Welcome to this week’s Brazil tech and innovation round-up. Every week, I pick key developments in the tech and innovation ecosystem of Latin America’s largest economy.
Noteworthy developments this week include new data on venture capital and private equity investments in Brazilian startups. Also, two noteworthy deals this week: e-commerce player Olist with the completion of its Series D round with an investment led by Goldman Sachs, and healthtech Beep Saúde with its Series B investment led by Valor Capital.
Also this week: new data on digital inclusion, the news around instant payments in Brazil and a move towards modernizing the equipment for electronic voting ahead of presidential elections next year.
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The private equity and venture capital industry in Brazil has seen a 87% investment boost in the first quarter of 2021 compared to the same period last year. Venture capital (VC) deals accounted for the lion’s share of investments, with 8.8 billion reais ($1.5 billion) in investments compared to the 1.9 billion reais ($340 million) invested in private equity (PE) deals.
The findings are outlined in a report published this week by the Brazilian Association of Private Equity and Venture Capital (ABVCAP) and KPMG. The study noted that 70 companies in Brazil received venture capital and private equity investments in Q1, of which 63 were backed by VC firms. “The technological disruption and the multiplication of Brazilian world-class entrepreneurs create the conditions for an excellent moment for the VC industry”, said Piero Minardi, president at ABVCAP.
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Investments closed in the first three months of the year where values have been disclosed totaled 10.7 billion reais, up 87% in the comparison with the same period in 2020. The average investment amount in VC deals was 140 million reais ($25 million) and 277 million reais ($49 million) in PE investments. The average ticket per company invested by VCs firms increased 140% in relation to Q1 2020. Divestments over the first three months of the year totaled 7.8 billion reais ($1.4 billion).
Companies targeted by VC and PE investors in Brazil tend to be fintechs, information technology firms, and technology companies active in the segments of insurance, marketing, advertising and healthcare segments. According to KPMG lead partner Roberto Haddad, the Brazilian ecosystem is becoming increasingly attractive to international backers: “The appetite of foreign investors for startups and Brazilian entrepreneurs is impressive, even in the currently challenging environment”, he noted.
E-commerce firm Olist has announced a Series D $80 million round led by Goldman Sachs on Thursday (15). The new investor was joined in the round by Redpoint eventures, a backer since 2015, which has increased its participation. The new investment is the conclusion of Olist’s 310 million reais ($55 million) Series D closing announced in November 2020. The investment was led by existing backer Softbank, with Valor Capital, Velt Partners, FJ Labs, Península Participações, and Kevin Efrusy, who led Facebook’s first venture capital investment, joining as additional investors.
Founded in 2015 by CEO Tiago Dalvi, Olist offers a platform that combines sales functionality with payment checkout tools and integration with logistics operators, in addition to market intelligence features in three languages. In all, it serves more than 200,000 users in more than 180 countries. With the new round, the startup plans to make strategic acquisitions to add to its product portfolio in 2021: last year, the company acquired e-commerce firm Clickspace and Pax Logística. The startup also plans to accelerate its international expansion plans.
Another noteworthy deal announced on Wednesday (14) and led by an international fund in Brazil was the series B round for affordable healthcare provider Beep Saúde. The 110 million reais ($19 million) investment was led by Valor Capital Group and was joined by DNA Capital, Endeavor Catalyst and Bradesco, one of Brazil’s largest banks. Moreover, Colombian billionaire David Velez, founder and global CEO of fintech giant Nubank, also joined the round.
The company founded in 2016 by doctor and firefighter Vander Corteze started out with vaccination services at the user’s home and broadened its scope to provide laboratory tests over recent years. Beep will use the fresh resources towards the expansion of the service portfolio and in the geographic expansion to serve the main metropolitan regions of Brazil.
On Wednesday (14), the Brazilian Institute of Geography and Statistics (IBGE) released findings on Internet access in Brazil. According to the new data, the proportion of connected households has increased from 79.1% in 2018 to 82.7% in 2019. The Institute noted that 40 million Brazilians do not have access to the web. In 2019, 12.6 million households in the country had no Internet access, due to reasons ranging from the lack of interest (32.9%), the service being perceived as expensive (26.2%) or because there were no residents in the household who knew how to use the Internet (25,7%).
Compared with more recent data, the IBGE findings provide an insight into digital inclusion in Brazil. According to a separate study published by the Brazilian Internet Steering Committee (CGI.br) on Internet access in the Covid-19 pandemic released in May 2020, 71% of Brazilian households have access to the Internet, while more than 20 million households remain digitally excluded. More than half (58%) of Brazilians access the network solely through their mobile phones, with that percentage reaching 85% among the poorest segments of the population.
On Tuesday (13), the Central Bank of Brazil has announced new functionalities for the country’s instant payments system, PIX. The new features, to be released this year, will include payee QR Codes, to enable payment for goods and services as well as transfers even when the consumer does not have access to the Internet at the time of the transaction.
According to the Central Bank, the feature is part of efforts to further democratize payments in Brazil, since many Brazilians have limited mobile data packages. Another feature of the system, to be launched in the second half of the year after a public consultation, will involve cash withdrawals through PIX. By offering consumers the ability to get cash back when making a purchase or simple cash withdrawals, the objective is to broaden competition in the Brazilian financial services sector.
PIX was launched in November 2020 as part of a wider innovation program that aims to overhaul the financial system in Brazil.
Brazil is refreshing part of its electronic voting machine estate ahead of the presidential election of 2022. Some 300,000 e-voting machines are expected to be used in the upcoming election, and up to 176,000 new units are set to be acquired through a tender that has taken place on Friday (16). Positivo, Diebold, Intel, Daten and HID Global were among the interested parties. The Brazilian government could spend up to 980 million reais ($175 million) acquiring the new machines.
One of the only countries in the world where the voting process is entirely electronic, Brazil introduced e-voting in 1996 to ensure secrecy and accuracy of the election process. The machines enable results to be processed within a matter of minutes after the closing of ballots. However, the Direct Recording Electronic model in use in Brazil does not produce a physical proof votes have been recorded, increasing the risk for large-scale software fraud and other types of tampering. Last year, Brazil started online voting trials as part of investigations around the feasibility of phasing out voting machines.