Bloomberg Línea — Visa’s (V) purchase of Brazilian fintech Pismo for $1 billion has had a reverberating impact on the venture capital sector in Latin America, with experts saying that the acquisition represents a positive signal for technology developed in the region, gaining global scale through the payments giant.
The transaction comes at a low point in M&As and investment for the sector, according to recent data on investments and deals from the innovation platform Distrito. In the first six months of 2023, there were 199 investment rounds recorded in Brazil in the first half of the year, with a total $384.7 million invested in 97 rounds in the second quarter, according to Distrito. The fintech sector led in volume with $185.9 million in 2023′s first six months.
The sale of Pismo also marks the emergence of Brazil’s first unicorn of the year, according to Distrito. For experts like Hernán Kazah, co-founder of Kaszek, Pismo’s exit is considered “amazing” and a validation of the ecosystem.
“I think it’s great, excellent news for the ecosystem, a company bought by Visa for $1 billion, and there was still competition between Visa and Mastercard. For me, this is terrific, congratulations on what they have built. It’s great for everyone, for entrepreneurs, investors, it’s a validation of the ecosystem,” he said in an interview with Bloomberg Línea in late June.
However, it is still too early to determine whether this transaction represents a new window of opportunities for multiple deals and valuations like those of 2020 and 2021, according to Felipe Barreto Veiga, founding partner of BVA Advogados and specialist in M&A, private equity, venture capital and corporate law, with a focus on startups.
For Barreto, despite the continued appetite for acquisitions, there are challenges in the tech market, such as the high cost of labor and the difficulty of obtaining financing.
“It is evident that enterprises and big corps continue with an agenda of acquiring companies and technology solutions, as seen with Visa and several other giants, such as Totvs, which recently announced the acquisition of Exact Sales,” Barreto said in an emailed statement.
“To give you an idea, some Brazilian technology companies listed on the stock exchange have still been priced below the available cash resources,” he added.
Furthermore, the consensus about the decline in the Selic rate could have a positive impact on valuations and an increase in the acquisition cost for buyers, according to Barreto. “Considering these factors, I believe we may be entering the end of the acquisition window in Brazil,” he said.
An entrepreneur from a Latin American payment infrastructure fintech told Bloomberg Línea that Pismo’s acquisition by Visa is an excellent sign for technology developed in Latin America.
Pismo is a company that provides a cloud-based banking platform and payment solutions, with operations in Latin America, the Asia-Pacific region, and Europe.
In the first half of the year, there were 61 M&As in Brazil, representing a 27.4% reduction compared to the previous semester and a 48.7% decrease compared to the first half of 2022, according to data from Distrito.
In quarterly analysis, the number of M&As remained stable compared to previous quarters.
In recent years, Latin America has witnessed notable exits through M&As in the startup sector. Among them:
- Auth0 (Argentina): US technology company Okta acquired Argentine authentication services provider Auth0 for approximately $6.5 billion in stock in 2021
- iFood (Brazil): In August 2022, Dutch investment group Prosus paid $1.8 billion for a 33% stake in Brazilian delivery company iFood, becoming its majority shareholder and valuing the business at $5.4 billion
- Cornershop (Chile): In 2021, Uber took control of the grocery shopping delivery platform Cornershop for $1.4 billion
- 99 (Brazil): In January 2018, Brazilian urban mobility company 99 was acquired by Chinese company Didi Chuxing in a transaction valued at over $1 billion
Ricardo Josua, CEO and founder of Pismo, graduated in business from Fundação Getúlio Vargas (FGV) in 1997. Josua had previous experience at Banco Garantia and Credit Suisse before working at his father’s company, where a small group was developing a payment processing platform. The project grew and became a business called Conductor, which he co-founded in 1999 and served as CEO for 13 years. It was there that he met his future business partners Daniela Binatti, Marcelo Parisi, and Juliana Binatti Motta. Together, they founded Pismo in 2016.
Josua participated in the negotiation with the private equity firm that acquired a 51% stake in the startup Conductor, which is now renamed Dock and under the leadership of Antonio Soares, and reached a valuation of $1.5 billion in a financing round in 2022.
The transaction with Visa is subject to regulatory approvals and is expected to be completed by the end of 2023.