Venture Capital 2025

BRAZIL Trends and Developments Contributed by: Fernanda Levy, FM/Derraik

Challenges of Corporate Venture Capital in Brazil The number of corporate investors across the globe has tripled in the last decade, and they are now part of one in every six start-up funding rounds, says the research published by Global Corporate Venturing in February 2025. In Bra - zil, corporate venture capital (CVC) has gained significant traction over the past years as well, as established companies seek innovative start- ups to drive strategic growth. While venture capital (VC) has suffered a reduc - tion in liquidity in the last couple of years after the VC hype in 2021 and 2022, enthusiasm for the CVC ecosystem seems to continue, accord - ing to data released last year by the Brazilian Association of Private Equity and Venture Capital (ABVCAP). Brazil has a clear competitive edge in sectors such as fintech and agribusiness, offer - ing a vast opportunity for the development of CVC investments in start-ups with potential to scale and grow. However, as the Brazilian CVC ecosystem matures, notable challenges arise. At the same time as managers are recognising the strategic growth potential for corporations, they are also acknowledging that, without proper structuring, governance and clear strategies that are aligned with the corporate objectives, CVC may face dif - ficulties, especially in the coming years, as high interest rates, tax reform and political insecuri - ties tend to shift the focus towards more con - crete results and financial gains in the short term. In this article, we explore the complexities of CVC in Brazil, focusing on the need to define clear and long-term strategies aligned and engaged with the corporation’s goals and busi - ness areas, to structure a diverse and integrated

CVC team and to master the intricate dynamics of value creation, among other insights. Clear strategies and alignment of interests Corporate investors often struggle with defin - ing clear strategic objectives when engaging in CVC. CVC investments are primarily designed to foster innovation and explore emerging tech - nologies while aiming for financial results. Corporations may approach CVC with a stra - tegic mindset, while start-ups may prioritise growth and independence. If expectations are not aligned, conflicts may arise, affecting the success of the investment and impacting the future of the start-ups. If the CVC operations are not clearly in line with the strategies of the parent company, this can lead to misaligned expectations between the corporate leadership and their venture capital teams, potentially hindering efficient execu - tion. In several cases, the corporate leadership might not be familiar with the risks intrinsic to venture capital activities, which ends up gen - erating friction and misaligned expectations in the decision-making processes, affecting the development of the start-ups. One of the main sources of misaligned strategies is a lack of separation between the roles of the CVC and those of other areas of the company connected to the innovation initiatives, such as business development, M&A or venture building. For example, the use of traditional M&A or pro - ject management mindsets in a CVC context can lead to disastrous consequences, lack of trust in the CVC operations being the most important one. This overlap or confusion between the roles proper to each function can lead to inefficiency and loss of valuable opportunities.

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