BRAZIL Law and Practice Contributed by: Fernanda Levy, Aline Bauermeister, Rodrigo Menezes and Fabiana Fagundes, FM/Derraik
1. Trends 1.1 VC Market
will show that investors are still acting with a certain degree of caution, opting to share risks with other players, even if it means lower returns. Discussions involving anti-dilution protections should also gain attention in view of uncertain - ties for the next couple of years. 1.3 Key Industries According to the Sling Hub/Itaú BBA report, the fintech industry remained the most dominant sector, accounting for 55% of total investment in Latin America during the 2024 period. Other notable sectors included: • energy (13%); • deep tech (6%); and • healthtech (3%). In Brazil, cleantech and agritech are expected to grow and attract significant investment due to sustainable solutions for global markets. AI-powered start-ups will continue to attract large VC investments due to their capacity to automate and improve business processes. 2. Venture Capital Funds 2.1 Fund Structure Many players are involved in a typical VC funding structure, including (among others): • institutional private equity funds on early- stage, growth-stage and late-stage modali - ties; • single limited partnership funds with corpora - tions as limited partners (also called corpo - rate venture capitals); • development fund investors; • angel investors;
After a couple of years of resilience and consoli - dation, 2024 showed small signs of growth and VC investor optimism in comparison with 2023. While capital deployment was still very timid in comparison with 2021, deal volume recovered, particularly driven by local investors in seed and early-stage rounds, as indicated by the 2024 report released by the Association for Private Capital Investment in Latin America (LAVCA). In 2024, Brazilian start-ups raised USD4.89 bil - lion across 513 financing rounds. According to a report commissioned by Itau BBA and issued by Sling Hub (a data intelligence platform for the sector), Latin American start-ups saw a 37% year-over-year growth in 2024, which is the first annual increase since the 2021 peak. The num - ber of financing rounds, however, decreased in 2024. 1.2 Key Trends Despite the slight recovery of the VC market in 2024, high interest rates (encouraged by the Bra - zilian government to contain inflation) and global macroeconomic challenges create an uncertain scenario for the VC market in 2025. There was a significant increase in the capi - tal raised by start-ups through debt rounds or receivables funds, which shows that typical VC investors are still restrained in their deployment of cash in equity financing rounds. It looks like venture debt and structured financing will remain key tools for start-ups navigating the challenges of fundraising in 2025. We also expect financings with the participa - tion of a greater number of investors, which
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