When MSW Capital launched its first multi-corporate fund, just over a decade ago, the Brazilian corporate venture capital (CVC) market was still in its infancy. What there was was the house’s bet that large corporations could be more than just a check for startups, but the missing impetus to foster innovation in the country.
Eleven years later, MSW’s thesis appears to be on the right track. The manager has just reached the milestone of R$540 million under management and announces the launch of its fifth fund, BB Ventures 2.
For partners Richard Zeiger and Moises Swirski, the half-billion milestone has brought more questions than answers. “Are we doing it right? What happens now? The questions will change our category. We are starting to move from being a boutique to being a mid-sized manager”, says Moises, who founded MSW in the 2000s, as a valuation and value management consultancy boutique.
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In an interview with Startups, they say that the idea is to continue looking at corporations as business partners. “It really means taking advantage of what corporations have to offer, which is usually not the check, but rather the channel, the expertise, very good people, and taking this to the advantage of the investees”, observes Richard.
The new fund and the bet on AI
BB Ventures 2 arrives with a committed capital of R$115 million, maintaining the focus on the fintech, agritech and govtech verticals, and incorporating two relevant adjustments. The first is a close look at artificial intelligence.
“We’re going to look at AI companies with more care and attention. Not because it’s fashionable, but because there’s no way around it today,” says Richard.
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The second adjustment is the opening for Series B rounds, something that the previous fund did not support. “Not that we will stop being an early stage investor, but when there are opportunities where we see that the bank can contribute, even at a slightly later stage, we will be able to look”, explains the MSW partner.
The checks must vary between R$5 million and R$15 million, and can reach R$25 million in specific cases, with part of the capital reserved for follow-ons.
Focus remains on the early stage
Despite the timely opening to Series B, changing course towards the late stage is not in the plans, according to investors. “We don’t know how to be passive in the things we invest in. The more late you are, the more you are a check. And that is not MSW’s philosophy”, explains Richard.
The argument also goes through the logic of partner corporations. For him, startups in the early stages are more susceptible to strategic support from large companies: “Sometimes the startup is designing a product that it really believes in, but it doesn’t have many customers yet. The corporation comes and says: if you adjust it a little here, it fits here. This adjustment can make a big difference. Now, a later startup doesn’t make this adjustment.”
Moises adds: “When the stage is earlier, it is a world of development. Financial resources are necessary, but the intangible resources — those that are not financial — are extremely necessary. And our intelligence lies in that.”
Fund family
With more than 10 years of corporate venture capital, MSW has investment vehicles at different times, which the partners compare to a family with children at different ages, from teenagers to newborns. The first was BR Startups, a multi-corporate company, which is already in the divestment phase. The second fund in this model was Multicorp 2, which brings together corporations such as Baterias Moura, BB Seguros, AgeRio and Embraer.
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In addition, the house has three proprietary funds: one from Embraer, in addition to BB Ventures 1 and 2. In total, there are 20 investments in the five funds.
In the portfolio, the manager accumulates cases that reflect the long-term approach. Fintech Pagaleve approached a valuation of R$1 billion in the last round, while Payfy had its solution integrated with Banco do Brasil products. Through MultiCorp 2, MSW invested early in drone companies such as SpeedBird and Tidewise, now exporting Brazilian technology. In terms of exits, the sale of Olivia to Nubank and Car10 to Webmotors appear as references for complete cycles.
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