Corporate Venture Capital Investors Set Their Sights on Brazil

Latin American startups have been drawing the attention of venture capital investors for the past few years, particularly Brazilian based startups. In fact, data from Statista indicates that Brazil accounts for the most VC funding in Latin America, bringing in half of all the VC deals in the region. And now, among investors in Brazil, an interesting trend has emerged – the growing amount of corporate venture capital investment (CVC) going into the country.

According to a recent article in Global Corporate Venturing, corporate investors now account for the majority of investment in startups in Brazil. Their data shows that CVC-backed rounds have represented 59% of the total investment volume in Brazil so far in 2023. This is despite corporations participating in far fewer deals and is the first time since 2018 that corporate-backed deals represented a larger portion than deals in which no corporations participated.

Global Corporate Venturing points out that corporate deals in the area have lagged behind non-corporate venture funding until now. This uptick could be because corporate venture investors have been able to weather the global economic downturn better than other investors.

Corporations choose to invest in startups for several reasons, such as the ability to reach new markets, customers, and  expand their services or product offerings without having to take on the innovation efforts on their own. Brazilian startups check many of these boxes for corporate investors as they bring significant innovation to an underserved area, with millions of consumers eager to take advantage of the incredible technological advances from Brazilian startups.

For instance, fintech has been one area that has been particularly attractive to CVCs in Brazil.

CVC investment interest in fintech is largely due to the fact that fintech startups in Brazil and Latin America are addressing a market that has been underserved and needs the services fintech startups are providing. Fintech investment trends are something we have discussed in previous posts.

As CVC investment becomes more of a focus in Brazil, there are some key considerations for startups when looking at securing corporate investment vs. traditional investment from a venture capital firm.

First, when a corporation invests in a startup, its motivations, timeline, and goals might look very different. A venture capital firm is often looking for early-stage startups and disruptive technologies that will become the target of an acquisition or will be prime for an IPO as possible exit strategies. Corporate investors, on the other hand, typically have a longer-term plan, looking for partnerships that align with their business strategies and objectives. They are more motivated to invest in companies that will allow them to grow and achieve their strategic goals.

Startup founders need to consider their options carefully and determine whether corporate investors are the right fit for their company. This depends on the ultimate goals of the founders and whether they are looking for more of a partnership that could open doors to a much larger market for them or if they are looking for M&A opportunities or an IPO as their end goal. Advisors can play a crucial role in helping startups navigate these decisions and determine what is the best fit.