Don’t Count the VC Money until Cashing the Check

São Paulo — California law firm Gunderson Dettmer, which specializes in venture capital financing for startups, is opening an office in São Paulo to be closer to clients in Latin America.

For Gunderson’s clients in the region, there have been no down rounds yet. “But we have seen the movement of [investments] that need to close very quickly and a movement for us to have in the documents that are more for the investor side,” Christel Moreno, a partner in the São Paulo office, told Bloomberg Línea.

According to Moreno, the firm has been advising startups not to count on VC money until it is in their accounts, as there have been cases of funds pulling back on their investment.

“We have seen a little less of this movement [pulling the check] from funds that are more used to investing in Latin America. Hence our advice for founders to be more conservative about spending.”

Adan Muller, the co-founder of the São Paulo office and corporate partner at Gunderson, said the firm has been involved in Brazil for 15 years, representing foreign investors who were investing in Netshoes, for example.

He says he has seen cycles where the market is doing well and where there is less investment and companies have to think about how they are going to survive. “It’s something that happens in Latin America, but at the end of the day, we believe that the technology sector in the region has a lot of growth,” he told Bloomberg Línea.

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The firm works with venture capital financing with 100 Brazilian client companies and 90 investment fund clients in the country. Since 2018, Gunderson has conducted eight mergers and acquisitions (M&A) for local companies, with a total value of more than $2 billion.

In the region, the practice counts 200 startups as clients and 151 funds. The firm has brokered more than 600 foreign VC and growth equity rounds in Latin America since 2017.

The Latin America team has also represented companies in more than US$3.8 billion in M&A transactions in the region since 2014, including Didi’s acquisition of 99 Taxis in 2018, OLX Brazil’s acquisition of Vivareal in 2020, Uber’s acquisition of Cornershop in 2020, Etsy’s acquisition of Elo7 in 2021, B3′s acquisition of Neoway in 2021 and SoFi’s acquisition of Technisys in 2022.

From the São Paulo office, Gunderson Dettmer intends to serve startups and funds for Brazil, Mexico, Colombia, Chile, Argentina, and Peru.

According to Muller, in recent years the valuations were very high. But now, at a time of more cautious investors, the office expects to focus more on early-stage.

“That’s the market that’s going to be most active this year for our companies that are capitalized and probably some buyout activity for the ones that are not as capitalized, that are not being able to raise,” Muller said.

“I think the last couple of years was a boom of investors writing million-dollar cheques with virtually no investor rights and today there is a lot more caution. We’re seeing that deals that would normally close in three weeks, now take much longer weeks,” Moreno added.

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