Lemann and Claure’s warning: the right time to invest in startups

Jorge Paulo Lemann, from 3G Capital

The world has gotten a lot tougher for startups. Rising interest rates have dried up the ample liquidity seen in recent years, forcing entrepreneurs to change paradigms, abandoning the mantra of growing at any cost to the search for profitability.

Already some investors are starting to “get real”, seeing that many of their investments in companies that promise revolutionary products will not bring the expected return.

A difficult scenario to operate, but which, for names like Jorge Paulo Lemann and Marcelo Claure, represents an opportunity to invest in truly disruptive businesses, with the chaff being separated from the wheat, and at lower values ​​than in the past.

“This is a wonderful time to invest,” said Lemann, from 3G Capital, one of AB InBev’s largest shareholders, during an event held by Volpe Capital, a venture capital manager founded by former SoftBank André Maciel, this Monday, May 9th. “Prices have retreated and entrepreneurs are ready to accept slightly lower offers. You can find good things and invest in them.”

Last year, the Brazilian venture capital market registered a record volume of investments, around R$9.4 billion, according to a survey by the Distrito platform. But with the main central banks raising interest rates to contain the acceleration of inflation around the world, the cost of capital will become more expensive, which increased the cost of funding for investors.

As a result, startups, which used the resources to grow and were less concerned with financial sustainability in the first years of life, will now have to tighten their belts. Many have already started, as was the case with QuintoAndar, Loft and Facily, who adjusted their staff.

Cash preservation is also something for companies that have long since ceased to be startups and are a benchmark for the sector, as is the case with Uber, after a loss of US$ 5.9 billion in the first quarter.

“Companies will need to be profitable faster, quickly find ways to be quickly profitable and cash-generating,” said Claure, then-trustee of SoftBank founder Masayoshi Son and responsible for bringing the fund to Latin America.

Claure left the conglomerate earlier this year over alleged differences over her pay. Now, he is making investments on his own through his family office, the Claure Group, whose aim is to invest in real estate, technology, games and cryptocurrencies. The target are public and private companies. Even seed it’s on the radar.

For Claure, who will win in this scenario will be those companies that actually present a disruptive product or service and with their operations well adjusted, so they don’t have to depend on new rounds of financing, which may not come or significantly undervalue the company. “There will be less capital in the market, but good companies that are transforming their markets will certainly have capital,” said Claure.

The role of the entrepreneur will be even more fundamental in the midst of market turmoil and lack of resources. Lemann and Claure place significant weight on the founder’s profile, even as they recognize that luck has a bearing on the success or failure of any company and endeavor. “What makes a great entrepreneur, in the end, is the fact that he is a fanatic, one who wants to do it, who does everything to make it happen,” said Lemann.

To exemplify the importance of the figure of the founder, Claure cited the case of WeWork, a shared office company invested in by SoftBank, whose command he took over in 2019 in place of founder Adam Newman to clean up and restructure the company, which was facing difficulties in making its business model viable. business.

“Adam is a great visionary, he saw that the office market would undergo profound transformations”, he said. “But the business was messy, a perfect example of growth at any cost. Adam failed to execute his vision. It’s not just good to dream big, you have to know how to execute it.”

Marcelo Claure will invest through the Claure Group, his family office

While guiding startups to adjust to new times, Lemann and Claure look to the market for new investment opportunities. They converge on the view that the world is undergoing a technological revolution and that there are great opportunities.

Claure, in particular, remains very confident about Latin America, seeing the continent benefiting from the movement of many companies to bring essential links in the production chain closer.

“When I came here for SoftBank, I was very optimistic about the region because of the lack of capital and opportunities, and we managed to equalize Latin America with the rest of the world,” said Claure. “With the flow of resources expected to come with the appreciation of commodities and changes in the supply chain, most of the investments I intend to make will be in Latin America.”