Q4'23 Venture pulse report Americas

VC investors in the Americas remained incredibly cautious in Q4’23, conducting significantly more due diligence on potential deals — driven by a number of factors, including the high profile failures of certain VC backed companies over the last twelve months, ongoing concerns about private company valuations, and the lack of exit opportunities. VC investors have also ratcheted up their focus on profitability, looking for safer bets and startups with business models that are resilient in the current economic environment. These factors combined to help slow deal speed considerably during Q4’23.

LPs also became more particular about the VC funds they invested in during Q4’23, with more focus directed to highly proven fund managers. This has led both to longer fundraising cycles in general and to first time funds finding it more difficult to fundraise in particular. With more investment options at their fingertips, some LPs have also started to rethink their investment allocations. 

VC investment in Canada was relatively strong quarter-over-quarter, rising from $976 million in Q3’23 to over $1.4 billion in Q4’23. Energy and cleantech continued to be one of the hottest areas of investment in the country, led by a $182 million raise by geothermal-focused alternative energy company Eavor and a $54 million raise by carbon removal company Deep Sky.

Quantum computing company Photonic also raised a significant round ($100 million) during Q4’23. Government funding programs for startups in areas like deeptech and AI continued to be strong, which will likely contribute to the long-term development of the space.

Despite challenging market conditions, there continued to be a lot of optimism in Canada’s VC market during Q4’23, given the significant amount of funding available. Despite a considerable slowdown in VC deal speed, VC investors have remained active in the country, if more choosy in their investment approach — looking carefully for startups that have the right fit for the current time. 

Despite a nearly 20 percent drop in the number of VC deals between Q3’23 and Q4’23, VC investment in Brazil dipped only marginally thanks to a $197 million raise by B2B enablement company QI Tech. Given the significant decline in VC deals activity, a number of startups in Brazil have found it impossible to raise additional funding forcing some to shut down entirely. Fintech continued to be the primary focus of VC investors in Brazil, with investors increasingly pressuring companies to start showing profitability.

While CVC investment declined in Brazil during Q4’23, the drivers of corporate investment in the country remained unchanged — with many corporates looking at VC investment as an opportunity to invest in technologies that could improve their core business or provide adjacent or disruptive opportunities for their organizations in the future. This will likely keep CVC investment more resilient amidst the current economic factors compared to other forms of VC investment.

While VC investment in Brazil may be somewhat muted at the moment, the country continues to be well positioned for growth long term given its large unbanked population, instant payment platforms, and the government’s ongoing focus on encouraging open banking and open finance. This could, over time, lead to more opportunities for fintechs and other organizations able to meet the wide range of needs of Brazil’s diverse population.

VC investment in the Americas is expected to remain soft in Q1’24, although the AI space will likely continue to see very robust deal activity and funding. The number of down rounds is likely to keep creeping up in the region until the IPO window properly opens — which is now not expected before the second half of 2024. There will likely also be a growing number of companies unable to raise funds as VC investors focus on companies with clear paths to profitability and those with sustainable business models able to thrive in the current economic environment.