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. 

Disruption. The pandemic comes as venture capital reached all time-highs in Brazil, with USD 2.9 billion raised in 271 operations. The environment was boosted 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. 

Panic. 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”.

Perspectives 1. 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.” 

Perspectives 2. Research by venture capital fund Atlantico released on a live broadcast with fund managers shows that, among interviewed fund managers, one-third believe there won’t be any new...