Q4’22 Venture Pulse Report– Americas

Despite a significant amount of dry powder, VC investors in the Americas took a conservative approach to their investments during Q4’22. This likely contributed to a much smaller number of very large funding rounds, including $100 million+ megadeals. As the largest VC market in the world, the US bore the brunt of this decline; during Q4’22, the US only attracted 3 deals over $500 million: a $1.5 billion deal by Anduril, an $830 million raise by alterative energy innovator TerraPower and a $614 million deal by Seattle-based battery manufacturer Group14 Technologies.

Outside of the US, few companies attracted large funding rounds. Brazil-based exchange receivables company Cerc raised $101 million during Q4’22—the only startup in Latin America to attract a $100 million+ funding round. The largest deal in Canada was a $318 million raise by emissions-adsorption solutions provider Svante, while the largest deal in Mexico was $60 million of funding for expense management software maker Mendel.

Over the past two years, crypto companies in the Americas have received a significant amount of interest and funding from VC investors in the Americas, including follow-on investors and those motivated by the fear-of-missing-out (FOMO). The well-publicized collapse of Bahamas-based digital exchange FTX—once valued at $32 billion—in Q4’22 put a significant amount of scrutiny on investor decision-making related to the space. It has also driven many VC investors in the US, Americas, and globally to review, improve, and enhance their due diligence platforms and processes.

Given rising interest rates, geopolitical uncertainties, the Q4’22 national election, and an economic slowdown, many companies in Brazil have started to face credit and balance sheet challenges. This has led to growing VC investor interest in credit-focused fintech companies, including startups looking to provide better credit tools and structures, new credit business models, and data analytics to support credit decision making.

Fintech more broadly continued to be the most attractive area for investment in Brazil during Q4’22, followed by cloud and cyber solutions and agritech. Interest in cross-sector offerings also grew, such as companies focused on agri-fintech or agri-biotech.

VC investment in Canada increased slightly quarter-over-quarter. While the level of investment was much lower in Q4’22 compared to the same quarter in 2021, the total remained in line with investment levels seen in quarters prior to 2021.

Canada continued to see strong government support for the VC market ecosystem this quarter. The Business Development Bank of Canada launched several new funds in Q4’22: a $400 million climate tech fund focused on supporting the development and growth of technologies needed for Canada to achieve Net Zero and a $300 million fund focused on supporting women entrepreneurs with companies at the Seed and Series A and B levels.

Heading into Q1’23, VC investment across the Americas is expected to remain relatively soft given ongoing global macroeconomic concerns. Deals will likely take more time to complete as VC investors conduct more due diligence and put a laser focus on profitability and business model sustainability.

The change in government in Brazil could see investors acting with more caution in Q1’23, while they get a stronger sense of what the new regime’s priorities will be. Fintech is expected to remain the hottest sector for investment in Brazil, followed by cybersecurity, B2B cloud solutions, and agritech.