Investments in Private Equity and Venture Capital reach R$2.2 billion in the first quarter

This is a machine translation of a press release by Abvcap

São Paulo, May 16, 2023. Investments in Private Equity (PE), Venture Capital (VC) and Corporate Venture Capital (CVC) totaled R$ 2.2 billion from January to March this year in Brazil. The reduction is 79% compared to the last quarter of 2022 and 84% compared to the first three months of last year. The data are in the report released by ABVCAP (Brazilian Association of Private Equity and Venture Capital) in partnership with TTR Data.

In Private Equity, investments in the period reached R$ 600 million. The amount was contributed to 17 companies. It is the quarter with the lowest investment since the beginning of 2019, the period of analysis of the report. Compared to the fourth quarter of last year, the reduction in the volume invested by PE funds, which are generally aimed at mature companies, was 92%.

Allocations in Venture Capital fell by 12% on the same basis of comparison and ended the period with R$ 1.42 billion in investment, basically aimed at startups. Corporate Venture Capital, formed by funds from consolidated companies that invest in startups, allocated BRL 180 million to innovative companies in the first three months of this year, 70% less than in the last quarter of last year and the lowest amount since the beginning of 2021.

The strong retraction observed at the beginning of this year demonstrates the restriction on liquidity, resulting from the increase in interest rates worldwide, and the lack of perspective regarding the end of the global monetary tightening. Mainly responsible for foreign investments in PE, VC and CVC in Brazil, the United States saw its basic interest rates rise nine times in a row in the last 12 months.

On the domestic front, maintaining the Selic at a high level adds to economic uncertainties. “We have important tax issues for the industry being discussed. This makes foreign investors wait and prefer to wait for more concrete signs about the direction of the country's economy. High interest rates, discussions about the inflation target, still modest economic growth and uncertainty about the fiscal anchor reinforced the scenario of retraction in investments”, says Piero Minardi, president of ABVCAP.

According to Minardi, Brazil has everything to return to attracting long-term investments with measures that allow an advance in the business environment. According to the executive, it is essential that investors in FIPs - Fundos de Investimentos em Participação, the main investment vehicle for private equity funds, have tax treatment similar to that of investors on the stock exchange. “We have some bills pending in Congress that would eliminate these asymmetries and bring legal certainty to investors. Approving these measures will attract more investment from abroad and improve our regulatory framework”, says Minardi.

Brazil leads in CVC. Brazilian funds lead the Corporate Venture Capital operations. Of the 9 transactions registered in the first three months of this year, eight involved Brazilian funds. In 2022, there were 101 transactions, with 89 transactions involving Brazilian CVCs, 12 Americans and 2 Germans.

“The numbers show that Brazil continues to be important in the global scenario for investments in established companies and startups. The data we collected show a challenging environment around the world and confirm the cyclical character of the PE, VC and CVC industry”, comments Wagner Rodrigues, Director of TTR Data. TTR Data became responsible for ABVCAP's quarterly investment survey.

About ABVCAP

ABVCAP - Brazilian Association of Private Equity and Venture Capital is a non-profit organization that represents more than 215 national and international institutions active in the Private Equity and Venture Capital markets. The membership includes 130 fund managers, 13 institutional investors and 65 service providers, including major law, audit, administration and consulting firms in the Brazilian and international markets.

About TTR.

TTR Data tracks Mergers and Acquisitions, Private Equity, Venture Capital, Capital Markets and corporate information in Latin America and the Iberian market. The company provides up-to-the-minute transactional data and market intelligence through personalized email alerts, dashboards and market reports.