Performance of Brazilian Private Equity and Venture Capital Deals (1984-2021) (Spectra Investments)

Summary

• Overall Brazilian PE and VC deals achieved an average gross MOIC of 2.8x and a gross IRR of 17% p.a. in USD, compared to an average gross MOIC of 4.7x and a gross IRR of 19% p.a. in BRL.p.2
• Tech exits showed a VC return pattern, with 40% suffering total losses and 8% yielding a gross USD MOIC above 10x (reaching a maximum of 455x), resulting in a tech average gross MOIC of 6.2x in USD and 8.3x in BRL.p.2
• Non-tech deals exhibited a PE return profile with an 8% total loss rate, a 20% partial loss rate, and an average gross MOIC of 2.9x in USD (3.5x in BRL).p.2
• Write-offs accounted for 24% of all analyzed exits, with a high concentration in tech deals (41%) compared to non-tech deals (14%).p.2
• IPOs were the most profitable exit route for non-tech companies with a 66% average gross IRR and 4.7x average gross MOIC, whereas sponsor-to-sponsor transactions achieved the highest average MOIC for tech deals at 27x.p.3

Key insights

1. The number of investments in Brazilian tech companies has expanded since 2010 and surpassed non-tech investments in 2012.p.2
2. Currency devaluation significantly suppressed reported returns for foreign investors, reducing tech average gross MOIC from 8.3x in BRL to 6.2x in USD.p.8
3. High-performing outliers strongly drove tech returns, with the 8% of tech deals returning over 10x MOIC contributing 53% of the total tech average gross MOIC.p.5
4. Brazilian non-tech PE deals outperformed global standards, generating an average gross USD MOIC of 2.9x compared to 2.19x for global PE/VC deals exited between 2015 and 2019.p.6
5. Tech IPOs generated lower average returns (30% IRR, 4.3x MOIC) than strategic sales or sponsor-to-sponsor exits in Brazil because fund managers rarely take pre-breakeven tech startups public.p.11
6. Buybacks proved to be the least profitable and highest-loss exit mechanism, causing losses in 71% of tech buybacks and 32% of non-tech buybacks.p.13