In late September, Chinese internet giant Baidu announced Easterly Ventures, its new $60 million investment fund exclusively for Brazilian startups.
Easterly Ventures says it aims to build a diverse mobile-driven ecosystem in Brazil in the coming years. This is strategy that makes sense. Smartphone penetration in the country is impressive and ranks regularly in the top five countries for smartphone usage. However while the fund has been built for Brazil startups, it’s still looking for young companies with global ambitions.
Yan Di, general manager of Baidu Brasil, said it expects to make its first investments by the end of the year and apply its methods for the Chinese market to Brazil, despite the country’s significant recession.
Baidu’s step further into Brazil shouldn’t come as a huge surprise. The company added a Portuguese language version of its search engine in 2014 to take advantage of burgeoning internet use in the country and this year it launched a local version of its mapping service, just in time for the Rio Olympics.
While Brazil’s economy has floundered in recent year and its political landscape in turmoil, its startups have weathered the storm.
There may have been casualties but investments in Brazilian tech firms haven’t subsided in any significant way. This is especially true of early-stage companies that have started to attract investors both at home and from Silicon Valley. Meanwhile Goldman Sachs invested $11 million in CargoX, a logistics tech company; in 2015 growing fintech company Nubank raised a $30 million round from investors including Sequoia Capital; and in late 2015, fintech start-up GuiaBolso raised R$60 million (US$18 million) in a Series C round.
“A month doesn’t go by where we don’t have a Brazilian company that we’re looking at,” a partner at Sequoia told Bloomberg last year and the trend hasn’t died down.
Startups deliver in LatAm
Food delivery startups have a patchy record regardless of the market but in South America and Mexico, companies have found a groove by raising large funds and consolidating their businesses.
Sao Paolo-based iFood secured $30 million in August for its food delivery service from investors including Just Eat and Movile, who were involved in a $50 million round in the startup last year. Movile now has a majority stake in the company but it’s still an impressive amount of funding for iFood to raise in the space of 12 months or so. The company also acquired California’s SpoonRocket, marking its 15th acquisition.
It shows a high level of confidence from investors in not just food delivery but its potential in Latin America as the segment flounders in other markets. Just Eat also acquired Mexican food delivery startup SinDelantal in early 2015 and Movile’s Rappido also merged with Mexico’s 99Motos.
These larger investments and mergers suggest improving confidence in Brazil’s tech sector and the wider Latin American ecosystem despite economic uncertainties but start-up and VC activity in Brazil isn’t a silver bullet either.
Figures published in October by LAVCA show that venture capital activity in the region grew 46% year over year with 2015 described as a “banner year”. Mexico, Colombia, Argentina, and Chile all made gains in this 12 month period where Brazil, despite experiencing some of these so-called banner investments, is actually down compared to its neighbours in the last year. However, it’s still a very active market.
Mexico is leading the charge for growth for the first time ever. This is largely credited to government agencies and programs like Fondo de Fondos and the National Institute of the Entrepreneur (INADEM) for stimulating the business environment for young entrepreneurs.
The Valley looks to the Amazon
Top Silicon Valley firms are returning to the region and we’ve seen some major VCs take their first dives into Latin America.
Andreesen Horowitz invested an undisclosed sum in Colombia’s Rappi, yet another food delivery startup. In April, American VC firm Accel Partners made its first LatAm investment by participating in a $6.7 million round for Mexico’s Cornershop, a grocery shopping service.
But while food delivery and grocery shopping look like the “it” investment right now, fintech is a hot market too, accounting for 40% of IT investments in LatAm. Along with the aforementioned GuiaBolso, Mexican companies Konfio and Kueski raised $8 million and $10 million respectively this year.
We’ve previously looked at the potential for Agtech in Asia but a similar revolution is afoot in LatAm. It may be a blip on the screen compared to fintech and ecommerce but it’s making strides. BR Startups is a Brazilian investment fund worth $92 million especially for agtech run by Microsoft, Monsanto and Qualcomm Ventures. The latter also invested in a $3 million round in Strider, a Brazilian company using big data for farmers. Meanwhile Basf, the German chemical company, is supporting a Brazilian agtech accelerator called AgroStart
Brazil’s economic and political instability of recent years presents, at least on the surface, a rocky environment in the country and Latin America for investing. This may be true for the traditional industries but the startup economies in countries like Brazil, Colombia, Argentina and Mexico have instead kept their heads down and sought funding locally and internationally in the face of this uncertainty.