Tech Roundup, Apr. 3, 2020 | Covid-19 to drain venture capital funds in Brazil

. Apr 03, 2020
Tech Roundup, Apr. 3, 2020 | Covid-19 to drain venture capital funds in Brazil

You’re reading The Brazilian Report‘s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: how scammers are using Covid-19 for fraud in Brazil, a Brazilian company developed an equipment to help critical Covid-19 patients and the impacts of the pandemic on the venture capital industry.  

Covid-19 to slow down venture capital in Brazil

The financial crash in Brazilian

and global markets since the Covid-19 outbreak is expected to diminish the availability of venture capital funds for local startups in the months to come and reduce company valuations, increasing the pursuit for more profitable business models, according to experts. </p> <p><strong>Disruption. </strong>The pandemic comes as venture capital reached all time-highs in Brazil, with USD 2.9 billion raised in 271 operations. The <a href="">environment was boosted</a> by low-interest rates and expensive stock valuations. As of February, Brazilian startups had raised USD 317 million in 37 operations and perspectives were bright for March, a month which has a good track record, said innovation company Distrito cofounder Gustavo Gierun.&nbsp;</p> <p><strong>Panic. </strong>For Pedro Englert, CEO of business school StartSe, investors will be more cautious and adopt a wait-and-see approach before investing in the following months. In his view, venture capital will always be an interesting option, but this kind of investment will face the competition of other assets at this point, such as equities. “The biggest return is when you invest in a pre-IPO phase and this will always be interesting, but now you have competition. There was a sell-off, people can buy stocks in companies such as Petrobras for half of the price”.</p> <p><strong>Perspectives 1. </strong>Mr. Gierun also expects a fall in investments but believes a rebound will start in the second half of 2020, especially when it comes to seed capital and Series A and B rounds — which normally involve less money. “We know that we are going through some cautious months for investors, but the majority of funds that are active in Brazil have raised funds in 2019, so they have money and are looking for good assets.”&nbsp;</p> <p><strong>Perspectives 2.</strong> Research by venture capital fund Atlantico released on <a href="">a live broadcast with fund managers</a> shows that, among interviewed fund managers, one-third believe there won’t be any new fundraising rounds in the next few months. Meanwhile, average company valuation is set to drop by up to 50 percent in the following six to 12 months after the crisis, partially because of foreign exchange rates. “Most investors said they are still open for business, but of course at a more cautious speed,” said Julio Vasconcellos, a partner at Atlântico Venture Capital. “We are seeing a bit more renegotiation in deals previously discussed, but it doesn’t seem to be going on in all cases”.</p> <p><strong>Opportunities. </strong>While the economic recession is terrible for business in general,<strong> </strong>the crisis has accelerated some sectors, such as telemedicine, which has now been freed to operate under emergency circumstances, and e-commerce. “E-commerce will never be the same in Brazil. When the coronavirus is over, people will be already used to delivery apps, there is no coming back,” says Mr. Gierun.<strong> </strong>The experts also believe that mobility companies, fintechs, and B2B-focused startups will probably feel the hardest blow.</p> <p><strong>The “WeWork” effect. </strong>The pursuit for more profitable and sustainable business models that have been in the spotlight since the flop of coworking network WeWork’s IPO will be accelerated, they say. While investors will probably be more keen for profits, startups will realise the need for stronger business models. “The growth-only approach started to weaken and both sides are looking for sustainable business models. This process will be intensified, because in moments such as this startups are harmed if they rely too much on investors; it’s like they run out of gas,” said Mr. Englert.</p> <hr class="wp-block-separator"/> <h2>Scammers use Covid-19 to commit fraud all over Brazil</h2> <p>If getting infected by coronavirus wasn’t enough concern for Brazilians, criminals are using the pandemic for malicious activities on the web. Scammers use the name of companies whose services are being increasingly used amid social isolation measures to attract viewers for malicious purposes — which can be a danger for both citizens and companies.</p> <p><strong>Red flag for employees.&nbsp; </strong>Cybersecurity company CheckPoint found out two fake domains related to Microsoft Teams, which is being used by companies as employees work from home. In an emailed statement to <strong>The Brazilian Report</strong>, CheckPoint also mentions malicious files mimicking the app. “Running these files leads to the installation of the infamous InstallCore PUA on the victim’s computer which could potentially lead to additional malicious software installation,” says the company. This is potentially dangerous for companies that are rely heavily on communication software to keep their business running.&nbsp;</p> <p><strong>Response.</strong> In an emailed statement, Microsoft informed that its filter Microsoft SmartScreen blocks domain with typos — such as the ones found by CheckPoint — and that the company has a <a href="">page</a> where users may denounce fake websites.&nbsp;</p> <p><strong>Spreading the disease.</strong> Cybersecurity firm Kaspersky found at least 300 phishing domains and 35 malware domains related to the words “corona” or “covid” in Latin America from February 1 to March 15. In Brazil, <a href="">the company says</a>, they identified a scam spread over WhatsApp, saying Netflix was releasing services for free due to Covid-19, aiming to bring traffic to a webpage with advertising. But more dangerous activities have also been found, such as a scam using hand sanitizer invoices from a drugstore that infects devices with a banking trojan allowing criminals to make transfers in the owner’s name.&nbsp;</p> <p><strong>What are authorities doing?</strong> Even Brazil’s National Telecoms Agency (Anatel) has not escaped the wave of fraud, as the agency’s name was used for a scam that promised free data packages for smartphones. <a href="">On its website</a>, Anatel warns about the fraud and urges Brazilians to adopt basic cybersecurity measures, such as not opening unknown links and not providing personal information.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Brazilian startup develops tomography appliance that optimizes ventilation for Covid-19 patients  </h2> <p>Brazilian startup Timpel developed an electrical impedance tomography that helps to monitor patients and optimize artificial ventilation in ICUs, diminishing the time these individuals spend in mechanical ventilation and avoiding damages by overexposure to the treatment.&nbsp;&nbsp;&nbsp;</p> <p><strong>How does it work?</strong> A belt attached to the patient sends electric shocks — similar to an electrocardiogram — and measures the resistance of the body to the passage of the electric current, which varies in accordance with the airflow in the lungs. The electric pulses create 50 images per second.&nbsp;</p> <ul><li>By using software connected to the equipment, doctors know how the lungs are working and may adjust oxygen pressure and concentration to avoid damaging the patient’s organs. It also reduces the need to expose patients to x-ray tomographies and the risks of passing the disease on, which are high for Covid-19 patients that need to be isolated, said Timpel’s CEO, Rafael Holzhacker, to Agência Fapesp.&nbsp;</li></ul> <p><strong>Next steps. </strong>The equipment — partially funded by research promotion agency Fapesp and linked to Brazilian public universities — is already working in hospitals from Brazil, the U.S., Europe, Japan, and the Middle East. According to Mr. Holzhacker ,the goal is to get data from hospitals in Italy, Spain, and the U.S., where the machine is being used to treat Covid-19 patients, and come up with an<a href=""> algorithm specially for the disease</a>.</p> <hr class="wp-block-separator"/> <h2>Take note</h2> <ul><li>Brazil is set to implement the first digital edition of its <a href="">National University Entrance Exam (Enem) </a>on October 11 and 28. The physical version will be applied on November 1 and 8 and applicants may not take part in both. Students must submit their applications from May 11 to 22, according to the Ministry of Education. In the first edition, only the first 100,000 applicants will be able to take the test digitally, but the Brazilian government plan is to make a full transition until 2026. As of 2019, 5.1 million students have applied, the smallest number since 2010.  </li><li>The Physics Institute of São Carlos, a department of University of São Paulo (USP), has developed a squeegee able to decontaminate large surfaces using UV radiation. The light must be applied in 1 square meter per minute and is able to destroy viruses, avoiding their spread on floors and shoes. Two pieces of the equipment have been donated to a local hospital in São Carlos, <a href="">according to USP</a>.  </li><li>America Movil’s Claro was chosen as the most accessible company for people with disabilities in 2019, according to Anatel. The company earned the title after translating its website to sign language, adapting its stores with tactile floors, a sound system for queuing, ramps with handrails, priority assistance and assistance with sign language.  </li><li>All 16,000 Brazilian health units will be fully connected to the internet by the end of April, according to the Federal government. The initiative is part of the effort to fight off the Covid-19 pandemic.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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