Funding totaled R$46.5bn last year, and several initiatives are now testing investor’s appetite for illiquid classes
09/03/2022
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Patrick Cannel, Caio Costa, Guillaume Sagez, with Fors Capital — Foto: Silvia Zamboni/Valor
The cycle of high-interest rates in Brazil has not been enough to stop private-equity companies. Last year was a busy one, especially in the venture capital segment, as funding totaled R$46.5 billion – out of R$53.8 billion, according to data from Abvcap and KPMG. And this year began with several initiatives testing the investor’s appetite for illiquid classes even as the Selic, Brazil’s benchmark interest rate, is back to double-digit levels.
SPX has unveiled the intention to raise up to R$2.5 billion in its first private-equity fund after taking over Carlyle’s portfolio and team in Brazil. Romero Rodrigues, with Headline Global, now part of XP Asset, envisions a new vehicle to invest in VC newcomers, with plans to hold R$5.5 billion in the sector in five years. Daemon Investimentos will launch a renewable power private-equity investment fund, while Fors Capital and Blustone have sought capital and selected businesses with an impact bias.
Fors Capital, which emerged from the split of Performa Investimentos, one of the first venture capital managers with an emphasis on environmental, social and corporate governance (ESG) in Brazil, intends to raise up to R$500 million for a new fund. Caio Costa, Banco Nomura’s CEO for Brazil in the past four years, has joined the company as a partner.
With a long career in investment banking – including stints in BI&P, Nomura Securities, Deutsche, ING and UBS – the executive took part in the privatization of the electricity and telecommunications industries in Brazil, and since 2018 he had been studying a change to the venture capital segment but wanted a focus on sustainability. “Since the cycles are seven to ten years – raise, invest, divest – it was important to find the right people to set this up,” he said. “We discussed an agreement, a real [corporate] partnership, everyone participates in the exact same proportion.”
If recent history is any guide, corporate divergences often split teams, a sore point in an industry where human capital is worth as much as money. Fors itself has faced changes in the original team. The first cleantech fund, with R$175 million, was created in 2013 by Guillaume Sagez, a Frenchman living in Brazil, alongside Eduardo Grytz, who joined Carlos Miranda’s BR Opportunities to found X-8 Investments in 2019. Patrick Cannel arrived in 2015 and now with Mr. Costa, the three make up this new stage under the Fors Capital brand.
The new structure is already born with three invested assets, Mr. Sagez said. The target return is around 25% per year, a multiple of 3 to 5 times throughout the investment. The focus is on the “growth” segment, entering series C and D rounds onwards, in companies with revenues between R$50 million and R$500 million. Mr. Costa added that he prefers “B2B” businesses that directly serve the consumer, in sectors linked to agribusiness, energy, logistics, health and financial products.
In the portfolio are Unicoba (Led lighting), Contech (solutions for the pulp and paper industry) and Globalyeast (biotechnology). The firm left Intelipost (freight management through technology), Tecverde (efficient construction) and Mandaê (logistics), the latter sold to Nuvemshop, an e-commerce unicorn.
Another asset manager that proposes to make impact investments and is trying to raise up to R$100 million is Blustone, founded by Colombian-American Marlon Ramirez – who co-founded Azul Linhas Aéreas, Azul Cargo and Azul Viagens. Next to him is Carlos Lopes, who worked at Pátria Investimentos between 2014 and 2020 and has also been vice president of Standard Bank in Brazil, had a stint at TowerBrook Capital (spin-off of George Soros’s asset-management firm) and was an analyst at Goldman Sachs.
Mr. Ramirez is based in Miami, while Mr. Lopes is looking for deals in Brazil. The goal is to make investments in Latin American companies at different stages, from seed capital to series A and B rounds, taking part in the several stages of growth of the selected companies. The firm has just closed an investment in the freight platform Goflux, a kind of “Uber” of cargo transport, which operates in the agribusiness chain, including multinational shippers.
Blustone has already invested in the Mexican logistics company Cubbo and in the Brazilian Canal Dstak, a wholesale application.
The idea is to raise the first tranche by the third quarter and then reach R$300 million in a secondary offering. In the prospecting effort are both U.S.-based institutional investors and clients served by wealth managers and funds of funds in Brazil, who like to get in on the initial rounds.
The goal is to have a pulverized portfolio with 25 to 30 companies in different sectors of logistics and commerce in Brazil and other Latin American countries, such as Mexico, Colombia and Chile. “This class of ‘growth capital’ showed the best returns in the last 10 years,” Mr. Lopes said. The Blustone fund targets a return of 25% per year.
Mr. Ramirez says that the ESG bias enters the evaluation of the investments as the technology has the potential to bring efficiency to the business. He cites the reduction of carbon emissions in the logistics chain and the cheapening of products in the wholesale-retail flow, a segment that usually employs women who are heads of families and that is dominated by large online marketplaces.
“Startups, because they are growing, don’t focus on creating ESG processes. But some can be adopted on a daily basis, following the World Bank standards, such as issues related to diversity and sustainability,” Mr. Ramirez said. On the advisory board, Blustone is supported by Tariq Fancy, founder of the Rumie Initiative and former sustainable investing CIO at BlackRock.
The newest target of investments, Goflux, was founded by Rodrigo Gonçalvez, an entrepreneur who made a career in the logistics sector, including stints at Log-in, Vale and Algar Agro. He seeks a round of R$15 million after having received, in a previous stage, support from Banco Rendimento and SP Ventures, which is focused on startups in the agricultural segment.
One objective with the proceeds is to strengthen the financial operation, one of the biggest difficulties in the cargo transport chain, Mr. Gonçalvez said. “Traditional banks don’t look so favorably on the sector. They consider it risky and have little knowledge about it. In addition, with the pandemic, credit availability got worse.”
With more than R$2.5 billion in freight transacted through the platform last year and expectations of reaching R$6.5 billion by 2022, Mr. Golçalvez says that Goflux is able to have a unique view of credit risk and can offer funds to carriers even before a receivable is created tied to the payment of the service.
The company also intends to offer factoring of receivables and digital custody of documentation such as invoices, transportation contracts and inventory. The funding comes from some financial partners, but a credit-receivable fund (FIDC) is already in the final stages to supply this capital demand.
Source: Valor International