Brazilian Seller of Startup Stakes Shifts Platform’s Focus From LatAm to Global

Carlos Naupari, CEO of Velvet, explained to Bloomberg Línea why he has decided on a new strategy for the company, two years after raising US$200 million

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Bloomberg Línea — Velvet, a fintech that operates a platform facilitating the buying and selling of stakes in startups within a digital secondary market, has opted to change its business focus and discontinue operations in Latin America due to declining business in the region.

The new objective is to relaunch the product and target innovative global startups, as stated by Carlos Naupari, CEO and founder of the fintech, in an interview with Bloomberg Línea. Consequently, the company aims to attract high-income investors from family offices interested in investing in privately-held startups in the United States.

To implement this shift in strategy, Velvet has entered into a partnership with Templum, a technology company led by entrepreneur Christopher Pallotta based in New York, specializing in developing systems for asset trading in private and alternative markets.

Today, our investors, with assets exceeding $10 million, already have accounts abroad and seek diversification beyond traditional financial market products in Brazil. With this partnership, we offer an alternative. We can provide targeted investments in things that not everyone has,” said Naupari, former country manager of Easy Taxi in Mexico City and former private banker at UBS in New York.

According to the founder, the collaboration with Templum will grant investors access to companies like SpaceX, OpenAI, and Neuralink. “These are truly exponential companies that impact humanity,” he said. Velvet’s goal is to reach $250 million in transactions by 2024.

Among its competitors are companies like Carta and Nasdaq Private Market, which also function as marketplaces facilitating the trading of stakes in private companies.

The decision to focus on global privately-held startups rather than Latin American companies comes amid a downturn in the venture capital market in the region, leading to a decrease in the value of some unicorns (startups valued at $1 billion or more). Consequently, shares of Latin American companies traded on the secondary market have experienced significant losses.

“The major unicorns in Latin America are companies that digitalized something. Proptech companies, for example. They reached values of $3 billion, $5 billion after receiving funding, but nobody else believes in those values in the secondary market,” Naupari stated.

Almost every week, I receive messages from former employees or employees of major Latin American unicorns asking about secondary transactions. We no longer conduct secondary transactions for Latin American companies simply because there is no demand, no appetite on the other side. Ultimately, we have to focus on bringing returns to our investors,” he added. Velvet was founded in 2021 as a financial platform for investors in secondary transactions of illiquid assets.

The company sold equity stakes of employees, former employees, or investors of Latin American unicorns who wanted to divest part of their position. Buyers are typically private banking and wealth management clients. The service was offered to startups themselves as a way for employees to capitalize on the shares received as bonuses.

It seemed like a great business in a year when venture capital injection in Latin America reached $15.7 billion, more than the region raised in the entire previous decade, according to Lavca (Latin American Private Equity and Venture Capital Association).

However, the focus on the region ceased to make sense when high-interest rates deterred investors from risk assets. In February last year, Velvet raised $200 million in venture funding in a deal led by Yolo Ventures. Previously, the fintech had raised $3.5 million in seed funding in a deal led by Global Founders Capital in December 2021. The new platform emerged from the partnership with Christopher Pallotta’s Templum.

“He’s a great friend of mine, precisely from the time I was in New York from 2008 to 2013,” Naupari said. Christopher’s father is James (Jim) Pallotta, a billionaire founder of Raptor Group, a private investment company. He was one of the early investors in Uber and Airbnb and also owned AS Roma, an Italian football club.

Earlier this year, Naupari was in Miami where he met Christopher Pallotta. “We had a conversation, and we thought, why not partner with the technology Templum had already developed, with the reputation Velvet had built?”

After downsizing the team in response to market changes, Naupari believes in the potential of the new strategy, highlighting his solid relationships in Brazil and abroad. “We have enough cash to finance this new product,” he said.