Brazil’s Startup Boom: How Early-Stage Companies Are Fueling an IPO Revolution
A Shifting Economic Landscape
Since 2007, Brazil’s public markets have undergone a dramatic transformation. The number of publicly listed companies plummeted from 400 to just over 300, with only 21 IPOs occurring in the past six years (averaging 3.5 annually). Surprisingly, by 2019, even Iran boasted more listed companies than Brazil.
However, 2020 marked a historic turning point. Driven by global pandemic stimulus packages and record-low interest rates, Brazil witnessed:
- 25 primary and secondary equity offerings in Q3 alone
- The most active year in history for deal volume and dollar value
- Startups entering public markets for the first time
The Rise of Tech in Traditional Markets
Brazil’s IPO pipeline tells an even more compelling story:
- 47+ companies have filed with CVM (Brazil’s SEC equivalent)
- 6 approvals granted in just the first half of October
- Tech sector breakthrough: Only 2 software IPOs occurred between 2010-2020 (both in 2013)
Historically dominated by commodities and utilities, Brazil’s market is now welcoming internet and technology companies. This shift reflects changing investor appetites and market dynamics.
Why Brazilian Startups Previously Looked Abroad
Several factors drove Brazilian growth companies to US markets:
- Local investors traditionally favored value plays over growth stocks
- Foreign investors (70% of 2007 IPO demand) avoided domestic market risks
- Undervalued currency depressed local valuations
Notable examples include:
- Stone Payments
- Netshoes
- PagSeguro
- Arco Educação
- XP Investimentos
Ironically, Brazilian startups completed three times more US IPOs in the past five years than domestic offerings in the last decade.
The 2020 Startup Surge: Records Shattered
September 2020 marked a watershed moment:
- $843 million raised by Brazilian startups (monthly record)
- Vtex became Brazil’s 10th unicorn
- 21 startup M&A deals (all-time high)
Brazil ranked third globally for new unicorn creation in 2019, trailing only the US and China. Traditional financial institutions are adapting:
- BTG Pactual launched BoostLAB for tech companies
- B3 created special listing rules for smaller businesses
New Investors Driving Change
The 2020 boom differs fundamentally from 2007:
- Local investors now drive 2⁄3 of equity demand (vs. foreign dominance in 2007)
- Retail investor growth: From 500,000 to 3 million in three years
- Institutional shifts: Massive portfolio relocation from fixed income to equities
This domestic focus creates stability, as local investors:
- Understand Brazilian market dynamics
- Maintain customer relationships with issuers
- Provide more consistent capital than volatile foreign flows
2020’s Trailblazing Startup IPOs
This year has seen unprecedented public market entries:
- Mosaico
- LocaWeb
- Boa Vista
- Enjoei.com.br
- Meliuz
- Wine
- Housi
Remarkably, many are cash-burning companies with net losses and modest revenues (\(10-\)20 million annually)—a first for Brazil’s public markets.
Challenges and Uncertainties Ahead
While promising, Brazil’s capital market expansion faces headwinds:
- 12% GDP deficit from COVID stimulus
- Debt/GDP ratio potentially exceeding 100%
- Political hurdles: Municipal elections (2020) and presidential race (2022)
Key questions for investors:
- Will retail investors remain committed during market shocks?
- Can international investors be attracted to local-currency bargains?
- How soon will crucial fiscal reforms materialize?
The Long-Term Outlook
While the current boom may be partly temporary, fundamental shifts suggest lasting change:
- New economy sectors gaining traction
- Domestic investor base expanding
- Financial infrastructure adapting to startup needs
Brazil’s capital markets may finally be ready to support its homegrown innovation ecosystem—marking the true beginning of the country’s “Roaring 20s.”
