Despite the challenge fundraising environment of 2022, we saw more big companies launch their corporate venture weapons in Brazil last year than during the boom years 2020 and 2021.
While the short-term impact of where we are in the market cycle has caused many founders to go into “survival mode,” these CVCs should be structurally beneficial to Brazil’s startup ecosystem as it provides a stable medium-term pool of dry powder term which can reduce volatility.
That said, there are not as many CVCs in the Brazilian venture capital market compared to countries like the United States. Peter Seiffert of Valetec Capital, a CVC-focused asset manager in Brazil, estimated that CVCs only 5% to 10% of the total volume of venture dealsbut said he expects these numbers to eventually grow to 25% to 30%.
Larger companies need to set up venture arms and embrace this style of investing, which is exactly what happened last year.
The early majority are entering the CVC space
The CVC space is expanding in both breadth and depth as the range of institutional investment solutions expands and diverse companies enter the fray.
The financial industry has traditionally been an early adopter of new investment philosophies, so it’s not very surprising that financial companies are at the forefront of the corporate venture space.
Currently financial companies make up about 20% of CVCs in Brazil, which is more than in any other sector. This has resulted in a dynamic where the majority of successful and mature startups in Brazil are fintechs.
Non-financial firms, on the other hand, tend to fund or partner external accelerators, venture capital firms, and incubators without bringing these capabilities internally. But this dynamic has been changing significantly in recent years thanks to a new wave of CVCs sponsored by companies that have little to do with finance.
The list of companies that have announced CVC related programs in 2022 is impressive and includes vivoa subsidiary of the Spanish telecom company Telefonica; Valleythe largest producer of iron ore and nickel in the world; Animationone of the largest higher education institutions in Brazil, and Suzanoone of the largest paper and pulp producers in the world.
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