Venture capital activity in Q1 slows and private equity accelerates in Brazil

Private investments in companies totaled 11.6 billion Brazilian reais ($2.5 billion) in Brazil in the first quarter of 2022. The volume is 8.4% above the 10.7 billion Brazilian reais ($2.3 billion) invested in the same period last year. The data has been published in a new survey by the Brazilian Association of Private Equity and Venture Capital (Abvcap) and KPMG.

The growth seen in the first quarter is attributed to the private equity segment, which in the first 3 months of the year generated 5.2 billion Brazilian reais ($1.1 billion), in deals, up 173% on the same period in 2021. On the other hand, the venture capital sector shrank by 27%, totaling 6.4 billion Brazilian reais ($1.3 billion) in Q1.

The stagnation of the venture capital segment in Brazil had already been noticed at the start of the month, when innovation hub Distrito reported $2 billion in investments had been made in the first quarter. The volume represents an increase of only 4%, alongside a drop in the number of transactions – between January and March, there were 167 deals, 33 less than in the same period of the previous year.

A global slowdown for venture capital

The global scenario is not that different. The most recent survey published by Crunchbase showed a global decline in venture funding in the first quarter of 2022. According to the data from the report, investments reached $160 billion in the first three months of the year, a 13% drop compared to the $184 billion accounted for in last quartile of 2021.

According to Roberto Haddad, private equity and venture capital partner at KPMG Brazil, investments made by private equity funds have returned to relevant levels. Regarding venture capital, the executive stated that, although “at a lower value than that recorded in the same period in 2021, [the figures] remain high”. “Both [investment types] are solidified as drivers of investments and acquisitions in the Brazilian market”, the executive pointed out in a statement.

Unsurprisingly, the fintech segment leads in terms of investments, according to KPMG. Alongside insurtechs, financial services startups received 25% of investments from venture capital funds in the first quarter of the year. Healthtechs represented 13% of the deals, followed by retailtechs, with 10%.

“The volume of deals closed is encouraging, as is the growing interest of international investors”, considers the president at Abvcap, Piero Minardi. “Even though we have many issues that bring uncertainty, such as the war, elections, inflation, tense local and international politics, the movement for investments in the domestic market is intense and confirms the dynamism and resilience of the Brazilian entrepreneurial ecosystem”, he concludes.

(translation by Angelica Mari)