other expenses
436.1 8.2%
394.2 34.0% Personnel and social charges (actives)
357.0
Personnel and social charges (inactive)
316.6
REFORMS UNDER DISCUSSION: 281.4
9.4%
Social security (rural)
TAX AND SOCIAL SECURITY Health expenses
Continued payment benefits
Unemployment insurance
9.5%
Outlays on social security account for over half Social assistance (Bolsa família Programme)
of Brazil’s primary federal budget. Only 10% of its 2011 2012 2013 2014 2015 2016 2017 2018 Education spending
14.0%
budget is allocated to education and healthcare, 12.6%
which are sectors that are crucial to economic and
social development. Made with
Net debt of public sector and international reserves (%) of GDP FY10-FY18
The deterioration in budget outcomes has been
worsened by rising public outlays and above all by Net debt of public sector (% of GDP) International reserves (% of GDP)
soaring social security expenditures, explaining
why Brazil’s net debt has ballooned. 53.8
51.6
46.2
38.0
35.6
34.5
32.2 32.6
30.5
19.8 20.3 20.1
18.2
15.1 14.6 14.8
13.0 13.5
2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Ministry of finance; Federal Budget Office; Brazilian Central BankA welcome side-effect of
Operation Car Wash is better
compliance levels among
local companies, dimming
impressions that Brazil has a
corrupt society. EMBI* Brazil performance (country-risk)
RISING LEVELS
OF CONFIDENCE
600
Since its launch in 2014, the Operation Car Wash
corruption clean-up drive has upped compliance 500
levels among Brazilian companies, as a way of
preventing fraud while also showing markets,
400
investors and consumers that they obey the law.
The steps taken since then – which led to prison
sentences for corrupt executives and politicians 300
– are already presenting positive results in terms
of perceptions of corruption in Brazil among 200
investors and the business sector.
100
At Petrobras, for example, steps taken during
the past few years for dealing with corruption
scandals and reducing the debt of this state-run 0
oil giant have helped rebuild investor trust, which
is reflected in the value of its shares. 01/04/10 01/04/11 01/04/12 01/04/13 01/04/14 01/04/15 01/04/16 01/04/17 01/04/18 01/04/19
*Difference in the mean daily
payback on Brazilian papers and
return on US Treasury bonds.
Source: IPEADATABackground for Brazil
SOLID GROUND FOR THE
EXPANSION OF THE PE&VC
Dominican
Costa Rica
2017/2018
Argentina
Colombia
Republic
INDUSTRY
Uruguay
Jamaica
Panama
Mexico
Brazil
Israel
Spain
Chile
Peru
UK
Scorecard
The regulatory context for setting up Equity
Investment Funds (FIPs), tax treatment, Brazil’s Overall score 51 69 71 64 58 42 51 67 51 54 61 86 78 96
capital market and entrepreneurship are among Laws on PE/VC fund formation and
the mainsprings of the private equity and venture operation 1 4 3 3 2 2 2 3 2 2 2 4 4 4
capital industry in Brazil, according to the LAVCA
Tax treatment of PE/VC funds &
Scorecard, prepared by the Association for Private investments 2 3 2 2 3 1 2 2 2 1 3 3 4 4
Capital Investment in Latin America .
Protection of minority shareholder rights 2 3 3 3 2 2 2 3 2 2 2 4 3 4
Despite emphasizing the need to curb corruption,
the Report acknowledges the efforts of the Restrictions on local institutional
1 2 2 3 1 1 2 3 2 3 2 4 3 4
investors investing in PE/VC
Courts to punish offenders in fraud cases.
Furthermore, the recent reform of Fund Protection of intellectual property rights 2 2 3 2 3 1 2 2 2 2 3 3 3 4
regulation by the Brazilian Securities Commission
(CVM) was mentioned as a major step forward for Bankruptcy procedures/creditors’
the industry. rights/ partner liability 2 3 3 3 2 1 2 3 2 2 3 2 3 3
Capital markets development and
feasibility of exits 2 3 3 2 2 1 2 3 2 2 2 3 3 4
Registration/reserve requirements on
inward investments 3 3 3 3 3 3 3 3 3 3 3 3 3 3
Corporate governance requirements 2 3 3 3 2 3 2 3 2 3 2 4 3 4
Strength of the judicial system 2 2 2 2 3 1 2 2 2 1 3 4 2 4
Perceived corruption 2 1 1 1 3 1 1 1 1 1 3 3 3 4
Quality of local accounting/use of
international standards 4 4 4 3 4 3 3 3 3 4 3 4 4 4
Entrepreneurship 3 3 3 3 2 2 2 2 2 2 2 3 2 3
Source: LAVCAPE&VC MILESTONES
Investments in PE&VC begin to firm up in Brazil
during 1994, with the Real Economic Stabilisation
Plan. Since then, local assets have continued to
2000
mature, with complete maturation cycles and
Establishment of the Brazilian Private Equity
steady inflows of international and Brazilian firms & Venture Capital Association (ABVCAP),
into this segment. an entity striving to encourage long-term
investments in Brazil through private equity
1997 and venture capital initiatives.
Patria starts its private
equity activities in Brazil
Launch of the Inovar Innovation Project by
the Studies and Projects Financing Agency
(FINEP) linked to the Ministry of Science
1995 and Technology, in order to encourage
1994 Brazil’s National Social and Economic investment in technology-based firms and
The Real Economic Stabilisation Plan Development Bank (BNDES) transfers the start-ups in Brazil.
ushers in a stable currency, with first venture capital investment to RSTec, a
inflation curbed by interest rates and fund focused on innovative small businesses
fixed foreign exchange rates. and start-ups in Rio Grande do Sul State.
Issued by the Brazilian Securities
Commission (CVM), Instruction Nº
209 lays down the regulations for the
Emerging Companies Investment Fund
(FIEE), designed as an investment
channel for venture capital firms.
1980
During the 1980s, there are few managers GP Investment raises its first private
in Brazil working only with venture capital. equity fund locally
An Insper/Spectra survey showed that
the outcomes of this strategy were
unimpressive.
1976
A partnership between France’s Paribas
and Brazil’s Unibanco, Brasilpar is known
as the first company to encourage
venture capital investments in Brazil.
Source: ABVCAP; Brazilian Central Bank; B3PE&VC MILESTONES
Important steps for the progress of the industry However, Brazil’s political and economic turmoil
are related to more favourable market conditions left foreign investors wary, highlighting the need
resulting from better corporate governance for the maturation of its private equity industry.
practices: (I) expansion of minority shareholder
rights; (II) introduction of different listing segments Lessons learned during this crisis may encourage
2018
by B3; and (III) greater FIP stakes. local institutional investors to comply with Acquired for US$ 1 billion, the 99 ride-
international standards, moving away from hailing company (mobility) becomes
Prior to Brazil’s economic meltdown, its private involvement in investment committees and fine- Brazil’s first unicorn.
equity industry was hamstrung by a handful of tuning fund selection processes, which may help
2017
bottlenecks that led to a split between funds promote a more sustainable alternative asset Private equity funds raise a record US$
focused on either local or foreign investors. industry in Brazil. 4.53 billion in 2017.
Factors such as the presence of investors on
2016
investment committees, and management Replacing Instruction Nº 391, the CVM issues Instructions
compensation based on management fees rather Nº 578 and Nº 579 with new regulations that unify and
than performance fees, prevailed nationwide, update Equity Investment Fund (FIP) rules. One of these
changes is the possibility of investing in limited liability
hampering the full development of this sector. companies.
2015
An investment crunch in Brazil reflects
an economic slowdown, with currency
devaluation and political turmoil.
2008
Establishment of the BM&FBOVESPA
Stock Exchange through merging the
São Paulo Stock Exchange and the
Commodities and Futures Market
(BM&F) in Rio de Janeiro.
2007
Launch of the Criatec 1 Fund by the BNDES,
in order to select, invest in and accelerate
36 technology-based firms in at least seven
Brazilian States.
2003
Instruction Nº 391 issued by the CVM with
a new regulatory framework ruling on the
establishment, management and functioning
of Equity Investment Funds (FIPs).
Source: ABVCAP; CVMPrivate equity & venture capital in Brazil
With an upsurge in the amounts
raised in Brazil, the relevance PE&VC fundrasing in Brazil FY18 (R$ billion) Fundrasing by modality FY18 (R$ billion)
of foreign investors continued.
Of the R$ 13.6 million raised Private Equity Venture capital Venture Capital 0.9
during the period, 83% was in
foreign currency. 12.7
PE&VC FUNDRAISING
4.4
In 2018, the amount of private capital raised for
investments in Latin America almost doubled,
0.8 0.9
as shown in the graph released by the Emerging
Markets Private Equity Association (EMPEA). In 2017 2018
Brazil, the amount raised by private equity and Private Equity 12.7
venture capital funds rose by 162% to R$ 13.6
billion, compared to R$ 5.2 billion in 2017.
Fundraising in Latin America by strategy FY13 - FY18 (US$ billion) Fundraising by currency FY18 (%)
As divestments increase, with more funds in
their final stages that now are paying back
11.0
capital to their investors, it is natural for the
uptake process to intensify; already apparent In R$ 17.3%
8.9 8.7
during the past couple of years, this process will
continue in 2019.
6.0
International investors are vital for the Brazilian 4.5 4.5
PE&VC industry, accounting for 83% of funding
raised in 2018.
2013 2014 2015 2016 2017 2018
Buy Growth Venture Capital
In foreign exchange 82.7%
Private Credit Infrastructure Real Assets
Source: ABVCAP/KPMG; EMPEAThe appetite of private equity funds
for investments in Brazil is back with a Total investment and as a percentage of Brazilian Amount of invested companies and average value of
bang, spurred by economic recovery GDP FY11 - FY18 (R$ billion) investments in Brazil FY13-FY18
and a widespread need to raise capital
for expansion, particularly among
18.5
medium-sized businesses. 17.6 132
14.9 15.2 117
13.3 13.5
95
AMOUNTS INVESTED 11.8 0.33 11.3 87
0.31
R$ billion
% of GDP
IN PE&VC 0.31
R$ million
0.27 72
67
186
#
0.23 0.23 175
0.2 159 157 202
In 2008, consolidated data prepared by KPMG 0.18
101
and ABVCAP on the PE&VC industry reflected
record-breaking venture capital investments
of R$ 6 billion, up 150% over R$ 900 million in
2017. However, the total amounts invested by the 2011 2012 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
industry dipped from R$ 15.2 billion in 2017 to R$
13.5 billion in 2018, for both private equity and Total Investment (PE&VC) % of GDP Average Value Amount
venture capital.
Furthermore, there was a 15% increase in the
Volume of investment in main sectors FY18 (R$ million)
number of target companies over the period,
reaching 202 compared to 175 in 2017. Among
them, the sectors absorbing the highest amounts
Financial Services 2,698.6 Health and farmacy 1,052.7
of funding in 2018 and Brazil were financial
Food and beverage 2,053.0 Logistics and transport 914.6
services, food and beverages, education, and
retail. Education 1,538.8 Agriculture 618.3
Retail 1,159.6 Energy 473.6
Total investments by PE&VC funds in Brazil topped Infrastructure 418.0
Others 1,111.6
R$ 13.5 billion in 2018, of which R$ 7.5 billion
IT 1,103.6 Real estate and civil construction 344.3
consisted of private equity and R$ 6 billion in
Industry (products and services) 44
venture capital, invested in 202 companies.
Source: ABVCAP/KPMG; Brazilian Central BankThe total amount of capital
committed by the industry has Commited capital and available for investments in Commited capital by type of investor FY18
been rising steadily, still with PE/VC FY11-FY18 (R$ billion)
a very significant share held by
foreign capital, pension funds, and Pension funds and
Total commited capital Available capital 10%
institutional investors. institutional investors
170.3
F
10%
154.3
153.2
individuals
142.8
COMMITTED CAPITAL – PE&VC
126.9
Corporate investors
100.2
9% Governmental
50%
In 2018, Total Committed Capital rose to R$ 170.3 agencies
83.1
billion, up 10% over the previous year. These Funds managed by
63.5
9% other managers
figures underpin the view that foreign and domestic
39.3
39.3
39.1
30.7
30.2
28.7
28.5
22.7
investors believe in the solidity of Brazil. Others
8%
Resources from the
4% fund manager
Among new funds and others already raised but not 2011 2012 2013 2014 2015 2016 2017 2018
yet fully allocated, estimates indicate that private
equity and venture capital managers have some R$
39.3 billion available for investments in Brazil.
Top 10 fund managers by total commited Commited capital in Brazil by origin FY11-
capital in Brazil FY15-FY18 Made with FY17(R$ billlion)
10 largest Others
The amount of committed capital in the PE&VC
industry has been rising steadily since 2011, 10 largest Others National Foreign
while the share held by foreign capital is
100
expanding steadily. 180
100 160
80
32 32 140
80 39 40 39 120
60 44
32 32 100
39 40 39
60
40 44 80
87.3 75.7 89.5
60 71.1 112.4
40.7 55.1
40
20 40
34.3
20
20 67 60 59 55 67 60 29.6 42.4 45.1 55.8 65.9 67.1 64.8 57.9
0 0
2011 2012 2013 2014 2015 2016 2017 2018
2015
67 2016
60 2017
59 2018
55 2015
67 2016
60
0
2015 2016 2017 2018 2015 2016
Source:ABVCAP/KPMG; EMPEAIn 2017, divestments reached a new
high, continuing on through 2018,
under the influence of a favourable
% Divestments per year FY11 -FY18 R$ billion Divestments in Private Equity R$ billion
IPO window that encouraged Brazilian Other PE exits PE exits through IPOs
companies to go public, firming up as 13.7 100% 182 140 6,300
a feasible alternative for moving out of 90%
investments. 80%
10.2
70%
60%
DIVESTMENTS – PE&VC 50%
6.0 5.7 5.8 40%
4.7 5.0
Reflected in the number of IPOs during the year, 3.6 30%
divestments by private equity and venture capital 20%
funds reached a historic high of R$ 13.7 billion in 10%
2018, up 34% over 2017. 0% 5,618 4,860 3,900
2011 2012 2013 2014 2015 2016 2017 2018 2015 2016 2017
Since 2017, Brazil’s capital market has proved
more attractive for stock offerings, with thirteen Divestments in Brazil by sector FY13-FY18 (R$ million) Perfomance and average investment period by exit strategy FY17
companies spending the equivalent to R$26 Made with
Average investment period (years) IRR (%)
billion during the past two years on Brazil’s B3
Stock Exchange.
Education 4,971.1
Health and farmacy 2,464.4 159
Divestments by private equity and venture Retail 1,029.5
1,201.2 6.2 6.0
capital funds reached some R$ 55 million in Logistics and transport
Energy 1,155.9
Brazil since 2011. 5.3
Others 795.5
Infrastructure 668.6
Financial Services 505.2 4.5 4.7
Food and beverage 178.8
IT 172.6
Real estate and civil construction 161.5
Tourism and entertainment 150.7
Industry (products and services) 105.3 50
Agriculture 68.0
21
Telecom 40.0
0 10 3
(R$ Million) IPO Sale for Sale for Others Sale to
strategic PE/VC business
owner
Source: ABVCAP/KPMG; INSPER/SPECTRA; B3While providing a feasible exit
alternative for private equity and IPOs of PE invested companies FY08 - FY18
venture capital investments in Brazil,
stock offerings also firmed up their
position as one of the most profitable
options, especially for investors
continuing as partners and merely
diluting their stakes.
DIVESTMENTS - PE&VC
In 2018, 61% of divestments (including partial
sell-offs) by private equity funds were handled
through stock market offerings. Funding raised
by companies going public in Brazil (particularly
in 2017 and 2018) reached R$ 26 billion, of which
R$ 14.7 had private equity funds as investors,
thus consolidating this exit alternative for private
equity funds. Performance comparison: stocks which investors exited
total ou partially compared to IBOVESPA
Furthermore, as shown previously, divestment
performances with market exits proved far
superior to other options. When compared to the 189%
219%
IPOVESPA Index, shares issued by companies with 105% 148% 101% 182%
private equity investors outperformed this Index. 116%
99%
Moreover, those retaining investor partners with 22%
62% 30%
only partial departures tended to move away from 21% 37%
42% 31%
the Index, with much better performances. 26% 26%
12% -11% 5% 27%
14% 15% 23%
-6% 1% -15% -17% 0%
-28%
2010 2011 2012 2013 2014 2015 2016 2017 2018
IBOVESPA Shares with no PE in an IPO Shares with PE continuing
or full divestment of PE after an IPO
Source: B3Disregarding prices in 2015 and
2016 that resulted from shrinking IRR of Brazilian PE/VC funds raised between 1982 and 2010 EV/ EBITDA of Brazilian transactions FY12-FY17
corporate profits during the
recession, businesses with attractive Equity/ EBITDA Net debt / EBITDA
Gross IRR US$ Gross MOIC USD
valuations in private equity and
max
venture capital have remained the 159% 24.1x 0.7
norm in Brazil since 2013. 1st
51% 2.9x
2nd
med 2.3
PROFITABILITY – PE&VC 20% 1.9x
1.3
3.2
3rd 1.4
1.6
According to an Insper/Spectra study, the mean 8% 1.5x
gross internal rate of return in US dollars of 4th
Brazilian PE&VC funds is 22%, while the mean gross -100% 0x
min
MOI is 2.6x. Similar to the international industry, with
performances scattered widely between best and 7.4 6.1 5.3 6.9 11.6 5.9
worst, the highest internal rate of return peaked at Mean 22% 2.6x 2012 2013 2014 2015 2016 2017
159% and the lowest dipped to -100%.
Despite recent crises, PE&VC deals performed well PE/VC deals performance in US$ between 1994 e mar-18 Proportion of Brazil/LATAM dedicated funds
overall between 1994 and March 2018. The average raised in US$ or R$ FY00-FY17
gross multiple of invested capital (MOIC) in US$ was
2.6x and the median was 1.3x. The maximum MOIC
for PE was 34x and 60x for VC (see Exhibit 7). More US$ R$
Total sample Private Equity Venture Capital
than 60% of the deals had positive returns (with the
MOIC topping 1.0x), and almost 30% returned more max max max
than 2.5x invested capital (see Exhibit 8). Similar to 60.0 x 34.1 x 60.0 x
20
21
the global industry, VC deals had a high write-off of 1º 1º 1º
25
29
32
44%, but the 13% of deals with outstanding returns 2.8 x 2.8 x 2.5 x
38
2º 2º 2º
42
drove the mean MOIC to 2.3x for VC deals.
46
med med med
50
1.3 x 1.4 x 0.4 x
53
55
56
58
3º 3º 3º
Particularly with its recent recession, Brazil offers
great opportunities for private equity managers 0.18 x 0.8 x 0.0 x
4º 4º 4º
to invest in companies that have been poorly
min 0.0 x min 0.0 x min 0.0 x
10 90
managed and under-capitalised, providing funds
100
100
100
100
80
71
44
75
50
79
54
47
58
68
42
45
62
that help them grow and bring in good returns. Mean 2.6 x Mean 2.7 x Mean 2.3 x
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Source: INSPER/SPECTRA; EMPEAAs a result of the maturation
process, some Brazilian private MOIC* of private equity investments
equity and venture capital funds are in US$ in Brazil FY94 - mar 18
outperforming their counterparts in 38
the USA, as shown by Insper/Spectra
surveys.
PROFITABILITY – PE&VC
MOIC* of private equity investments in Brazil
19
The Insper/Spectra study indicates that private 17 (before and after 2015 crisis)
equity investments generally performed well in 14
Brazil between 1994 and March 2018. Similar FY94-FY14 FY15-mar/18
to the international industry, there is a wide
gap between the best and worst performing
6 3.2
managers. In the analysis, first and second 5
3
quartile funds in Brazil are classified as equal to 2.8
2.9
or better than the global industry.
Despite the recent economic slowdown, venture 0x 0x - 1x 1x - 2,5x 2,5x - 5x 5x - 10x Over 10x
2
capital investment returns have been improving 1.8
since 2015, compared with figures for 1994 through MOIC* of venture capital investments in
%
to 2014. Brazil (before and after 2015 crisis)
Although Brazil’s PE&VC industry is relatively young, 1
FY94-FY14 FY15-mar/18
it has many experienced fund managers: 72% of the
PE&VC firms in the sample are at least six years old; 8.3
40% were established more than ten years ago; 59%
of them have set up two or more funds; and 34% 0
have set up three or more funds. US$ R$
The Brazilian PE/VC industry has been going through
4.8 * Multiple of invested
a natural renewal cycle, and investors are learning %
to be more selective in choosing a fund manager. capital (MOIC)
2.9
2.0
US$ R$
Source: INSPER/SPECTRA; ABVCAPPrivate equity & venture capital in Brazil
With experienced managers and a
proven track record, Brazil’s private Years of activity of private equity players in Brazil FY18 Total private equity investment and as a percentage
equity industry has already completed of GDP FY11-FY18
at least one investment cycle.
More than 10 years
5 years or less 40.4% Total investment % GDP
27.3%
Almost half these private equity fund managers
have been operating in Brazil for more than ten
Total investment (R$ billions)
years, and have already or almost completed at 17.3
least one complete investment cycle. 14.3
0.3%
% GDP
In parallel to the need to expand their businesses, 10.5 0.2%
Brazilian businesspeople already glimpsing 0.2% 7.5
opportunities opened up by the operational
0.1%
support that fund managers can offer their
businesses, in addition to synergy with companies
in their portfolios. Between 6 and 10 years
32.3% 2015 2016 2017 2018
In 2018, capital committed by the industry reached
R$ 153.7 billion, with R$ 36.9 billion available for
new investments. This reflects growth of 5% and Private equity commited capital and available for
30% respectively over the figures for 2017. investment FY15-FY18 R$ billion
Commited capital Available capital
153.7
147.8 146.0
136.7
37.6 36.9
28.2 28.4
2015 2016 2017 2018
Source: INSPER/Spectra; ABVCAP
Made withThe ongoing maturation of
Brazil’s private equity industry PE - Amount of invested companies and
average investment value
is strengthening the nation’s
economy, focusing on industrial Amount (#) Average value (R$ million)
bottlenecks and the effects of the
Issuers - 2017 and 2018 (R$ billion)
recent economic meltdown. 80
73
68 Private Equity in IPO No Private Equity in IPO
63
As it matures, the growth prospects of the private
277
equity industry are promising in Brazil. R$ 0.8 bi R$ 0.6 bi
The reasons for this include strong possibilities
150
of sectoral diversification, with a wider range 144 R$ 0.9 bi R$ 0.6 bi
of attractive sectors whose appeal comes from 95
economic bottlenecks and underdevelopment, R$ 1 bi R$ 5 bi
as well demographic and territorial opportunities
2015 2016 2017 2018
that favour sectors such as agriculture and energy,
R$ 1 bi
among many others.
R$ 2 bi
In 2018, eighty companies were targeted by private
equity funds, with a mean investment value of R$ Average investment period of private equity
95 million. deals in Brazil by exit year FY09-FY17 R$ 5 bi
R$ 2 bi
Market exits are a reality for companies targeted 5.0
4.9
4.7 4.7 4.7
for investment by private equity funds in Brazil. R$ 2 bi
From 2013 to 2018, 65% of companies that went 4.0 3.9 3.8
3.6
public had been targeted by private equity funds,
R$ 2 bi R$ 2 bi
some of which sold out completely, while others
retained only partial interests, diluting their stakes.
2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: PWC; B3With 2018 a notable year MAIN PRIVATE EQUITY DEALS IN BRAZIL 2019-2018
for private equity industry
transactions in Brazil, the 2019 INVESTOR(S) TYPE VALUE (BILLION) COMPANY SECTOR
Education, Healthcare and Retail Mubadala; Farallon Investment R$ 1,650.0 Rota das Bandeiras Infrastructure
sectors were outstanding in Softbank Investment US$ 1,000.0 Rappi Mobility
the twenty largest transactions Vinci Partners; Capital Group; Temasek Divestment R$ 714.5 BK Brasil (Burguer King Brasil) Food & Beverage
(investments and divestments), Pátria Investments Investment R$ 500.0 Bio Ritmo (Smart Fit) Services
totalling 66% of the total value of Vinci Partners Investment R$ 500.0 Vero Internet Telecommunications
these top deals. Vinci Partners Divestment R$ 415.0 Cecrisa Retail
GTIS Partners Investment R$ 400.0 BHG Hospitality
Softbank Investment US$ 200.0 Creditas (Ex-bankfacil) Fintech
Kinea Investments Investment R$ 200.0 Wiser Education
Softbank Investment US$ 190.0 GymPass Services
2018 INVESTOR(S) TYPE VALUE (BILLION) COMPANY SECTOR
Tarpon Investments Divestment R$ 4,100.0 Somos Education Education
Bain Capital Divestment R$ 2,377.7 Intermédica (Notre Dame) Healthcare
Advent International Investment R$ 1,900.0 Walmart Brasil (Bompreço) Retail
GIC Divestment R$ 1,730.0 Somos Education Education
Carlyle Investment R$ 700.0 Madero Food & Beverage
Brookfield Asset Management Inc Investment R$ 660.0 Ouro verde Logistics
Sequoia Capital Investment R$ 610.5 Rappi Mobility
CVC Capital Partners Investment R$ 562.0 Moove Industry
Rakuten Capital; TheVentureCity; Endeavor Catalyst;
Investment R$ 500.0 Maxi Mobility (Cabify e Easy) Mobility
GAT Investments
DST Global; Red Point E.ventures Investment R$ 495.0 Nubank Fintech
Source: AVCAP – Public dealsPrivate equity & venture capital in Brazil
Infrastructure bottlenecks are Infrastructure project by government programme FY07-FY17 Infrastructure investment in Brazil and deficit as a % of GDP FY17
strangling economic activities Average annual investment (2011-2016)
in Brazil and must be removed, Completed projects (#) Foreseen projects (#) % of conclusion Growth expected Investment needed for improvement
with private credit playing a
100%
leading role in this process,
4.2
due to funding needs and 80%
project management support
requirements. 60%
2.3
100 2
40%
15
Brazilian investments in infrastructure are 9,128
126 1.1
insufficient, still unable to resolve the nation’s 20% 0.9
0.7 0.7
bottlenecks. 15,004 0.5 0.4
0.2
0% 1,538 3,337 8 38 74
Properly-proportioned investment flows can PAC 2007-2010 PAC2 2011-2014 PIL 2012-2015 PIL 2 2015-2016 CRESCER /
Transport Energy Telecom Sanitation Total
endow Brazil with a keener competitive edge over Avançar 2017-2018
the long term, in addition to driving its economy
through infrastructure works. Infrastructure ranking by country FY18 (%) Public and private infrastructure
investment in Brazil FY10-FY18
Private capital already accounts for a very
significant slice of these investments, which must Grade from 0 to10, 0 as the worst performance
Total investment in infrastructure Private sector participation
7.6
increase over the coming years, particularly with 7.1
privatisation and concessions being urged by a 6.6 250 80
newly-elected administration. 5.3 5.3 54 5.5
% 4.7 200 64
4.4
150 48
100 32
50 16
a
a
a
a
ile
da
il
a
o
az
in
re
tin
si
di
ic
Ch
na
s
Ch
ex
In
Ko
Br
n
Ru
Ca
ge
M
0 0
h
Ar
ut
2010 2011 2012 2013 2014 2015 2016 2017 2018
So
Source: CNI; OCDE; Infrastructure Directory 2016/2017; ABDIB; Frischtak and Mourão (2018)In parallel to repressed
demands, and with subsidised Infrastructure fundraising in emerging markets FY12-FY17 Fundraising by strategy in emerging markets FY12-FY17
public funding petering out,
there is a clear and increasing Raised Capital (US$ billion) Number of funds (#)
Buyout Growth Venture Capital
need for private credit
among companies in Brazil’s Infrastructure Private Credit
19
infrastructure. 18
17
8.1
16
16 4 5 7 10 12
9 7
14 8
Sparse government-subsidised funding for 8 6 8 10
infrastructure projects and a new guideline 13
introduced by Brazil’s National Social and 16
19
4.5 4.5 4.1
Economic Development Bank (BNDES) for long-
term financing are spurring immediate demands 3.2 41 41
for private credit in this sector. 25
33
2.7
51
The need to attract new capital to this sector is
a noteworthy issue, as financing costs are on the
rise, while the availability of subsidised credit for 38 22 37 31 34
investment is shrinking. 2012 2013 2014 2015 2016 2017 2008-2009 2010-2011 2012-2013 2014-2015 2016-2017
Private equity funds with infrastructure expertise
can offer – together with credit – operational
support that underpins better performances and
expansion by companies in this sector.
In this context, private equity investments can be
an important source of funding, complementary to
BNDES’s lines and subsidised debentures.
Source: EMPEA; ABVCAP/KPMGRecent changes in the rules MAIN INFRA DEALS IN BRAZIL 2019-2018
of auctions and infrastructure
projects aim to adopt global
2019 INVESTOR(S) TYPE VALUES (MILLION) TARGET COMPANY SECTOR
standards contracts, guarantees
and risks, in order to promote an Mubadala; Farallon Investment R$ 1,650 Rota das Bandeiras Infrastructure
environment to offer legal certainty
Vinci Partners Investment R$ 500 Vero Internet Telecom
and attractiveness to domestic and
Softbank; Microsoft; GGV;
foreign investors. Investment US$ 150 Loggi Logistics
Fifth Wall; Velt Partners
Axxon Group Divestment US$ 100 America Net Telecom
Brazil’s infrastructure deficit led to the
Warburg Pincus Investment US$ 100 America Net Telecom
expansion of privatization projects and regulatory
authorities improvements aiming to attract Alothon Group Investment R$ 100 Elétron Energy Energy
domestic and foreign investors to the sector.
The creation of a Ministry of Infrastructure Pátria Investimentos Investment Undisclosed Impacto Logistics
by the new government aims to reduce
consultation time and approval of projects and
seeks to facilitate the execution of long term
2018 INVESTOR(S) TYPE VALUES (MILLION) TARGET COMPANY SECTOR
constructions. In addition, the new government
has committed to strengthening regulatory Brookfield Asset Management Inc Investment R$660 Ouro verde Logistics
agencies, seeking to ensure predictability and
Alberta Investment Management
clear rules for bids and projects. Investment R$ 400 Iguá Saneamento (ex- CAB) Infrastructure
Corporation (AIMCo); IG4 Capital
Recent movements in the sector point to a growing GIC Investment R$ 352 Algar Telecom Telecom
interest FDI inflows in infrastructure projects.
Softbank Investment US$ 100 Loggi Logistics
In Brazil, the most attractive sector has been
energy. Only in 2018, private funds equity moved GWI Asset Management Investment Undisclosed Gafisa Civil construction
more than R$ 473 million in stakes of companies
positioned in this sector. Foreign investors who Darby Overseas Divestment Undisclosed Alesat Energy
in 2010 accounted for 27% of private investment
Pátria Investimentos Investment Undisclosed Marlim Azul Energia Energy
infrastructure in Brazil, started to respond 70% of
investments in 2018. Gávea Investimentos Divestment Undisclosed Energisa Energy
Source: ABVCAP – Public dealsPrivate equity & venture capital in Brazil
As it matures, Brazil’s venture
capital ecosystem has been Amount of invested companies and Commited capital and available for
average investment value in VC (#) investment in venture capital (R$ billion)
attracting rising numbers of
foreign investors, who have Commited capital Available capital
headed up the main startup 40
investment bidding rounds. 29
16.6
In 2018, venture capital 26
21
investments rose more than 19 8.3
sevenfold over figures for the 13 12 12 11
5.4
6.1
R$ Billion
previous year. 7 7 7
4 3
2.3 2.4
2
1.7
rs
h
ce
ce
ch
ch
ch
e
h
ec &
an L ec &
po s
ec y
tin &
ec
ar
ec
oT ac
ns stic
he
g
d o h
rt
h
h
la
er
Te
Te
Te
nT y
rT h
ke h
ftw
Up 567% over the previous year, new unicorns and
riT
ea rg
ilT
su ec
ar ec
Bi m
tp
m
Ot
tru
Ed
lth
tra gi
Cl n e
& ar
ke
In int
M T
ta
m
Ag
So
ea
Ad
ns
Ph
E
Re
co
ar
F
recent IPOs for local start-ups during 2018 hint at 2015 2016 2017 2018
H
Co
M
E-
Brazil’s importance on the venture capital stage.
Venture capital investments in Brazil FY18 (R$ billion) Amount of invested companies and average investment
As a result, the mean investment value rose value in venture capital FY15-FY18 (R$ million)
significantly, in parallel to larger quantities as well.
6
Among these target companies, 33% are in the Amount Average value
fintech and insurtech sectors.
140 60
As this industry matures, the appraisals of these
start-ups are also starting to rise. Established 120 51.4
more than five years ago, some of them are
100 42.9
now reaching maturity and starting to bring in
impressive returns.
Average value
80 34.3
Amount
60 25.7
40 17.2
1.2
0.8 0.9
20 8.6
0 0
2015 2016 2017 2018
2016 2016 2017 2018
Source: ABVCAP/KPMGVenture capital investments Global investment in venture capital Investment in main venture capital sectors in Latin
are on the rise in Latin FY14-FY18 (US$ billion) America FY17 - 1H18 (US$ million)
America, despite significant Seed-angel Early stage Late stage Technology growth
underinvestment, hinting at
540
massive potential for growth and 17
maturation by the local industry.
Investment amount (US$ billion)
398
180
304
Venture capital investments are thriving all over the 26
world. Since 2017, Latin American start-ups have 8
12
been included among their main targets, resulting 100
80
in a VC investment boom in Latin America. 56
80
42 67 57
135
The fastest-growing sectors for start-ups in this 85 16
75
region include fintech, marketplaces, e-commerce 42 60
Fintech Logistics Marketplace Edtech Biotech/ Agtech
and transportation technology, in parallel to 5 6 6 6 6 and transport Healthtech
2014 2015 2016 2017 2018
investments in technology focused on education
and healthcare.
Latin American investments investment in venture Start-up investment in LATAM FY17-FY18
Mexico and Brazil are Latin American favourites capital FY14-FY18 (US$ million)
with venture capital investors, particularly new
Investment amount Number of operations Others 1.8%
unicorns and major deals in Brazil.
1,8K 350.0 Chile 1.8%
Argentina 5.7%
1,6K 311.1
The main venture capital investment sector in Latin 1560 Mexico8.0%
Investment amount (US$ billion)
America is fintech, with US$ 540 million invested 1,4K
290
272.2
249
through 94 transactions between early 2017 and
Number of operations
1,2K 233.3
Investment amount
1141 Colombia 9.8%
the first half of 2018. 1K
197
194.4
186 182
0,8K 155.6
0,6K 111 119 116.7
594
526 500
0,4K 69 387 425 77.8
0,2K 143 38.9
Brazil 72.9%
0 0
2011 2012 2013 2014 2015 2016 2017 2018*
figures refer to the
estimate based
on June 2018 Source: Crunchbase; LAVCAForeign investors have been MAIN VENTURE CAPITAL DEALS IN BRAZIL 2019-2018
active players in Brazil’s 2019 INVESTOR(S) TYPE VALUES (MILLION) TARGET COMPANY SECTOR
investment rounds. According
Softbank; General Atlantic; Atomico; Valor Capital Group Investment $ 300 Gympass Services
to Consolidated Data released
Softbank Investment $ 200 Creditas Fintech
by KPMG and ABVCAP, 211
companies were targeted by Softbank; Microsoft; GGV; Fifth Wall; Velt Partners Investment $ 150 Loggi Logistics
venture capital investments, Monashees Capital; 500 Startups Investment $ 150 Grow Mobility
with the fintech and insurtech QED Investors; Invus Opportunities Investment R$ 87 Escale Services
sectors particularly noteworthy. Riverwood Capital Investment R$ 80 Omie IT
Point72 Ventures; IFC; Quona Capital Investment R$ 75 Contabilizei Fintech
Andreessen Horowitz; Thrive Capital; Monashees Capital;
Some of the main public transactions are listed Investment $ 70 Loft Marketplace
Canary; Valor Capital Group; Fifth Wall; QED Investors
below for this period, with the IT and fintech
Redpoint Eventures; Intact Ventures Investment $ 60 Minuto Seguros Insurtech
sectors accounting for 62% of total top deal
values. (considering investments whose values
were disclosed). 2018 INVESTOR(S) TYPE VALUES (MILLION) TARGET COMPANY SECTOR
DST Global; Redpoint Eventures Investment R$ 495 Nubank Fintech
Naspers; Innova Capital Investment $ 400 Ifood Marketplace
General Atlantic; Kaszek Ventures; Qualcomm Ventures Investment R$ 250 Quinto Andar Marketplace
Tencent Investment $ 200 Nubank Fintech
Naspers; Innova Capital Investment $ 124 Movile IT
Softbank Investment $ 100 Loggi Mobility
FTV Capital Investment R$ 99 Ebanx Fintech
Temasek Investment R$ 95 Bionexo Health Tech
IFC; TheVentureCity; Ventech Investment R$ 72.6 RecargaPay Fintech
Monashees Capital; Omidyar Network Investment R$ 72 Banco Neon Fintech
GGV Capital; Monashees Capital; Base10 Capital;
Investment $ 63 Yellow Mobility
Glass 5 Global
Source: AVCAP – Public dealsPrivate equity & venture capital in Brazil
To an increasing extent, the Allocated capital in impact investments in Impact investment in LATAM FY16-FY17 (US$ million)
managers of private equity
LATAM FY18 (US$ billion) 140
and venture capital assets in
Latin America are turning to Microfinance Other sectors
130
funds specializing in impact 0.2
investments, with Brazil being 80
one of their main destinations. 65
60
50
0.7 30
18
With PE&VC investors already accounting for 0.5 8 7 5 2 2 1
79% of impact funding in Latin America, many 2.3 0.7 0.3
Europe Latin America United States
are investing jointly with impact fund managers
ua
a
a
ile
s
ay
il
or
a
ru
a
ca
ia
az
ra
al
in
am
bi
liv
Pe
ad
gu
Ch
Ri
ag
m
nt
m
du
Br
Bo
n
u
u
ar
a
te
lo
ge
Pa
on
Ec
Ur
st
in start-ups working with financial inclusion,
Co
a
ic
Ar
Co
Gu
H
N
healthcare, agriculture and education.
Financial products for this niche may vary Net annual return of impact investments in Brazil (%) Made with
from direct stakes in companies to papers,
A study conducted by the LAVCA (Latin America
convertible bonds, credits, structured
25% 25%
Venture Capital Association) and ANDE (Aspen
operations and specialised funds. They
Network of Development Entrepreneurs) indicated
are slowly starting to appear as portfolio
that 33 impact investors from Latin America were
diversification options with attractive growth
19% planning to raise US$ 2 billion in 2018 and 2019,
prospects over the next few years.
with expectations of investing US$ 1.7 billion in
this region. Of this amount, US$ 236 million was
%
13% 13%
earmarked for Brazil (almost twice the amount
invested in 2016 and 2017), with agriculture and
financial inclusion tagged for more funding. Out
6% of the total number of investors interviewed, 63%
expected a net annual payback of 11%.
0-5% 6-10% 11-15% 16-20% 21-25% Over 25%
Source: LAVCA/ANDEYou can also read
