I have three reasons to keep betting on Brazil

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You can be deeply skeptical about Brazil’s institutions, frustrated by its interest rates, and still be very optimistic about building businesses there.

I’m definitely in this camp.

I just watched a 2014 conversation with Beto Sicupira (English captions and AI translation work miracles for those of us who still don’t speak Portuguese after six years of doing business in Brazil 😒). It’s incredible how those two views can go together like tequila and lime, coffee and cigarettes, New York and complaining about New York.

Sicupira had no illusions about Brazil’s problems. He had spent decades operating through them. And he still considered the country an extraordinary place to build.

That approach feels especially relevant right now, a few days after Lula was elected president of Brazil for a fourth term in what might be the most improbable political comeback of the year. Before this election, no candidate who finished second in the first round had gone on to win any of Brazil’s seven presidential runoffs since 1989. Also, did you guys see the Polymarket odds in the final 24 hours before the second round?

So yes, it is entirely reasonable to worry about fiscal policy, the cost of capital, regulatory uncertainty, and what the next government will do. Those things affect customers, companies, and investment returns.

I’m not a politician, and I don’t have a crystal ball. Will Lula pursue fiscal discipline, get debt under control, and help create the conditions for interest rates to fall, or at least stop rising? We don’t know yet. And another three hours of scrolling through social media probably won’t make us any wiser.

What I do know is that there are opportunities to build (and fund!!) impressive businesses, even if the macro picture doesn’t improve.

For me, those opportunities fall into three buckets:

1. AI-native vertical software. Companies using AI to tackle expensive, complicated problems in industries like legal services, wealth management, manufacturing, payroll, and healthcare.

2. Profitable SaaS and fintech secondaries. Opportunities to buy into established businesses with proven economics while giving existing investors and employees a path to liquidity.

3. Data centers and AI infrastructure. The opportunity for Brazil to host more of the computing capacity behind the global AI boom.

Each has a different set of drivers, capital requirements, and risks. Here’s how I think about each one and why I believe the opportunity is there.

1. AI-native vertical software

If you want to understand what is bringing U.S. venture investors back to Brazil, start here.

Sequoia invested in Enter, the legal AI company, marking only its second investment in Brazil, roughly twelve years after Nubank. In May, Founders Fund led Enter’s more than $100M Series B at a $1.2B valuation. That is a fairly substantial vote of confidence in a company building AI for Brazilian legal departments.

Then there’s Decade, which raised $85M from Greenoaks, Benchmark, and Diffusion to build an AI wealth adviser. Tractian raised $130M at a $1.4B valuation in October, led by Sapphire Ventures and co-led by M&G’s Catalyst. And Comp’s $17.25M Series A, led by Keith Rabois, marked Khosla Ventures’ first investment in Brazil.

Different industries, different stages. But I see a common attraction: large pools of spending, expensive work, and founders using AI to rethink how that work gets done.

Legal, financial services, manufacturing, healthcare, HR. These industries don’t disappear because interest rates stay high. Neither do their inefficiencies.

For small and mid-sized businesses, the opportunity can be extremely attractive. An enterprise can afford a specialist team to manage collections, compensation, or financial planning. A smaller company often makes do with whoever is available, a spreadsheet, and a lot of manual work.

AI can change the economics of serving that customer. It can make expertise more accessible, reduce administrative work, and allow a provider to serve businesses that would previously have been too expensive to acquire and support.

That is one way to build a substantial company in Brazil under the conditions that already exist.

But there is another part of this thesis that I think is way less obvious to many: Brazil can also be a better place to figure out a new business model before taking it to the rest of the world.

And yes, I think that in certain parts of financial services, challenging the status quo in Brazil can be easier than doing it in the U.S. I suspect some of you will disagree with me.

Brazil combines sophisticated financial services with infrastructure deliberately designed to enable competition. Pix provides shared instant-payment infrastructure. Open Finance allows customers to authorize the sharing of financial data, giving new providers a way to compete beyond the information held inside an incumbent bank. The Central Bank explicitly identifies competition and new business models among its objectives.

My argument is that these foundations can give a founder more room to build a particular product, test distribution, and establish customer relationships. The relevant comparison is the specific business you want to launch and the barriers you face in each market.

The same logic applies outside fintech. Think Comp.

Comp launched in Brazil because HR technology adoption is lower than in the U.S. and companies are more accustomed to buying services. That makes it an attractive starting point for a business combining HR specialists, AI engineers, and customized software. Its customers include Nubank, iFood, and QuintoAndar.

I also see the potential for lower customer acquisition costs in Brazil as an important advantage: more room to test your offering, figure out distribution, and establish the economics before taking on the U.S.

And surprise, surprise: the U.S. is on Comp’s expansion roadmap. Prove the model in Brazil, then take it into a much larger market.

This is what I mean by Brazil as a sandbox: a very large market that, for the right business, can be a friendlier place to get started. A place to work out what customers will pay for, how to acquire them, and how to deliver the service profitably before expanding.

Of course, the business still has to travel. A product built around Brazilian regulation may need substantial adaptation abroad. But the technology, operating model, and expertise developed here can give founders something valuable to take into the next market.

That leaves two opportunities I find compelling: use AI to serve much more of Brazil’s economy, and use Brazil to build something with global potential.

The size of the ambition matters in both.

2. Profitable SaaS and fintech secondaries

By my estimate, Brazil has around 40–50 B2B software businesses, some with fintech layered on top, doing more than $100M in annual revenue or revenue run rate. Some are already in the hundreds of millions. CloudWalk is well beyond $1B.

Think Contabilizei, Omie, Jusbrasil, Solfácil, Sólides, EBANX, Asaas. These are substantial businesses. Many are profitable. They’re still growing. They have very sticky customer relationships and sit on years of data, in some cases more than a decade of it.

And they have a huge opportunity to disrupt themselves with AI. Improve their economics, do more for existing customers, and go after segments they couldn’t profitably serve before. So I would argue that, for many of these companies, a substantial part of the growth is still ahead.

But Brazil doesn’t have a deep pool of dedicated VC growth funds to finance that next chapter. And this is where the technology practices of private equity firms are stepping in, providing growth capital and buying out earlier investors.

Look at Warburg Pincus. In Contabilizei, it bought $125M worth of shares from earlier investors, including Kaszek. In VOLL, it bought out Localiza’s controlling stake in a transaction of more than $120M.

Then there’s Advent International’s ~$400M investment in EBANX, at the time its largest technology investment in Latin America. And Partners Group’s $160M deal in Omie, buying out existing shareholders.

As Bruno Maimone told me during our interview, the biggest question related to secondaries they discuss in their board meetings is whether they can buy more secondaries.

Think about that. You can buy secondaries in Brazilian technology cash cows where much of the early risk has already been taken. The product works. Customers pay for it. Distribution exists. AI could unlock another substantial chapter of growth. And relatively few dedicated funds are competing for those transactions.

So far, a huge part of the transfer of ownership and the opportunity to capture the next phase of value creation is happening at the private equity level.

And I think there is definitely room for much more dedicated capital here: VC growth funds, technology secondary funds, and continuation vehicles that give existing investors liquidity while allowing others to stay invested.

Especially because I expect the number of $100M-plus revenue businesses to go up, and AI to help those companies reach that scale much faster.

3. Data centers and AI infrastructure

Data centers and AI infrastructure are among the sexiest places to invest right now, in the U.S. and globally.

But actually getting one built in the U.S. can feel like a loser’s game. Unless you’re Crusoe, Amazon, Microsoft, or, of course, Elon Musk.

From that perspective, Latin America at large, and Brazil specifically, represents an enormous opportunity.

Brazil generates roughly 87% of its electricity from renewable sources. That’s a meaningful advantage when the industry you’re trying to attract needs an enormous amount of power.

Brazilian companies are adopting cloud services and AI on steroids, shall we say. Brazil is among OpenAI’s five largest markets by revenue. It’s also one of ChatGPT’s three largest markets by weekly active users. However, around 60% of the country’s digital workloads are still served from abroad.

And Brazil can use its energy advantage to sell computing capacity to the rest of the world, particularly for workloads such as AI training that don’t need to happen close to the end user. That, in essence, is the big bet these infrastructure investors are making.

Think I Squared and Elea. SoftBank, through DigitalBridge, and Scala. BlackRock’s GIP and MGX buying into Aligned.

I Squared bought a majority stake in Elea and is backing an expansion plan requiring more than $10B to build over 1GW of capacity.

SoftBank bought DigitalBridge, the investment firm that controls Scala Data Centers. Scala is developing an AI City in Rio Grande do Sul, starting with a $500M investment and an ambition to eventually reach 4.75GW of capacity.

BlackRock’s GIP and MGX were part of the $40B acquisition of Aligned, a U.S. data center company whose Latin American operations include facilities in São Paulo.

Then add Redata, Brazil’s new tax incentive regime for data centers, which reduces taxes on qualifying equipment purchases and imports. For projects requiring billions of dollars in equipment, that directly changes the economics of building in Brazil.

So you have renewable energy, a large domestic market, demand from international customers, and tax incentives that make the build-out more attractive. And some of the world’s largest infrastructure investors putting capital behind it.

And mind you, some data center investments target ~25% annualized returns. To put that into perspective, three out of four VC funds in every vintage from 2017 to 2024 were reporting returns to their LPs of 15.5% or less. Think about that.

· · ·

And it’s worth remembering that some of the region’s most important companies got started during turbulent and uncertain times.

Mercado Livre started in Argentina in 1999. Then came the dot-com crash and Argentina’s economic collapse.

XP started in 2001, the year Brazil faced an electricity crisis that forced households and businesses to ration power, while financial contagion from Argentina put pressure on the currency and investor confidence.

Nubank was founded in 2013. Its critical early years coincided with a deep recession and political turmoil in Brazil. Hardly an obvious moment to bet on the country’s future.

It’s rarely black or white. Most of the time, it’s some shade of gray, which is admittedly much less entertaining than whatever is happening in your social media feed.

But if you can shut out some of the noise and panic, there’s an important question to ask: what is likely to remain true over the next ten years, and what can you build around that?

For companies operating across countries, moving money gets expensive and complicated fast. Every new market can mean another bank, another currency, another payment rail and another layer of reconciliation.

Jeeves is built to remove that complexity. Its stablecoin-native financial operating system brings payments, FX, corporate cards and treasury into one stack — allowing global companies to move and manage money across markets without rebuilding their financial infrastructure country by country.

For Orinter, one of Brazil’s largest B2B travel operators, the impact was 87% lower international transfer costs.

The less it costs to move money globally, the more capital you have to grow globally.

So if you’re a founder, CFO or finance leader building across markets, stop building financial infrastructure country by country. Go to tryJeeves.com to see what a global financial OS can do for your company.

Advent International raised $30B, expanding its capacity to buy bigger businesses in Latin America.

Around $27B went into GPE XI, the largest buyout fund to close this year, with another $3B raised for a new mid-market strategy. The flagship can invest up to 20%, ~$5.4B, in emerging markets, including Latin America. Advent can combine that capital with its $2B regional fund for larger transactions, typically starting around $400M–500M. Recent investments include Brazil’s Skyone and Mexico’s CONTPAQi.

→ Expensive debt, fewer competing buyers, and companies that still need capital. That is an attractive combination if you have money to deploy. For founders and early investors, a buyer capable of writing larger checks creates more options for liquidity. And it reinforces something I’ve been saying: private equity is taking a bigger role in financing tech in Latin America.

QuintoAndar: ~$240M in consórcio credit originated in its first year.

I think you guys don’t appreciate consórcios enough. Here’s how they work: a group of people contributes monthly to a shared pool, which funds members’ purchases over time. Each month, participants receive access to purchasing credit through a lottery or by bidding to pay more upfront. They continue making their installments afterward. There’s an administration fee instead of traditional loan interest, and buyers wait their turn to access the money. QuintoAndar offers this through its partner Bamaq, with 10% cashback for customers who use their credit to buy a property on its platform.

→ QuintoAndar already has the customers, the property listings, and the distribution. The consórcio gives it a way to turn someone who can’t buy today into a future buyer, with a financial incentive to complete that purchase on QuintoAndar. More revenue from the same customer relationship, more demand for its listings, and a business that can grow even when expensive mortgages make selling homes harder.

Itaú is buying NeoSpace, a Brazilian startup building AI models for financial services, for nearly $600M.

NeoSpace builds AI models trained on a company’s own data, connecting transactions, financial records, and customer behavior to improve credit decisions, detect fraud, and personalize offers. Itaú had spent almost two years using the technology before deciding to own it. For a bank of its scale, better lending decisions, fewer fraud losses, and more relevant offers can create enormous value.

→ $18M raised, including $15M from Itaú, followed by a nearly $600M acquisition less than two years later. Not bad for angels like Micky Malka, Martín Escobari, Nigel Morris and Hans Morris. And a reminder that you don’t need a multibillion-dollar IPO to deliver an attractive exit when relatively little capital went into building the business.

Flying Rivers is raising a $400M climate fund with partial currency protection for foreign investors.

The firm was founded by Luciana Antonini Ribeiro, who also co-founded Brazilian private equity firm eB Capital. It secured a $50M anchor commitment from the Green Climate Fund, alongside ~$93M from BNDES, bringing commitments to ~35% of its target. The fund plans to back six to ten growing Brazilian businesses in areas including battery storage, biomethane, agricultural inputs, and recycling.

The interesting part is the structure: the Green Climate Fund can give up part of its returns to offset foreign investors’ currency losses if the real depreciates sharply. It’s the first structure of this kind approved by the climate fund.

→ You can back a great Brazilian business, watch it grow, and still see your dollar returns eaten by the currency. Flying Rivers is addressing that problem directly. Using a climate fund’s capital to absorb some of the currency risk could bring in investors who like the companies but can’t get comfortable with the real. I’d like to see more structures like this.

Listen — Nik Storonsky, co-founder of Revolut, on David Senra.

Nik Storonsky is an absolutely brilliant founder. Extremely direct, very technical, zero bullshit. As a fellow Eastern European, I recognize the style. There’s so much to love in this conversation, from the culture of making multiple bets, shutting down those that don’t work, and doubling down on those that do, to how you build the organizational muscle to keep doing this at scale. Then there’s how he thinks about board governance, why he keeps VCs off his board, and whether investors are actually qualified to tell founders how to run their businesses. My fellow investors, this part is for us.

Read — Team of Rivals by Doris Kearns Goodwin.

Lincoln was hardly the obvious choice for the Republican nomination, let alone the presidency of the United States. His rivals were better known and, on paper, better qualified. What made him so successful was his ability to understand people, their ambitions, their insecurities, and what it would take to get them working together. He managed his own ego well enough to bring those political rivals into his cabinet, including men who thought they deserved his job. And then he found ways to put their talents to work. There’s a lot here about ambition, patience, and the confidence to surround yourself with people who don’t necessarily think you’re the smartest person in the room.

Thanks for reading,

Olga 

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