Column: Why are investments in startups higher than ever?

Investors realize not only the adaptability of these startups, but also the health that these businesses already had before the crisis

In view of the crisis caused by the new coronavirus, some projections pointed to an eventual reduction in investments in startups . However, what was seen in the country was another type of scenario. Investments maintained the intensity of previous years in the first half and point to growth in the second half of the year.

But why did this happen?

One of the main reasons is that, with the crisis, innovation is on the rise. The ecosystem came from a period of abundance, of growth, of good projection when the pandemic arrived. And, if it is true that the crisis that followed caused an initial drop in investments in general — largely due to the uncertainty that emerged in this context -, on the other hand, this same crisis exposed a series of opportunities, as it was clear to everyone the potential of digital transformation in all businesses, and also in people’s lives.

In other words, the change that was already necessary and was already taking shape, ended up being accelerated in this period. Several paradigms are being broken, and barriers that previously existed are being broken, and startups are at the forefront of this transformation.

Ecosystem maturity

Today, investment in startups comes from several sources. Be entrepreneurs that are joining angel investors, big companies that perceive the urgency of innovation and find solutions to their challenges in startups, or venture capital funds that, after a necessary reevaluation period — and that lasted a short time — , are already able to identify where the best opportunities are: those most resilient to the crisis, those that even bring solutions to what this post-crisis world will be, or the expected resumption after that period.

At 100 Open Startups, we have already seen a greater investment offer, accompanied by an even greater demand. Many startups that had, eventually, a good performance — and that would not necessarily need fundraising — quickly noticed the change in the market scenario, made a change in their business too and then started to demand capital and went after these investors.

At the other end, investors perceive not only the resilience of these startups, but also the health that these businesses already had before the crisis. They are startups that managed, despite a momentary thump, to show that they are even more promising solutions and, consequently, more attractive for investments. After all, it is at times like these that great ideas emerge, that break paradigms.

Investments in the first half

Between January and June 2020, according to District data, 167 deals were made, while in the same period in 2019, 98 deals were registered. If we consider only the numbers from April to June 2020, a critical period of the pandemic in Brazil, there were US $ 333 million in investments, very close to the US $ 336 in the first quarter, which points out that there was no significant decrease in the contributions before and after the arrival of the pandemic in Brazil, and the expectation is for growth in the second half.

In the same period from April to June, we mapped 14 acquisitions made by large corporations, such as Stone (which bought Vitta), VTEX (dLieve and Biggy), XP (Fliper, Antecipa and DM10), Via Varejo (ASAP Log), among others . And the second half also starts promising, with companies like Embraer and Nubank acquiring startups in the midst of a crisis.

The pandemic has undoubtedly had a major impact, not only in our lives, but in all sectors of the market. However, the digital transformation, the urgency for innovation and the ability to reinvent itself, which resulted from this scenario, point to a future favorable to the innovation ecosystem .