MercoPress. South Atlantic News Agency

Brazilian unicorns hit by mass layoffs as financing runs scarce

The unicorn's guild says some 1,000 layoffs have been recorded in recent months, although other sources mention at least twice as many sackings.

Brazilian startup companies also known as “unicorns” are going through mass layoffs after their momentum seems to have calmed down and the consequences of COVID-19 lockdowns and their ensuing economic crises begin to take their toll, it was reported.

As investments begin to become scarce in an environment of increasingly restrictive monetary policies, companies are grasping the fact that their projections from 2019 or earlier need to be put on hold. Analysts speak of a “moment of correction” after the boom experienced in the last five years.

Brazil was the country with the most “unicorns” in the region, as interest in technology startups multiplied. However, investor appetite has waned in recent months against a backdrop of rising interest rates in the world's major economies to curb rising inflation.

“The increase in interest rates makes investors migrate from riskier investments to less risky ones,” Brazilian Startups Association (Abstartups) Chairman Felipe Matos told EFE.

According to Abstartups, in the first half of 2022, there was a 40% reduction in investments in Brazil, where there are more than 20 “unicorns,” a term referring to startups worth at least US$ 1 billion.

With less funding available, the value of startups has fallen, resulting in increased cutbacks in order to adapt to the “new scenario,” Matos pointed out.

The unicorn's guild says some 1,000 layoffs have been recorded in recent months, although other sources mention at least twice as many sackings.

Cuts have reached real estate giants QuintoAndar and Loft; Mexico's car-dealing Kavak; fintech Ebanx and digital commerce platform Vtex, among others.