2

The Brazilian Private Equity and Venture Capital Association is a non-prof-it organization that promotes the development of Private Equity, Venture Capital and Seed Capital in Brazil, by improving industry conditions and understanding and also fomenting best practices that are aligned with international industry standards.

The Brazilian Trade and Investment Promotion Agency promotes Brazilian products and services abroad and attracts foreign investments to strate-gic sectors of the brazilian economy. ApexBrasil coordinates the actions related to foreign direct investment (FDI) attraction into Brazil, seeking to allocate resources in sectors of strategic relevance for the development of the competitiveness of Brazilian companies and of the country itself.

The Private Equity & Venture Capital InBrazil program operates as a joint initiative between ABVCAP and ApexBrasil with the goal of informing and connecting international investors with brazilian fund managers and portfolio companies. The main goal of the program is to inform and empower the global investor community in respect to the Brazilian PEVC ecosystem and its many opportunities.

Derraik & Menezes Advogados is one of the pioneers in the Venture Capital area in Brazil. Members of our team were actively involved in the first wave of VC investments in Brazil in late 90s and remain fully active nowadays. We represent private equities, institutional and corporate venture capitalists, from Brazil and abroad, helping our clients with their investments. We have handled numerous major transactions including some of the largest and most sophisticated companies restructurings, M&As, fund formations and foreign investments in Brazil.

3

AN OVERVIEWThe purpose of this publication is to provide an overview of the venture capital industry in Brazil through the analysis of industry data, recent investments made and opinions and insights of industry stakeholders.

The perspectives are positive. The year has started with the Real valued and stable and the local stock exchange index, after a long period of stagnation, has exceeded the thresh-old of 60,000 points. New sectors begin to appear on the radar of VC managers. Transactions carried out between 2016 and 2017 highlight the increased interest of VCs for fintechs, a segment driven by the revolution of the internet and social media in Brazil that combines financial and tech-nology services to solve a great demand in the country.

4

The following figures are part of the Data Consolidation of the Brazilian Industry of Private Equity and Venture Capital, prepared by ABVCAP together with KPMG. The material provides industry data from 110 general partners of domestic and foreign funds of various sizes. It is important to note that data from 2016 has not been included in this publication because it will only be published in June 2017 at ABVCAP´s Annual Conference. We recommend readers to check our site abvcap.com.br periodically for updates.

In 2015 investments made in private equity and venture capital in Brazil totaled R$ 18.5 billion, a 39% increase from the previous year. Of this total only 6% represents the amount invested in venture capital, however, the seg-ment accounts for the majority or 60% of the number of companies invested in 2015.

TOTAL INVESTMENTS (R$ BILLION)PRIVATE EQUITY AND VENTURE CAPITAL IN BRAZIL

NUMBERS

5

Considering the capital available for investment and expenditures in venture capital of more than R$ 1.7 billion, and the average ticket of investments of R$ 12 million, it is expected that at least 149 companies will be invested in the next years.

COMMITED CAPITAL X CAPITAL AVAILABLE BY INVESTMENT TYPE2015

INVESTMENTS MADE2015

Furthermore, the amount of venture capital transactions was greater than the number of deals in private equity. In total, the volume invested in VC in 2015 was R$ 1.1 billion.

VENTURE CAPITAL (R$ BILLION)PRIVATE EQUITY (R$ BILLION)

Available for investments and expenditures Committed capital

63 PE 96 VC

NUMBER OF COMPANIES

R$ 277 PE R$ 12 VC

AVERAGE AMOUNT (R$ MILLION)

6

Health, pharmacy and education sectors were the highlights of 2015, accounting for about 50% of investments reported in the year in the ABVCAP and KPMG consolidated data.

PERCENTAGE OF THE VALUE OF INVESTMENTS BY SECTOR

AGRIBUSINESS

ENERGY

TELECOMMUNICATIONS

HEALTH AND PHARMACY

RETAIL

OTHERS

CLEAN TECH / ENERGY

LOGISTICS AND TRANSPORT OIL AND GAS

2014

2014

2014

2014

2014

2014

2014

2014 2014

2015

2015

2015

2015

2015

2015

2015

2015 2015

3

6

4

22

5

22

0

7 3

6

8

2

9

7

16

MINING20142015 3

2FINANCIAL SERVICES20142015 12

7

REAL ESTATE AND CIVIL CONSTRUCTION 20142015 5

0

INFORMATION TECHNOLOGY20142015 41

133

INDUSTRIAL PRODUCTS AND SERVICES20142015 6

11

4 7

FOOD AND BEVERAGE EDUCATION2014 20142015 20157 13

3 3

REPORTED NUMBER OF INVESTEE COMPANIES

AGRIBUSINESS

ENERGY

OIL AND GAS

REAL ESTATE AND CIVIL CONSTRUCTION

OTHERS

RETAIL

INFRASTRUCTURE TRANSPORT AND LOGISTICS

2014

2014

2014

2014

2014

2014

2014 2014

2015

2015

2015

2015

2015

2015

2015 2015

0%

11%

10%

2%

5%

11%

0% 4%

3%

4%

29%

0%

8%

INFORMATION TECHNOLOGY20142015 3%

12%

3%INDUSTRIAL PRODUCTS AND SERVICES20142015 2%

2%

HEALTH AND PHARMACY20142015 38%

16%

0% 21%

FOOD AND BEVERAGE EDUCATION2014 20142015 20152% 12%

1% 1%

7

We observed that other Latin American countries have increased their fundraising since 2010 and Brazil still accounts for more than 50% of investments in venture capital in the region. In addition, the country is the main destination for foreign investment in Latin America and the eighth destination in the world.

2011

2012

2013

2014

2015

LATAM FUNDRAISING BY GEOGRAPHIC FOCUS

VENTURE CAPITAL DEALS IN LATAM BY COUNTRY

Source: LAVCA 2016

LATAMNUMBERS

64% Brazil

7% Argentina

3% Colombia

9% Other4% Chile

13% México

3% Argentina

51% Brazil

13% Chile

13% Other15% México

5% Colombia

81%

54%

42%

53%

43% 39% 13% 5%

43% 2%2%

9%

27%

9%

5%

15%

21%

5%

4%

26%

8

Mexico$30.3 bn+18.0%

Colombia$12.1 bn-25.8%

Brazil$64.6 bn-11.5%

Argentina$11.7 bn+130.1%

Chile$11.7 bn-5.0%

Flows by range

Above $10 bn

$5.0 to $9.9 bn

$1 to $4.9 bn

$0.1 to $0.9 bn

Below to $0.1 bn

2015 inflows$167.6 bn

2015 in world9.5%

Top 5 hosts economies

FOREIGN DIRECT INVESTMENT (FDI) FLOWS IN LATIN AMERICA

Source: UNCTAD - World Investment Report 2016

9

FDI FLOWS IN 2015

DESTINATION FOR FOREIGN INVESTMENT IN THE WORLD

8TH

United States

Hong Kong, China

China

Ireland

Netherlands

Switzerland

Singapore

Brazil

Canada

India

Other

Total

Country US$ billion

$380

$175

$136

$101

$73

$69

$65

$65

$49

$44

$607

$1,762

22%

10%

8%

6%

4%

4%

4%

4%

3%

3%

34%

Source: UNCTAD Stat, IBGE

10

SAM

PLE

OF

RECE

NT V

ENTU

RE C

APITA

L TRA

NSAC

TIO

NS IN

BRA

ZIL 2

016

/ 201

7 YEAR FUND MANAGER (S) INVESTMENT AMOUNT TARGET COMPANY SECTOR

2016 Founders Fund, Kaszek Ventures, Sequoia Capital, Tiger Global Management

R$ 200,000,000 Nubank Fintech

2016 IFC; Kaszek Ventures; Ribbit Capital; QED Investors

R$ 60,000,000 GuiaBolso Fintech

2016 SP Ventures Undisclosed Agrosmart Agrotech

2016 CRP Participações R$ 5,000,000 uMov.me Mobility

2016 Red Point E.ventures Undisclosed Olist E-commerce

2016 Verus Group Undisclosed Omie Business Inteligence

2016 Ribbit Capital R$ 100,000,000 Ideal Invest Fintech

2016 Invest Tech Undisclosed Ahgora Sistemas IT

2016 CRP Participações R$ 4,000,000 Exact Sales Business Inteligence

2016 Bozano Investimentos Undisclosed Grupo NRE Educacional Education

2016 Bozano Investimentos Undisclosed Medcel Education

2016 Monashees Capital R$ 10,000,000 DogHero Services

2016 SP Ventures R$ 2,000,000 Biotechnology Pesquisa e Inovação

Biotechnology

2016 CRP Participações R$ 3,000,000 SumOne Food & Beverage

2016 Arpex Capital; Finvest R$ 3,000,000 Vitta Health

2016 Inseed Investimentos R$ 3,000,000 OXI Ambiental Cleantech

2016 CRP Participações R$ 4,000,000 Hiper Services

2016 E.bricks Early Stage; Kaszek Ventures

Undisclosed Contabilizei Fintech

2016 TPG; Red Point E.ventures; DGF Investimentos

R$ 62,000,000 Resultados Digitais Communication/Media

2017 Riverwood Capital Undisclosed 99 Urban Mobility

2017 Kick Ventures Undisclosed Unimove Education

2017 Monashees R$ 1,000,000 Cambly Education

2017 Tencent; Sequoia Capital; Thrive Capital; Capital G

Undisclosed Practo Health

2017 CRP Participações 2,500,000 Asaas Fintech

2017 Red Point E.ventures Undisclosed Pismo Fintech

2017 Algar Ventures Undisclosed NetSupport Services

2017 Kaszek Ventures; Riverwood Capital

Undisclosed Netshoes RetailPubl

ic d

eals

11

We have seen technology change our consumption in key sectors such as transportation, leisure, tourism and food, among others. It is no different with the financial system, especially in Brazil where 40% of the population does not have a bank account and at least 8.5 billion of low income Brazilians would like to open a business but has no access to credit. (1)

The global financial crisis in 2008, the revolution of the internet and social media, the increasing access to smart-phones, created a very conducive environment for the development of fintechs in Brazil and online consumption as a whole.

Previous pioneer companies in online services in Brazil, such as Netshoes, Buscapé and Hotel Urbano, helped to open the way for fintech to become an attractive option by providing lower operating costs, more efficient services and easy access to credit by small and medium enterprises.

Important regulatory frameworks, such as eliminating the exclusivity of CIELO and Redecard to operate VISA and Mastercard brands in 2010 and the resolution of the Brazilian Central Bank on opening current accounts, have a direct impact on the significant growth presented by the sector. According to FintechLaB data, in 2016 244 fintech companies were mapped, a figure 4.5 times higher than the previous year, when 54 companies were recorded ope-rating in this sector. (2)

SECTOR SPOTLIGHT: FINTECH

(1) BACEN 2015, Febraban 2015, Data popular 2015

(2) In 2016, a Central Bank ordinance allowed the opening of current and savings accounts online

12

FINTECH COMPANIES BY SEGMENTBASED ON 244 BRAZILIAN COMPANIES IDENTIFIED IN 2016

Companies in the payment segment are the most significant: they represent 32% of total fintechs, an increase of 22% of the segment over the previous year. The loans segment consolidated and increased opportunities, especially among small and medium-sized companies with a credit gap. They add up to 33, representing 18% of the fintech market.

80% HAVE PAYING CUSTOMERS;10% HAVE MORE THAN 50 EMPLOYEES;7% HAVE MORE THAN 100 EMPLOYEES;72% HAVE RECEIVED INVESTMENTS, 14% OUT OF THESE ABOVE R$ 20 MILLION.

Venture capitalists have had a very significant presence in the volume of these invest-ments. In addition to funding the operations of the companies, they have also helped to professionalize and organize the investee companies, especially because many of them are very young. The industry is still very fragmented and, therefore, offers many opportunities for consolidation.

32% Payments

18% Financial Management13% Lending

8% Investments

7% Funding

6% Insurance

5% Debts negotiation

5% Cryptocurrencies and DLT

4% Currency and multiservices

2% Financial efficiency (Bigdata / API / Anti fraud system)

Source: Report FintechLab 2017

13

YEAR FUND MANAGER (S) INVESTMENT AMOUNT

TARGET COMPANY

2016 Founders Fund, Kaszek Ventures, Sequoia Capital, Tiger Global

Management

R$ 200,000,000 Nubank

2016 IFC; Kaszek Ventures; Ribbit Capital; QED Investors

R$ 60,000,000 GuiaBolso

2016 Ribbit Capital R$ 100,000,000 Ideal Invest

2016 E.bricks Early Stage; Kaszek Ventures Undisclosed Contabilizei

2017 CRP Participações R$ 2,500,000 Asaas

2017 Red Point E.ventures Undisclosed Pismo

RECENT FINTECH TRANSACTIONS IN BRAZIL2016 / 2017

Currently many local and foreign VCs are part of this ecosystem, investing in lead-ing companies. The total investment has exceeded R$ 1 billion in recent years, ac-cording to the Report FintechLab 2017. Highlight for GuiaBolso, which already received investments from Kaszek Ven-tures, Ribbit Capital, QED and IFC (finan-cial arm of the World Bank) and Nubank, invested by funds as the Founders Fund, Sequoia Capital and Tiger Global. (3)

Public deals

(3) Largest VC investment made in 2016 in Brazil according to the FIPData, a database platform of ABVCAP and ANBIMA

14

Against all odds, the economic crisis has encouraged the recent growth of the venture capital industry in Brazil. Key factors have been relevant to this pro-gress: (i) the increase of more innovative local startups; (ii) the devaluation of the Brazilian currency has attracted foreign investments into local startups; and (iii) the fact that many executives are leaving their senior positions in large corpora-tions to explore new opportunities. In addition, three other relatively recent initiatives (which will be the focus of this article) have been playing a relevant role in the development of the Brazilian venture capital industry:

(I) the enactment by the CVM – Comis-são de Valores Mobiliários (the Bra-zilian equivalent to the SEC) of CVM Regulation 578, dated as of August 30, 2016, which has contributed to foster the venture capital and private equity industries; (II) the rise of venture capital hubs around Brazil; and (III) increased participation of large corporations in the venture capital industry through corpora-te venture initiatives.

The CVM Regulation 578, has brought flexibility to the Brazilian based funds (Fundos de Investimentos em Participa-

REGULATORY UPDATEVENTURE CAPITAL IN BRAZILTHE PATH AHEAD BEYOND THE CRISIS

ções - “FIPs”) and substantially expanded their investment alternatives by (a) lifting then existing restrictions for venture ca-pital and private equity investment funds to invest in foreign assets and in different types of Brazilian investment vehicles, and also (b) giving regulatory benefits for early stage investors (i.e., it is no longer mandatory for the investor to be seated on portfolio’s board of directors, early stage companies don’t need to be audited, among others).

In addition, angel investment was finally regulated by the Brazilian legislator through the Supplementary Law 155, of October 27, 2016. This is a victory of the Brazilian investment industry, as it was so-mething that had been expected for long time, not only by investors/entrepreneurs, but also by the local market as a whole.

Hi-tech emerging companies are major attractions for angel and venture capi-tal investments that bet on the benefits carried out by these innovations. Those innovations are part of the activities of successful companies nowadays called "unicorns"– emerging companies with market value equivalent to $ 1 billion prior to an initial public offering (IPO). We do not have a Brazilian born unicorn

RODRIGO MENEZES / FOUNDER & PARTNER / DERRAIK & MENEZES ADVOGADOS

15

(yet), but we have a handful of startups with a clear potential to become one soon. Some are very close…

Also, although São Paulo remains as the heart of the hi-tech investment industry in Brazil, different tech hubs are growing in fast pace, spreading innovation around Brazil, such as in Rio de Janeiro, Florianópolis, Recife, Belo Horizonte, Piracicaba and São José dos Campos. As new virtuous clusters of innovation are under development, Brazilian and fo-reign investments continue to be spread out through a number of target compa-nies, so that today we have approxima-tely $2.0 billion invested or allocated for investments by the venture capital indus-try in Brazil. Within this context, a hungry industry is emerging, which includes the growth of local strong investment thesis, such as impact investment, fintech, edte-ch, agtech, software and healthcare.

Last but not least, large Brazilian and foreign corporations are surfing/entering into the venture capital/startup world, as venture capital provides a useful tool for them to stand out in their respective markets, as through partnership with startups, they may identify and gain access to new markets and develop

disruptive and competitive advantages for their business operations. As a result, many of them are seeking beyond their four walls through corporate venture initiatives, with the aim of optimizing their innovation processes, in order to modernize their production/services and reduce costs. For reference, there are about 1,000 corporate venture arms globally, and Brazilian corporations and banks, as well as multinational compa-nies located in the country, are currently exploring such practice in Brazil. Moreo-ver, following the Silicon Valley patterns, local corporations and venture capital general partners are also establishing partnerships, forming new funds with the aim of investing in innovation.

Hence, although there is still a lot to develop the Brazilian venture capital ecosystem, it is possible to conclude that the investment industry has a massive growth potential in Brazil, due to these new regulations and the rise of new startups, which are appealing attractions for venture capitalists, corporate venture and angel investments. The Brazilian eco-nomic crisis, that is slowly overcoming its challenges, has surprisingly proved to be an important factor for boosting invest-ments in this industry.

16

Tells us about the Capital Tech VC fund. What types of investment are they seek-ing and what is the average ticket?

Capital Tech VC is a fund currently in fund-raising dedicated to early-stage invest-ments. It replicates the strategy of our fund I of investing in companies with revenues of up to R$ 16 million per year, but that necessarily have customers, revenues, staff and general partners with a good ability to retain and develop business.

We begin investing at about R$ 1.5 million per company and can arrive at, in successive rounds, up to R$ 8 million. Our focus is on the technology, media & telecom sectors, dedicated to B2B or B2B2C market, preferably through minori-ty interests. In it, we evaluate companies that operate in several segments, and we are seeing interesting growth rates in the health, agribusiness, infrastructure, ed-ucation, finance sectors and some other segments. I think these are resilient sec-tors and showed excellent breakthrough opportunities in the way business-to-busi-

MAURICIO LIMA / CO-FOUNDER & CEO / INVEST TECH

ness is conducted or that need urgent changes in the control, organization and performance capacity.

How is the interaction between investee companies? Is there technology sharing between the investees, even working in different sectors?

Each company develops its own techno-logical base. We promote and encourage operational synergy between them. When we set up a portfolio, we seek to identify potential synergies. Today, in the port-folio of fund II, we have companies like Americanet and Aker working together to offer Americanet customers the unique solutions based on Aker technology. And with great success!

Most of the companies in the portfolio only operate in Brazil. What are the pros-pects for internationalization and what would be the most interesting markets?

Today some of the companies already do international business. Aker has customers

Invest Tech is a venture capital and private equity fund manager that focus on compa-nies in the IT and telecommunications segments and has an AUM of R$ 240 million.

GPPROFILE

17

in the US, Europe and Middle East. Navi-ta, in turn, has customers worldwide. We encourage the international expansion, pro-vided it is based on a clear strategy of serv-ing local customers with global demands or through partnerships. We also consider strategic acquisitions, but depending on the market, it may be very expensive.

Are you interested in co-investing with other general partners?

We love co-investments. We now co-in-vest with Intel Capital, Axxon and Oria Capital, but we would love to increase this scope. Our perception is that it generates a lot of value in the investee companies when there is alignment (which is natural, but sometimes there may be a different timing) and clear allocation of responsibil-ities between the teams.

When was the Invest Tech team formed and what do you seek in professionals to form the team?

Invest Tech was set up in 2004 as an advisory. We did not invest in companies for which we provide advisory, but our approach has always been to follow the companies, pursue operational improve-ments and then a strategic transaction. Our team was formed and trained to max-imize returns to stakeholders and, later, to investors in the fund.

We seek committed people, who like challenges and are capable of processing

several challenges. The demands change and we try to structure our group in the same direction, striving to complement knowledge, culture and experience. The entry of new members was the result of a vision we had in 2014: the market needed to change and we needed to grow.

In regards to new partners, at the end, we were pleasantly surprised to negotiate with a first rate Spanish group, with a lot of experience in the industries in which we invest and with a group willing to help in implementing the vision we had. It has been a great experience and now we can even attract new members through this same model.

In your opinion, what are the main oppor-tunities for the venture capital industry in Brazil in the coming years? 

We have no doubt internally that oppor-tunities to invest in the local market are numerous, but we doubt whether the funding will come from Brazil or other countries. Our investors lack long-term vision.

The winners will be those with focus and financial ability to attract and retain teams. Unfortunately, the cycles are very long, and it is very difficult to keep everyone aligned and dedicated to long-term growth. We have to beware of adventur-ers who end up tarnishing the industry with short-term strategies and little long-term commitment.

18

How did the idea of operating in the financial services sector arise?

Five years ago, my partner Thiago and I realized that the financial sector, although very profitable, did not offer good services to the user. Both of us had previously worked at McKinsey & Company as consul-tants for banks and insurers and we knew the market well. There were no fintechs operating in Brazil yet and banks were just beginning to develop mobile solutions.

We identified that the main problem fac-ing users was controlling their personal finances, just as there was a consumption boom. At that time, I worked at Grou-pon and followed this growing trend of greater access to mobile services by the population in general.

We began offering automated financial control services, which at the time was un-

BENJAMIN GLEASON / CO FOUNDER & CEO / GUIABOLSO

GuiaBolso is an application that provides financial organization and control ser-vices and connects users to the best credit offers. In July 2014, it was released in Apple Store and then Google Play. Currently it is the most downloaded free financial application in Brazil. It received investment from funds such as Kaszek Ventures and Ribbit Capital, and from the investment arm of the World Bank, IFC.

heard of: see your personal finances in an organized and categorized form, always up-to-date and with no need for manual input. Thus, we were able to understand that the main user demand was for loans with lower fees, and we began to devel-op this service to connect the user to the credit supply.

Industry data show that 80% of fintech companies already have revenue. Why did you decide to start offering an entire-ly free service?

Social impact is very important. Our goal has been to provide a better service to the user. As the idea is to help people organize their finances, it did not make sense to charge for it. However, this was only possible because we had access to good investors with long-term vision, which share with us the belief that, by providing an excellent service to our

COMPANYPROFILE

19

users and partner banks, we will arrive at a sustainable financial model.

Given this strategy, please tell us about the contributions received last year by the company. How do you plan to use these funds?

In 2013, we made the first round of seed funding and, at the time, we were not well received. We were focused on domestic investors, thinking that foreigners would have a hard time understanding the Bra-zilian market. We received contributions from Bricks and Valor Capital.

In the second round of fundraising, in 2014, we received a contribution from Kaszek Ventures, the largest VC fund op-erating in Latin America, whose founders had been very successful previously with the IPO of Mercado Livre, and thus were well aligned with the long-term strategy we were proposing.

In the third round, Ribbit Capital, a fund with a very active role in Silicon Valley and in fintech companies, QED Investors (from the co-founder of Capital One), Omidvar Network (social impact fund belonging to the founder of eBay), and Kaszek Ven-tures made their investments. Last year we received another round led by Ribbit Capital with IFC participation, and accom-panied by other investors.

Although currently we count with 3.3 billion users, we still have plenty of room to grow and that is the focus right now. However, we are always attentive to fund-ing opportunities from good investors, but without haste.

Some investors are large VC funds. In addition to financial resources, how does the participation of these partners adds value to the company's activities?

We managed to put together a very com-plementary team of investors, each with a specific focus. Kaszek Ventures is critical to help us think about digital marketing and products in Latin America. Ribbit, which has expertise in fintech, brings a vision of what worked in other markets, such as China and the US, for example, and we think about how to adapt this to the Brazilian market. QED, former leaders of Capital One, helps us structure the credit product. IFC, in turn, acts in the institutional part.

Fintech companies have helped to change the structure of the financial system. How is your relationship with the major retail banks?

We have had a long and healthy rela-tionship with these players and always leave the door open to partnerships. We are open to anyone interested in offer-ing good credit services. We are already experiencing the first partnerships, especially with medium-sized banks. We see ourselves supporting banks and not exactly competing with them.

Are you interested in merging with other industry players or acquiring any of them? What growth opportunities through M&A do you see in the Brazilian market?

Our growth trend is organic. The market has few established startup companies, such as Nubank and Creditas; in addition,

20

we believe in providing the best options for consumers, and it is generally easier to develop and provide this with partners, taking advantage of the strengths of each one, instead of through acquisitions.. We prefer to grow in an organic and indepen-dent manner right now, and in line with the strategy to generate long-term value.

The growth of fintech companies in Brazil took place very quickly. How do you as-sess the challenges and opportunities for the coming years in the industry, consid-ering such a fast increase and significant number of players?

Naturally, there is much room for growth. Brazil is the country with the highest inter-

est rates in the world. There is plenty of room for companies interested in creating good services. Not every company has access to funding because there is a gap between the development stage of the companies and investors’ appetite. There is still room for companies in the mobile channel. Consumers are not satisfied with traditional financial services and prod-ucts, and are beginning to look beyond their bank. There is a major challenge to provide increasingly better products and services, so companies that are more responsive to user needs tend to be more successful. In addition, this trend is going to favor the consumer, which in turn will have better services, with a better cost-benefit ratio.

21

How do you see the business environment in Brazil for Corporate Venture and how do you believe the participation of these play-ers affects the venture capital industry?

We are excited about the development of the Corporate Venture and venture capital industry. This ecosystem in Brazil is increasingly mature with a healthy balan-ce of supply of investment opportunities and capital, as well as a large number of service providers (lawyers, accounting consultancy offices etc.) who understand how the market works. We see the "capi-tal continuum" increasingly developed, with a greater number of angel investors, funds focused on seed capital, Corporate Ventures focused on A Series opportuni-ties. There are still gaps in the first stage and capital growth (Series C on), but it is being solved in time. We are seeing an increasing number of companies interes-

THE VIEW FROM A GLOBAL CORPORATE VENTURE

CARLOS KOKRON / VICE PRESIDENT & MANAGING DIRECTOR / QUALCOMM VENTURES

ted in Corporate Venturing and see it with good eyes. The Corporate Ventures now account for 20% of funding globally. The entry of these players in Brazil will bring a stronger capital base for our startups. In addition, its performance will promote greater collaboration between startups and large companies and encourage more innovation in companies.

What are the main opportunities and/or obstacles encountered by Corporate Venture players wishing to position themselves in Brazil?

Corporate Venturing is a long-term activity that requires total commitment of senior managers, and understanding of its operation, including the associated challenges. A possible form of action for those wanting to learn is to approach accelerators, and promote and support a

Qualcomm Ventures is the strategic investment and venture capital arm of Qual-comm. The operation began in 2000 in the US and arrived in Brazil in 2013. Since the arrival of Qualcomm Ventures in Latin America, they have already invested in 14 companies, 1 accelerator and 1 fund. In Brazil, the highlights are QuintoAndar, 100% online platform for residential real estate rental; 99, the urban mobility pla-tform; and Strider, pest monitoring technology in farming.

22

thematic group related to their company. Companies can also invest in funds ma-naged by professional general partners, so that they can develop a better un-derstanding of how to act, from pipeline development to promoting an exit event. If they wish to create their own fund, we recommend them to find general part-ners managers with extensive experience in the activity. It is important to note that corporate investors should avoid sear-ching for special rights, such as ROFR (right of first refusal), as it always scares co-investors and makes it very difficult to raise new funding for the company and an exit for entrepreneurs and investors.

Does being an investment arm of a tech-nology/mobility company influence the creation of investment theses? 

Certainly. We focus our time on opportuni-ties that will bring a positive impact for our industry if they work out (we understand that risk is inherent in our activity and that many opportunities will not develop as ex-pected). Time is our most scarce resource. In addition to analyzing new opportunities, we invest significant time helping compa-nies we invest in growth. Thus, we focus on companies where we can add value in addition to capital. There are excellent in-vestment opportunities that are not strongly aligned with our strategic objectives and, unfortunately, we cannot support them.

How is the interaction between investee companies? Is there technology sharing between Brazilian and foreign companies?

As a player in the mobile world and all things connected, we have strong re-

lationships with device manufacturers, network operators, content providers and we have to help our portfolio companies in several ways. It is not uncommon that we help our entrepreneurs with presenta-tions to executives of these companies to help them develop their business. We also make presentations to our engineers when there is opportunity to collaborate with our investee companies. Finally, we promote exchanges between our global portfolio companies if both parties are willing to do so. Importantly, we always operate in an agnostic way, allowing the companies to decide whether and how should they en-gage. We do not force anyone to use our technology, as we believe that companies should build an independent and sustai-nable business. Of course, if they see value in our solutions, we will give them every possible attention.

How can foreign investors benefit from the business environment in Brazil or from the exchange with Brazilian companies? Brazil is a large market with a potential 200 million consumers and 15 million companies. Our customers are highly engaged and our companies seek tech-nological solutions to improve efficiency. Clearly, one way to benefit is to participa-te in opportunities arising from this large and representative market. Moreover, as we still have a limited number of funds in Brazil, there is relatively little competition between startups (e.g., no more than 2 or 3 in the same sector, which is very common abroad). Our valuations are rela-tively cheap compared to other emerging markets, like China and India. Foreign in-vestors have the opportunity also to learn

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from the resilience, resourcefulness and creativity of Brazilian entrepreneurs.

The portfolio profile of Qualcomm Ven-tures in Brazil is very focused on technol-ogy, with a bias in services and consump-tion. Which segments do you consider promising for the coming years?

Qualcomm Ventures invests in com-panies that aim to improve the lives of people and businesses that make use of technologies related to mobility and all things connected. In this context, our focus includes opportunities in B2C and B2B, hardware, software and services leveraged by technology. Our portfo-lio in Brazil includes Marketplaces (99, Loggi, Ingresse, QuintoAndar etc.) that reduce inefficiencies where they operate empowering users and service providers (mobile enabled workforce) from the use of one or more sensors on the smartpho-ne, such as GPS, camera, etc. and thus are redefining industries, software companies B2B of IoT Analytics, such as WebRadar. We are experiencing a time when power-

ful components cost cents or a few dollars and this is leveraging new technology applications, such as drones, autonomous cars etc. These new technologies are ac-celerating the digital transformation and helping the rapid development of the Internet of Things. In Brazil, we see smart cities, Industrial Internet and Agtech as quite fertile fields for startups.

What are the exit strategies you consid-er more viable in the Brazilian market and why?

We believe that, no different from what you see abroad, most of our exits are acquisitions of our investee companies by larger companies that are seeking ways to grow inorganically in the Brazilian market. However, IPOs are a possibility; we are beginning to see a resurgence of IPOs, such as NetShoes and Decolar.com, for example. Fundamentally, we believe that companies that have a strong value proposition to the stakeholders will attract the interest of buyers either for their tech-nology, footprint or both.

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• A5 Partners• Acelera Partners• Altivia Ventures• Antera Asset Management• Astella Investimentos• Atacama Ventures• BBI Financial Gestão de Recursos• Bolt Ventures• Bossa Nova Investimentos• Bozano Investimentos• BR Opportunities• Cedro Capital• Confrapar• Copacabana House Ventures• CRP Companhia de Participações• CVentures• DGF Investimentos• DOMO Invest• e.Bricks Digital• FIR Capital• Fundo Pitanga

BRAZILIAN VENTURE CAPITAL FIRMS

• Gera Venture Capital• GrowPlus Ventures• Ideiasnet• IndicatorCapital• Inseed Investimentos• Invest Tech• KaszeK Ventures• Kick Ventures• Koolen & Partners• Mindset Ventures• Monashees Capital• Mov Investimentos• MSW Capital• Performa Investimentos• Portbank Private Equity• Redpoint eVentures• SP Ventures• TOTVS Ventures• Triaxis Capital• Trindade Investimentos• Vox Capital

This includes the majority of local VC firms

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Maria Alice Leal EXTERNAL CONTRIBUTOR

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