Brazilian startups kick off 2022 with mergers and acquisitions record

The Brazilian startup ecosystem has ended the first month of 2022 with the highest number of mergers and acquisitions (M&A) on record, according to research from innovation platform Distrito.

Throughout January, 20 mergers and acquisitions took place, the Inside Venture Capital report noted. Noteworthy deals include the takeover of social listening firm Stilingue by business messaging startup Take Blip and the acquisition of legal software startup Projuris by software firm Softplan. In addition, the month has also seen the purchase of artificial intelligence startup Inovamind by Brazilian ERP software giant Totvs.

“The digital transformation within companies continues to occur, and it is an infinite process of renewal that increasingly needs technological and robust solutions to sustain the growth of the Brazilian market,” said Gustavo Gierun, chief executive at Distrito. “The number of M&As is an indication that this movement will continue for the rest of the year and that the ecosystem will possibly reach new records.”

Mega rounds ahead

Moreover, Distrito’s Gierun noted last month’s sector performance demonstrates the venture capital investments in Brazil are still significant despite the macroeconomic uncertainty, high inflation, and interest rate hikes. Brazilian startups attracted $591 million in investments in January across 48 rounds, of which 32 were early-stage businesses while late-stage startups accounted for the remainder.

Regarding how the capital raised in January was split across segments, fintech remains a favorite for VCs, attracting $319.2 million in investments. At $260 million, the latest funding round raised by Creditas represented the most significant chunk of that total. After fintech, the most sought-after segments were proptech, which has raised $33.7 million in funding, followed by sportstech ($32.6 million), retail tech ($22.4 million), and healthtech ($10.9 million).

READ MORE: Fintech Creditas secures $260M round, valuation reaches $4.8B

Last month, the total amount invested is 27% lower than in January 2021, when digital bank giant Nubank raised $400 million in a Series G round before its public offering. However, Gierun noted this does not mean the market is slowing down, since investment volume in February, April, July, and September 2021 was lower than the numbers seen last month.

In fact, the Distrito report predicts a significant number of mega-rounds in 2022, as well as a continued increase in the number of early-stage investments, as the number of investors targeting Latin America increases.

Specific areas gathering momentum in Brazil featured in the research included software as a service (SaaS). Firms with cloud-based solutions as their primary business offering attracted $3.8 billion in 2021, accounting for 48% of the total investments made in Brazilian startups last year.

“Robust SaaS solutions that demonstrate solid scalability indicators certainly stand out within the innovation ecosystem,” Gierun says, predicting the level of interest in software-as-a-service firms will be maintained, with performance becoming increasingly significant.