Good day. Venture funds piled into Latin America in 2021, setting an investment record, so a pullback this year was going to be hard to avoid.

There were no surprises there—venture funding dropped by almost 70% in the second quarter compared with the same period last year—but what is surprising is that the level is still higher than at any time before 2021.

Foreign and local venture funds continue to eye Latin America, betting the digital transformation of the economy will open business opportunities and the middle class will keep expanding. “Our thesis has always been about the middle class and emerging middle class in Latin America, offering them better services and products through digital,” said Wenyi Cai, the founder and chief executive of Polymath Ventures, which is raising funds to invest in startups.

Ms. Cai is concentrating on seed and pre-seed investments, an area she says is underserved in Latin America. Polymath is likely to concentrate its venture funding in Mexico and Colombia, where the company has offices, Ms. Cai said.

Julio Vasconcellos, managing partner at Brazil-based Atlantico Partners, which has an early-stage venture fund, is betting the acceleration of digital usage in Latin America fueled by the Covid-19 pandemic will continue.

How the rest of this year and 2023 go for startups will depend in part on the region’s economy, which showed strong growth last year after the pandemic slowdown. Like much of the rest of the world, the region is facing high inflation, which has benefitted some commodity-exporting countries but has forced central banks to speed up interest-rate hikes.

And now on to the news...

Strategies for the downturn. Enterprise tech startups are continuing to innovate amid tighter economic conditions, fueled by demand from companies who fear underinvestment in tech could lose them market share, venture partners said. “Markets are won or lost based upon what you do in a downturn,” said Shane Wall, venture partner and president of the CXO Network at Fusion Fund, speaking at The Wall Street Journal’s CIO Network Summit held virtually Tuesday. Tech chiefs now have a critical role to play in ensuring their businesses continue prioritizing technology or risk falling behind in the market. One area where it is especially vital to continue spending is in cloud investments, Mr. Wall said, adding that we are only at the beginning of the cloud era.

The nation’s largest pension fund got a scathing performance review Monday when its new investment chief highlighted the retirement system’s underperforming returns and estimated it missed out on $11 billion in gains during a “lost decade” for private equity, WSJ reports. The unusually candid presentation to board members of the California Public Employees’ Retirement System, known as Calpers, showed returns lagging behind other large pensions in almost every asset class during the past 10 years, with private equity trailing the most at 1.3 percentage points.

One of the biggest promoters of SPACs is shutting down two deal-making efforts that together hold more than $1.6 billion after the market collapsed, wiping out tens of billions in startup market value and punishing individual investors, WSJ reports. Chamath Palihapitiya will wind down and return cash from the two special-purpose acquisition companies to shareholders after failing to find companies to take public. Giving up is an admission by the brash venture capitalist dubbed the “SPAC king” that the market that helped make him a mainstay on business television has effectively shut down.

People

Austin, Texas-based blood-testing company Babson Diagnostics Inc. said it has named four new members to its management team. Dominic Weilbaecher has joined as vice president, payer relations, and will lead the company’s payer engagement and market access strategy. He previously was regional sales director of health plans at Quest Diagnostics. Dasha McCarthy has been named vice president, clinician relations and will lead the engagement and partnership strategy with healthcare professionals. Most recently she was vice president of regional sales for the West at Pathnostics, a diagnostics solutions company. Roland Schneider will be vice president, manufacturing to lead design, development and deployment of the company’s manufacturing operations. David “Dutch” Vandersand has been hired as vice president, supply chain and will be responsible for leading procurement and supply-chain strategy.

DNAnexus Inc., a Mountain View, Calif., startup that sells cloud-based software for accessing genomics and biomedical data, has named Stephen Nuckols as its chief commercial officer. The new appointment follows a $200 million venture financing led by Blackstone Growth. Mr. Nuckols previously was chief revenue officer for ArisGlobal, a provider of cloud-based technology for drug safety, clinical development and regulatory and medical affairs, where he led the commercial organization.

SardineAI Corp., a San Francisco-based fraud, compliance and instant settlement startup, raised $51.5 million in Series B financing. Andreessen Horowitz's Growth Fund led the round with participation from investors including XYZ, Nyca Partners, Sound Ventures, Activant Capital, Visa, Google Ventures, Eric Schmidt, Vikram Pandit, the General Partnership, NAventures, ING Ventures, ConsenSys, Cross River Digital Ventures, Alloy Labs and Uniswap Labs Ventures.

Scratch Financial Inc., a Pasadena, Calif.-based fintech startup, raised $35 million in Series C funding. The round was led by Norwest Venture Partners, with participation from Alumni Ventures, Companion Fund, Struck Capital, SWS Venture Capital, TTV Capital and others.

Movellus Circuits Inc., a San Jose, Calif.-based network and chip-related startup, raised a $23 million Series B funding round. Tawain-based firm MESH Ventures and South Korean-based semiconductor company SK Hynix joined existing investors Accelerate Blue Fund, Candou Ventures, Hui Capital, Intel Capital, In-Q-Tel, Michigan Capital Network, Stata Ventures and other private investors in the round.

TrovaTrip Inc., a Portland, Ore.-based travel planning and booking startup, raised $15 million in Series A financing. The round was led by Madrona Venture Group with participation from PSL Ventures, Oregon Venture Fund, Elevate Capital and Portland Seed Fund.

Higlobe Inc., a Palo Alto, Calif.-based international payment transfers startup, raised $14 million in funding in a deal led by Battery Ventures.

Respond.io, a business communications startup, raised $7 million in Series A funding led by Headline Asia. Firms including AltaIR Capital, Smart Partnership Capital, Sterling Oak Group and Calendula Ventures participated in the deal.

Traction Ag Inc., an Indianapolis, Ind.-based cloud farm accounting and management startup, raised $3 million in seed funding from firms including Hageman Group, Allos Ventures and Elevate Ventures.

SecurityPal Inc., a San Francisco-based cybersecurity startup, raised a $21 million Series A funding round led by Craft Ventures.

• Amazon’s $1.7 billion proposed purchase of Roomba maker under FTC investigation
   
• Binance and FTX make top bids for bankrupt lender Voyager
   
• Chip-making push expected to boost U.S. innovation
   
• Salesforce enters the carbon-credit business
   
• Uber says it is victim of Lapsus$, a hacking group motivated by fame not money

This newsletter was compiled by Marc Vartabedian, Brian Gormley and Matthew Strozier.

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley, Angus Loten and Marc Vartabedian.

Follow us on Twitter: @wsjvc