What are the new priorities of startups in Brazil?
After an investment “boom” in recent years, which was responsible for the opening and consolidation of many companies, the priorities of startups Brazilian women had to change because of a moment of slowdown in contributions.
Between January and August of this year, the market was able to lift $3.6 billion, a value 45% shorter than the same period in 2021, when a report of $6.6 billion in total. These data were released by the study Inside Venture Capital, from the Distrito platform in partnership with BXS Banco, where it also points out that the downward trend should remain as accumulated for every year of 2022.
This drop was also observed in Startup Index Brazil, from Sling Hub. Let's see:
In this challenging scenario, keeping the market warm has become an even more complicated task. With that in mind, entrepreneurs from all over the country are reviewing their priorities and calculating their next steps well.
In this article, we will explore how the current economy is affecting this market, find new ways to circumvent the challenges and give a spoiler of what scholars point to the future. Check it out!
The impact of the Brazilian economic moment on the startup scene
The year 2022 is being marked by a lot of instability in Brazil and, as a consequence, the economy is one of the sectors that is feeling its negative effects the most.
According to the Global Economic Outlook report, released at the beginning of the year, the World Bank reduced the growth projection of the Brazilian economy by 2.5% towards 1.4%, the lowest rate among the 18 countries considered emerging and developing.
Responding to the projections, this unpositive current moment is unfortunately marked by soaring interest rates, rising inflation, large fluctuation in demand, low economic power of the population and, especially, by the fear of large investors to bet their chips on national companies.
In an interview with Medium & Message, Maitê Lourenço, CEO of BlackRocks Startups, affirms that this instability hinders the interest of investors from other countries, since investing in businesses here is riskier.
To overcome challenges and survive in this uncertain scenario, Brazilian startups continue to undergo constant transformation and evolution, making adjustments to their strategies, operations and priorities.
“Brazilian investment funds are quite traditional and avoid investing in innovative businesses because they read them as risky businesses. This, added to a year of elections, reduces the volume of investments made.” - Maitê Lourenço for the Medium & Message
New priorities to circumvent the troubled market
Even in the midst of difficulties, investing in startups remains a good solution to promote national economic and social development. At each R$1.00 applied to an Angel-type investment, are generated R$5.84 in the economy and R$2.21 in the form of taxation, according to a study by British consultancy Grant Thornton, in partnership with Associação Anjos do Brasil.
This means that no matter how complicated it is to be going through this turbulent moment, Startups are still a great deal. The time is not to give up, but to reorganize your priorities to emerge even stronger from this storm.
Among several priorities that have the potential to revolutionize the sector once again, we selected some that cannot be left off the companies' radar. Check it out!
- Sustainability
Caring for the planet has become an increasingly debated agenda and the population is becoming increasingly aware of environmental actions. As a result, many clients have started to choose companies that assume their responsibility with environment, even if not so consciously.
This behavior was also reflected in investors and more and more investments are being directed to startups that follow the ESG criteria and principles.
O ESG It is an acronym in English that means “Environmental, Social, and Corporate Governance”, and in translation it would be “Environmental, Social and Corporate Governance” which combines the three sets of practices for companies that are interested in responsible and more sustainable growth.
According to Morningstar, startups using the ESG playbook captured US$ 51.1 billion of new investors in 2020, twice as many as in 2019. This number shows that these practices are becoming a global requirement and, therefore, adapting to their criteria should be a major priority for Brazilian startups.
- Regulatory environment
Investing in a startup has its risks, often considered high, and this makes the need for a regulatory environment even more essential. O Venture Capital requires more agile and flexible processes in legal, tax and labor matters.
There are discussions on the subject taking place with the government, proposing measures and debating laws that aim to make the national business environment even more prepared for innovative companies.
Among the fundamental guidelines raised are the taxation of risky investments, in addition to the legal risks to which investors are exposed.
- Talent training
Even in the midst of the employment crisis in various sectors, startups are always looking for new talent, with hundreds of opportunities available on their career sites. Vacancies are piling up and one of the main reasons lies in the lack of qualified labor.
For Brazilian startups to continue to develop, it is essential to invest in the training of new talent to think and act in practice in innovation.
Therefore, one of the priorities of companies must be the search for an environment that correctly prepares young people for this new labor market, with innovative, technological, disruptive and diverse principles.
What does 2023 hold for Brazilian startups?
Throughout this article, we highlight how difficult the year 2022 has been for startups. But with the end of the year, hopes for better days are coming with full force, especially for early-stage companies.
According to recent surveys, startups in advanced stages suffered the most in 2022 and should still count on less investments next year.
For Carlos Akira Sato, COO of BTLAW and member of the BTTECH Advisory Board, the main reasons were the pandemic and the Russian War with Ukraine, which determined the interest rates charged by central banks around the world and impacted the entire market and, as a result, “great expectations were frustrated and investors raised the bar for evaluating new investments”. The executive still believes that this turmoil in the segment is expected to lose strength starting in the second quarter of 2023.
When looking at seed-stage startups, the first half of 2022 was recognized as the best in history, according to the District's balance sheet. Altogether, they were captured US$ 282 million in investments, an 86% higher number than in the same period of the previous year.
Early stage startups also had encouraging numbers, registering US$ 1.4 billion in contributions, growth of 14%.
These data indicate a more optimistic scenario for companies in their embryonic phase in 2023, thanks to the various national funds of Venture Capital focused on budding startups.
In her participation in the Cubo Conecta 2022 event, Laura Constantini, co-founder of Astella Investimentos, pointed out a new reality for companies. When the investment fund appeared, many startups replicated ideas that were successful internationally here in Brazil, but now “those who did well were those who adapted to local needs. The founders are already looking more closely at local problems to create solutions.”
At this same event, ESG, mentioned above as one of the new priorities, was also identified as a great opportunity for startups, according to Matthew Govier, director of Sustainability Services at Accenture in Latin America. “It is through the innovation ecosystem that large companies will find agents to assist in meeting ESG goals,” he said.
The great conclusion we draw from these analyses and data is the need to reinvent ourselves. The priorities of Brazilian startups need to be updated, strategies must be reviewed, and resilience is even more necessary in the daily lives of companies.
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