Brazilian startups expected to reduce liquidity burn as available capital shrinks – survey

Brazilian startups expected to reduce liquidity burn as available capital shrinks – survey

By Tatiana Bautzer

Ṣo Paulo (Reuters) РA survey by venture capital fund Atlantico found that founders of Brazilian unicorns, startups worth more than $1 billion, believe most startups will adjust their businesses to reduce cash burn amid a drop in venture capital investment.

Venture capital investment in Latin America fell to $2.4 billion in the second quarter from $5 billion in the same period a year earlier, according to data from industry group Lavca.

Unicorn founders agree that their peers will have to adapt to reduce the liquidity burn – 37% say their companies will, and 50% believe that will happen to their peers. Although only 5% of founders think their own company may have to close its doors or wind up in a surprise sale, 33% believe it will happen to their peers.

The survey showed that the most common measures to reduce cash burn are hiring freezes, reducing marketing expenses, and layoffs. About 80% of startups that have laid off employees have cut their staff by 10% or less.

Giulio Vasconcelos, managing partner at Atlantico, said that although raising capital is difficult, Latin America still presents good opportunities.

Internet penetration in Latin American countries has increased with the spread of the epidemic, reaching 78%, which is now higher than 69% in China and closer to the levels of developed countries. The US has a 92% penetration.

The rise in e-commerce’s share of Brazil’s sales to around 7% seems permanent, while in the US, e-commerce’s market share has reversed to pre-pandemic levels. The dynamics in healthcare, banking and delivery services have changed.

Vasconcelos added that despite the decline in share prices of technology companies in developed markets, investors are optimistic about the potential profits of technology companies in Latin America.

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Only 1.5% of the total market capitalization of technology-related Latin American companies, a share of up to 20% in China and 52% in the United States.

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