Brazil wins ten unicorns in 2021 after record investment in startups

After record investments in technology, Brazil closes 2021 with the unprecedented number of ten new unicorns — the name given to startups whose market values ​​exceed US$ 1 billion (more than R$ 5.6 billion), such as the well-known QuintoAndar and iFood.

It’s the highest number since travel app 99 became the country’s first unicorn, in 2017. The result easily surpassed the previous leader year, 2019, when the Brazilian herd of billionaires received five startups.

Even before the end of 2021, the volume of investments in innovation and technology is unprecedented in Brazil, according to data from the Distrito platform. There were US$ 8.85 billion (R$ 50.13 billion) until November, more than double the total of 2020: US$ 3.659 billion (R$ 20.726 billion).

Discounting technology companies listed on Stock Exchanges —such as Nubank, which after its debut on the stock market became another fantastic being in the industry jargon, an “ipogriff”—, Brazil reached 18 billion-dollar startups.

Technology companies in the financial sector, known as fintechs, are the most common: they add up to 7 out of 18.

In 2021, however, they were not the most popular. Despite leading investments, they added two of the most valuable companies, one less than those in the retail category — a sector that inflated after the coronavirus pandemic distancing measures boosted ecommerce.

The predominance of São Paulo remained: seven of the ten are from the most populous state in the country, two are from Paraná and one is from Minas Gerais. Over the past few years, the only company outside the Southeast and South regions was Arco Educação, from Ceará, which reached billion in 2018, the same time it went public on the New York Stock Exchange.

“It’s more and more common for startups to turn into a fast unicorn”, says the CEO of Sling Hub platform João Ventura.

The round that normally turns into a unicorn in Brazil is the fifth, the E. In the last year, however, five of the startups achieved pricing of US$ 1 billion in the C and D rounds. Two of them, in the B, even earlier, depending on the platform.

In the race to grab the market, these big startups have been buying others and forming holdings. “It is an avenue that the unicorn sees to grow”, says Ventura.

iFood is the biggest example: it bought 13 other technology companies throughout its history. Of this year’s stars, some examples are Unico and Hotmart, who bought three startups each.

Brazil’s growth is no stranger to other countries in the world. There were 491 new unicorns in all this year against 110 in 2020, according to data from CBInsights.

The numbers show that, like the beings who name them, these startups seem to live a reality parallel to the economy.

Since the beginning of the year, the Ibovespa, the main index on the Brazilian Stock Exchange, has fallen by 11.43%, and inflation has exceeded double digits in the 12-month period. In the US, despite the 21.79% growth of the index that monitors the 500 largest companies on the New York Stock Exchange, the price increase is similar to that of the early 1990s. Worldwide, variants of the coronavirus continue to bring down stock exchanges time to time.

The investment market, however, works in other terms.

“An important point is the presence of foreign investors”, says Ventura. “It’s relatively cheap to put money in Brazil.”

Since January 2019, the dollar has increased by more than 50%. At around R$ 3.70 at the beginning of that year, the currency closed this Tuesday (28) at R$ 5.64.

The American market, where most investors come from, shows more signs of excess capital and company saturation than the Brazilian market. “People have a certain difficulty in finding startups to invest in. They start, then, to allocate more money to other countries”, says Ventura.

Foreign funds are usually present in funding where the startup turns into a unicorn, because of the high volume of money. Japanese company SoftBank, for example, invested in the billionaire round of five of the ten Brazilians this year.

“We can change: let’s imagine that the dollar drops a lot. Then it starts to become more attractive for the local investor”, says Ventura. In short, he argues, less intense instabilities have little effect on large startups, which depend on foreigners’ money and compete with other developing nations.

Selic and its counterparts around the world can be one of those little shakes. Central banks in almost all countries cut base interest rates in the crisis as a way to stimulate the economy. In Brazil, the Selic reached a historic low of 2% a year and stayed that way for five months. The United States follows with the index zeroed.

In addition to lowering the cost of public debt, lower interest rates encourage investors to turn to the real market, which, with higher yields, is much more advantageous. With the increase in inflation, the BC set interest rates at 9.25% per year at its last meeting, in early December. The expectation is that the index will continue to increase in 2022.

The US prepares to bid farewell to next year’s economic stimulus period. The Fed (the US country’s central bank) will end the bond purchase program under way since the beginning of the health crisis in March, paving the way for three 0.25 percentage point increases in interest rates by the end of next year .

Neither the scenario depicted above nor Brazil’s uncertain elections next year detract from Ventura’s optimism. “If the economy is really bad, people won’t have the money to order meals on iFood, for example. But I think it’s difficult for a gigantic catastrophe to happen in a short period of time,” he says.

“The expectation is for growth, because more and more investors are entering Brazil. It may happen that we will surpass the number of new unicorns in 2022 compared to 2021”, says the businessman.