Startups face a wave of layoffs in Brazil due to investment cuts

Brazil, startup mecca in Latin America, faces a cascade of layoffs at its startupsin the midst of a global investment “crisis” due to global uncertainty and an increasingly restrictive monetary policy environment.

Brazil, the country with the largest number of “unicorns” in the regionit is going through a “corrective moment” after the boom experienced in the last five years, especially during the coronavirus pandemic, when interest in emerging technology companies has multiplied.

However, investors’ appetite has declined in recent months a scenario of rising interest rates in the main world economies to curb the rise in inflation.

“The rise in interest rates makes investors migrate from riskier to less risky investments,” he explains in an interview with Efe Felipe Matos, president of the Brazilian Association of Startups (Abstartups).

less money

According to the association’s data, they were only there in the first half of the year a 40% reduction in investments in Brazil, where there are more than 20 “unicorns”, as startups worth more than 1,000 million dollars are known.

With less money available for financing, the value of start-ups, Matos says, has shrunk, which has translated into more cuts to accommodate “new phase”.

According to AbsStartups, in recent months around 1,000 layoffs among “unicorns”even if the number has more than doubled in the entire sector according to reports from the Layoff Brasil portal.

The cuts came to the real estate giants QuintoAndar and Loft; to the Mexican Kavak, dedicated to the sale of used vehicles through applications; to Ebanx fintech and digital commerce platform for Vtex companies, among others.

“There is a paradigm shift. Companies wanted to grow as fast as possible.without generating a profit, because that way they were worth more and there were investors willing to pay for that growth, “says Matos.

The risks

“Today, with change, companies must prioritize profits over growth. You can’t grow at all costs,” he adds.

Despite the reduction in investments and the increase in layoffs, the Brazilian Association of Startups points out that the sector continues to grow, albeit at a slower pace than in previous years.

“Brazil and Latin America have a low volume of venture capital compared to other Latin American countries. There was and still is room for growth,” Matos points out.

For this reason, given the size of its market and the development that its startups have achieved, Brazil continues to be in the crosshairs of foreign investors.including Colombiansaccording to the experts consulted by Efe.

To start internationalization and continue to grow, the official ProColombia agency and 16 startups from different sectors, such as fintech, retailtech and healthtech, traveled to Sao Paulo last month to meet 30 Brazilian venture capital funds, with consultancy by KPMG Colombia.

“In Colombia we have an ecosystem of business and technological innovation with over 1,110 startups. Every day we bet an extra grain of sand on this exponential growth and having the support of an innovation and entrepreneurship giant like Brazil gives us the opportunity to continue growing “, said the leader of the private enterprise. by KPMG Colombia, Martín Escobar.

EFE agency

PB