VC investment in the Americas remained relatively strong in Q3’20, driven primarily by VC investment in the US. VC investment in Canada was quiet during the quarter, although the IPO of payments company Nuvei on the Toronto Stock Exchange showcased the strength of Canada’s technology innovation ecosystem. In Latin America, the fintech sector continued to attract most of the attention from VC investors, led by Neobank Neon’s $300 million raise.

VC investors in the Americas remain focused on late-stage deals and big bets

During Q3’20, VC investors across the Americas continued to flock towards late-stage deals and companies with proven business models. Investors also focused on companies in sectors that have seen opportunities grow as a result of the pandemic, including delivery and logistics, business productivity solutions, fintech, and health and biotech.

The focus of VC investors on safe bets, late-stage deals, and companies within their existing portfolios has made it even more challenging for seed and early-stage companies to attract funding. The prolonged decline in early-stage deals, which started several quarters prior to the pandemic, is concerning as it could affect the pipeline of middle and late-stage deals over the next few years.

Venture financing Americas, Q3'20

VC investment taking a breather in Canada

VC investment in Canada slowed in Q3’20 as dealmakers worked to adapt to new ways of conducting business, from holding virtual meetings to conducting remote due diligence processes. This slowdown is not expected to be prolonged given the amount of dry powder in the Canadian market and the fact that VC and PE firms with fully capitalized funds will not be able to sit on the sidelines for long. This could lead to an upswing in deals activity beginning in Q4’20 and into Q1’21.

Brazil VC market continues to mature

With interest rates at the lowest in the country’s history, Brazil-based investors exhibited more interest in making higher risk VC investments. During Q3’20, the level of VC investment in Brazil rose for the third straight quarter. While fintech continued to drive the vast majority of VC investments in Brazil, and across Latin America, during the quarter, other sectors also saw interest from VC investors, including healthtech and delivery and logistics. Mobile gaming company Wildlife Studio also raised $120 million during the quarter.

As the VC market in Brazil continues to mature, more startups are moving to the stage where they are looking to grow either regionally or globally, and will require the funds to do so. This will likely lead to larger deals in the region over time.

Trends to watch for in the Americas

Despite current economic challenges related to COVID-19 and the approaching US presidential election, VC investment is expected to remain steady in the Americas. Fintech is expected to remain a hot area of VC investment over the next quarter, in addition to health and biotech, transportation and logistics, and edtech.

During Q4’20, the Central Bank of Brazil is expected to rollout its new instant digital payments model, PIX, which will be mandatory for all major banks and financial institutions in Brazil6. This new model could spur significant VC investment in Brazil over the next few quarters.

Quote by Robson Del Fiol
Americas: Global analysis of venture funding infographic in Q3'20