Brazilian startups expected to cut cash burn as available capital dwindles – survey

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SAO PAULO, Sept 20 (Reuters) – The founders of Brazilian unicorns, startups valued at more than $1 billion, believe most startups will adjust their businesses to reduce cash burn amid falling capital investment. venture capital, according to a survey by venture capital fund Atlantico.

Venture capital investment in Latin America fell to $2.4 billion in the second quarter of the year, from $5 billion in the same period a year ago, according to data from industry group Lavca.

Unicorn founders agree their peers will have to adapt to reduce cash burn – 37% say their own companies will, and 50% believe it will happen to their peers. Although only 5% of founders think their own company might have to close or end up in a sellout, 33% think it will happen to their peers.

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According to the survey, the most common measures to reduce cash burn are hiring freezes, reductions in marketing spend and layoffs. About 80% of startups that have laid off staff have reduced their workforce by 10% or less.

Although raising capital is more difficult, Latin America still presents good opportunities, said Julio Vasconcellos, managing partner of Atlantico.

Internet penetration in Latin American countries has increased with the pandemic, reaching 78%, and is now higher than China’s 69% and closer to levels in developed countries. The United States has 92% penetration.

The rise in e-commerce share of sales in Brazil to around 7% appears to be permanent, while in the US e-commerce market share has returned to pre-pandemic levels. The dynamics have changed in healthcare, banking and delivery services.

Despite declining tech stock prices in developed markets, investors are optimistic about the potential earnings of tech companies in Latin America, Vasconcellos added.

Only 1.5% of the total market capitalization of Latin American technology-related companies, a share that reaches 20% in China and 52% in the United States.

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Reporting by Tatiana Bautzer; Editing by Stephen Coates

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