Despite the challenging fundraising environment of 2022, we saw more big corporations launching their corporate venture arms in Brazil last year than during the boom years of 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 advantageous for Brazil’s startup ecosystem, as it introduces a stable pool of medium-term dry powder that could reduce volatility.
That said, there aren’t that many CVCs in the Brazilian venture funding market compared to countries like the United States. Peter Seiffert of Valetec Capital, a CVC-focused asset manager in Brazil, estimated that CVCs account for just 5% to 10% of total venture deal volume, but 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, and that is exactly what happened last year.
The early majority is entering the CVC space
The CVC space is expanding in breadth and depth as the range of institutional investing solutions increases and diverse companies enter the fray.
The financial sector has historically been an early adopter of new investing philosophies, so it isn’t very surprising that financial companies have led the charge in the corporate venture space.
Currently, financial companies make up about 20% of CVCs in Brazil, which is more than any other sector. This has resulted in a dynamic where the majority of the successful and mature startups in Brazil are fintechs.
Nonfinancial companies, on the other hand, have tended to fund or partner with third-party accelerators, venture capital firms and incubators without bringing those capabilities in-house. But this dynamic has been changing meaningfully in the past few years thanks to a new wave of CVCs sponsored by companies that have little to do with finance.
The list of companies that announced CVC-related programs in 2022 is impressive and includes the likes of Vivo, a subsidiary of the Spanish telecom company Telefonica; Vale, the largest producer of iron ore and nickel in the world; Anima, one of the largest higher education companies in Brazil, and Suzano, one of the biggest paper and pulp producers in the world.