Valuations are down in Brazil and so is venture activity

Only several years ago, U.S. venture investors rushed to Brazil hoping to catch one of the world’s more promising markets on an upswing.

Oh, how times have changed.

“There’s definitely been a pull back in investing in general,” said Antoine Colaco, a partner at Valor Capital.

With the Brazilian economy in recession, the flights to Sao Paulo are no longer crowded with venture capitalists scouting the emerging startup landscape. Perhaps they should be.

The slower market, while bringing down valuations, hasn’t diminished the entrepreneurial appetite to disrupt the Brazilian economy.

“Things are just more reasonable now,” said Colaco, speaking at the Venture Capital in Brazil Forum held in late September in Silicon Valley. “It’s a very interesting time in Brazil from an investor’s perspective.”

So far this year, venture activity in Brazil is down from two years ago. Through late September, 30 transactions have attracted $270 million of capital, according to data from Thomson Reuters. That compares with 50 deals in 2013 and 36 last year.

U.S. venture investors haven’t stopped putting money to work in Brazil, though they, too, are moving at a slower pace. They participated in 19 transactions so far this year, which is down from the 28 they joined in 2012, according to Thomson Reuters.

Among the U.S. investors making bets in the country this year are Qualcomm Ventures, Tiger Global, Sequoia Capital, Accel Partners, Felicis Venturesand Riverwood Capital Group, Thomson Reuters finds.

Valuations got crazy a few years ago, said Nazar Yasin, managing partner atRise Capital, who also spoke at the forum. This has changed. Yet there is no shortage of top entrepreneurs, and a lot of businesses are being disrupted by mobile in Brazil, including in financial services and media, he said.

Deal competition also is down. People are no longer racing to get into deals, said Patrick Arippol, a managing director at the Venture Group. “That’s no longer there.”

He described the market as healthy.

One firm taking advantage of the changing environment is Redpoint eventures. The firm has made seven investments so far through mid-year 2015, said Partner Manoel Lemos. That compared with six in 2014.

To download an Excel file: Select VC-backed companies in Brazil