South Summit: Brazil has the conditions to become a global power in corporate venture capital

Brazil has the conditions to become a global power in corporate venture capital, experts indicate; see advice from major Brazilian CVCs

Corporate Venture Capital was highlighted on the last day of South Summit Brazil 2024; check out the main insights on the subject

Brazil has the capacity to become — in a short time — a global power in corporate venture capital (CVC), a modality in which large companies invest in startups, ideas and innovative solutions that connect to their businesses. The trend is observed by big names in the segment and was highlighted this Friday (22), at South Summit Brazil, at Cais Mauá, in Porto Alegre.

One of the pieces of evidence, according to experts, that shows Brazil’s potential in this industry is that the country is among the 10 with the highest number of CVC investments in the world, in 2023. This is the first time for a Latin American country in the world ranking of “deals” in the category. Despite being on the radar for new opportunities, there are still many spaces to be explored so that Brazil’s leading role in corporate venture becomes a reality.

According to a study by the Global Corporate Venturing Institute, Brazil has just over 80 active corporate venture capital funds, 75% of which were created in the last four years, a percentage higher than the global average (around 40%).

Despite the still timid presence of corporations investing in startups here, open innovation is going through an evident growth phase, translating into an opportunity capable of generating significant impacts for traditional companies that need to remain relevant. It is also attractive for startups, which are the engine of innovation in different business sectors.

According to Ivana Beltrão, Head of Development at GCV for Latin America, thinking about the scenario of recent years, with a drop in the number of investments and a reduction in valuations, the market realized that CVC activity is perennial, because corporations need to innovate in a constant. According to her, most of the CVCs created in the last three years in Brazil were born with resources and some independence in relation to the corporation, and having to deliver financial results, but also strategic results — a relevant factor, which markets in other even older countries in CVC are practicing only now.

“If we think that at the outset Brazil is already creating its CVC units with a more robust, independent strategy, with guaranteed continuity and delivering value to the corporation, it means that in the coming years we have a great chance of being in the spotlight. only in number of deals, but also among the largest investors in CVC”, highlighted Ivana Beltrão.

The favorable market leads renowned companies to create their own investment funds, such as Eurofarma, which currently invests in early stage digital health startups and has already assembled a portfolio of 10 investees in four years. Another interesting example that demonstrates optimism for the segment in the country comes from João Pedro Meduna, founder of L4VB, a R$600 million fund that counts B3 as its sole investor.

“We seek to invest in startups with the capacity to maximize return on investment based on B3’s relationship and know-how. We already have seven investments made in Brazil and abroad and with 20% of the capital already committed. We’re excited for what’s to come,” he signals.

Experts Share Strategies and Advice for Future CVCs

Eduardo Sperling, director of the venture capital manager Ahead Ventures, points out that to be successful in CVC it is necessary to have a lot of preparation to be able to extract value from this innovation initiative. “You’re not just doing a corporate-sponsored VC fund, but you have specific needs for this project to be successful,” he says.

According to the expert, the first major reflection that corporations must make is to understand that it will not solve all dimensions of the corporation’s innovation problems through CVC. “This is an initiative that comes together with other initiatives so that the company has a window into the future of the business. And it is important that there is autonomy, but the strategy does not distance itself from the logic of the operation. The company needs to be comfortable with this type of investment,” he says.

Another golden tip from the executive is that by becoming a partner in a startup, that company can absorb insights that go beyond just the product that the startup is delivering. “Be able to have a strong relationship and access to information that you wouldn’t have if you weren’t a partner in the startup. To just have the product, all you had to do was be a customer.”

Mateus de Abreu, director of digital strategies at Randoncorp, also shared insights that may be useful for those starting a CVC: aligning expectations about the business is important, but perhaps even more important is how to direct the company’s culture towards this connection with the environment of startups and investees.

“You don’t want to open a relationship program with startups just because everyone else is doing it, align your expectations with the executives, be well sponsored, prepare your company to innovate, because the CV is a foreign “core” to the business. And find good corporate partners, your company does not need to venture into this process alone, because this is a journey full of ups and downs”, he considers.

One of Randoncorp’s most successful investments is Motorista PX, which connects autonomous truck drivers and cargo carriers. Entering the business helped the corporation transform its servicing journey and fit the proposal into more than one business unit with the embedded solution. “In 2024 we expect that 60% of the business volume generated by PX will begin to circulate within Randon bank”.

Wana Schulze, head of investment and portfolio Wayra and Vivo Ventures, highlighted that when the company’s fund connects to a startup, it seeks to identify whether it has any synergy with the business: “we prefer to invest in startups in which we can accelerate commercially ”, he explains.

This consolidation takes place under two levers: distributing the product, because the company has very strong channels in both B2C and B2B; or a second possibility is for Vivo to be a client of this startup.

“Investment is not always the best way to help a business, and sometimes we identify startups that do not fit our investment thesis or that the return will not be what we expect, but that could become a great partner for Vivo”, he says.

According to the executive, in these cases the startup goes to Wayra, which develops and promotes these businesses between the startups and Vivo. One of the most significant cases in this strategy comes from Trocafone, a startup for buying and reselling used cell phones, for which Vivo ended up becoming a kind of supplier, helping to capture used phones that can be fixed and resold.

How to win the best deals

Stefanie Ng, director of Qualcomm Ventures, with more than 350 startups invested around the world, including Brazilian unicorns such as 99 and QuintoAndar, says she believes in the concept of “connected intelligence”, indicating that theses related to the internet of things, artificial intelligence and reality virtual markets are good markets for corporate venture capital to keep an eye on. “Look at strategies not only from the point of view of solutions, but also of financial return, knowledge, talent and innovation so that the business is good for both partners”, she explains.

Gustavo Cavenaghi, from Kortex Ventures, which brings together Grupo Fleury, Sabin and Bradesco, states that the prospect of a good business must always generate results not only in financial terms for the investor, but that is capable of generating value for the entrepreneur. “There is no other way to get the best deals.”