As we have preached

With $53 billion in AuM, Andreessen Horowitz is one of the largest of traditional SV firms and closely watched among other VC firms as a trend setter. Last week it announced that it has dissolved its core consumer team, known for bets on Airbnb and Instacart, hence completely pivoting from consumer to enterprise.

When we created Fabrica Ventures our goal was to craft a carefully curated and trustworthy vehicle for Brazilian investors seeking diversification in B2B VC (plus tech, plus late stage, plus US). To check the rationale behind our focus on B2B and tech, refer to: https://fabricaventures.com/stickiness/. And some insights of why late stage VC are available at: https://fabricaventures.com/late-stage-vc-turning-point/

This recent Andreessen Horowitz shift towards B2B is then a good catch to delve into some considerations why Brazilians should look abroad if they wish to invest in the B2B sector.

Obviously, a thriving B2B market is contingent upon the presence of numerous robust and growing companies. Let’s then examine the Brazilian stock exchange (as of 1/31/2024) as a proxy for the health of the B2B sector.

1) Thinness: only 324 listed companies boast a market cap exceeding US$10M

2) Size, as a proxy for B2B spend budget: only 117 listed unicorns (with market cap over US$1B), or 20% of the number of private unicorns in the US

3) International competition: most of the IT budgets (cloud, cybersecurity, SaaS, etc.) are captured by B2B multinationals

4) Lack of options: among the 100 largest (by market cap) companies, only two are B2B (services), Totvs (software) and GPS (labor outsourcing)

5) Not cheap: Totvs forward P/E of 28.1 is the same of SAP’s

6) The forever closed IPO window: the last one happened 2.5 years ago; since 2010 there has been 9 IPOs per year, on average

7) The 2021 nasty hiccup: most of the companies that IPOed in 2021, a record year, have been performing poorly – Clearsale, for instance, the most promising one, dropped by almost 90%

8) No escape: no avail to the few B2B Brazilian companies that tapped the US stock markets – Semantix, for instance, after spending more than R$50M in S&M, experienced a 50% revenue drop, from R$80.6M (3Q22) to R$40.0M (3Q23)

9) Investing vs. speculating: in a broader context, there is a material difference between investing (long term) and speculating (short-term, anything goes). The Brazilian stock market is for speculating, attested by the more than 15 years in bear territory (Ibovespa reached its peak in May 2008, at 72,767 points; adjusted to price inflation (IPCA), this peak would be equivalent to ~165,000 points today vs. the current 130,000 points).

Conclusion

US,

Late stage VC,

Tech,

B2B,

There is a name.