YC-backed Blabla raises $1.5M to teach English through short videos

Short, snappy, entertaining videos have become an increasingly common way for young people to receive information. Why not learn English through TikTok-like videos too? That was what prompted Angelo Huang to launch Blabla.

Originally from Taiwan, Huang relocated to Shanghai in 2019 to start Blabla after working in Silicon Valley for over a decade. A year later, Blabla was chosen as part of Y Combinator’s 2020 summer cohort. The coronavirus had begun to spread in the U.S. at the time, keeping millions at home, and interest in remote learning was reviving.

“It was my eighth time applying to YC,” Huang, who founded two companies before Blabla, told TechCrunch during an interview.

This week, Blabla announced it has raised $1.54 million in a seed round led by Amino Capital, Starling Ventures, Y Combinator, and Wayra X, the innovation arm of the Spanish telecoms giant Telefónica. While Y Combinator wasn’t particularly instrumental in Blabla’s expansion in China — one of the biggest English-learning markets — the famed accelerator was of great help introducing investors to the young company, said the founder.

The Blabla app pays native English speakers by the hour to create short, engaging videos tailored to English-learning students around the world. The content creators are aided by Blabla’s proprietary software that can recognize and tag their scenes, as well as third-party translation tools that can subtitle their videos. The students, in turn, pay a subscription fee to receive personalized video recommendations based on their level of proficiency. They can practice through the app’s built-in speech recognition, among other features like speaking contests and pop quizzes.

The startup is in a highly crowded space. In China, the online English-learning market is occupied by established companies like VIPKID, which is backed by Tencent and Sequoia Capital. Compared to VIPKID’s one-on-one tutoring model, Blabla is more affordable with its starting price of 39 yuan ($6) a month, Huang noted.

“The students [on mainstream English learning apps] might have to spend several thousands of RMB before they can have a meaningful conversation with their teachers. We instead recycle our videos and are able to offer lessons at much cheaper prices.”

The app has about 11,000 weekly users and 300-400 paid users at the moment, with 80-90% of its total users coming from China; the goal for this year is to reach 300,000 students. The funding will allow Blabla to expand in Southeast Asia and Latin America while Wayra X can potentially help it scale to Telefónica’s 340 million global users. It will be seeking brand deals with influencers on the likes of TikTok and Youtube. The new capital will also enable BlaBla to add new features, such as pairing up language learners based on their interests and profiles.

Blabla doesn’t limit itself to teaching English and has ambitions to bring in teachers of other languages. “We want to be a global online pay-for-knowledge platform,” said Huang.

MadeiraMadeira, Brazil’s answer to Wayfair and Ikea, is now worth over $1 billion

MadeiraMadeira, the Brazilian answer to Wayfair or Ikea, is now worth $1 billion after raising $190 million in late stage financing from investors led by SoftBank’s Latin American investment fund and the Brazilian public and private investment firm, Dynamo.

An online marketplace specializing in home products, MadeiraMadeira offers roughly 300,000 products so customers can build furnish, renovate and decorate their homes.

Founded in 2009 by Daniel Scandian, Marcelo Scandian and Robson Privado, the company has seen huge tailwinds come from the shift to online shopping in Brazil as a result of the global COVID-19 pandemic.

With stores closed, online shopping in Brazil surged. As Daniel Scandian noted, before the pandemic ecommerce penetration in Brazil was at roughly 7%, that number ballooned to 17% at the height of the pandemic in Brazil and has now stabilized at around 10%.

Combining third party sales with private labeled goods and its own shipping and logistics facilities has meant that MadeiraMadeira can take the best practices from several online retailers and home furnishing stores, Scandian said.

There are more than 10,000 sellers on the MadeiraMadeira platform and roughly 2.5 million stock keeping units. In recent years the company has added showrooms to its mix of retail facilities, where customers can check out merchandise, but complete their orders online.

“That’s the way we can tackle the offline market with a digital mindset,” Scandian said. 

Money from the most recent financing will be used to invest in expanding its logistics capabilities with the addition of new warehouse facilities to expand on its existing ten locations. The company also intends to add same day delivery and the expansion of its private label services.

The new capital, likely the last round before a potential public offering, included previous investors like Flybridge and Monashees along with public-focused investment firms Velt, Brasil Capital and Lakewood.

Early investors like Monashees, Kaszek, Fundo Avila, Endeavour Catalyst and angel backers like Niraj Shah, the founder of Wayfair, and Build.com founder Christian Friedland were instrumental to MadeiraMadeira’s early success, Scandian said.

Based in Curitiba, MadeiraMadeira has over 1300 employees, with the majority of them focused on technology, logistics and product development.

“With this new investment, we are raising our commitment to MadeiraMadeira’s long-term value creation vision as the company consolidates its position as the leader in Latin America’s home goods market. Since our initial investment, MadeiraMadeira’s management team has delivered everything they’ve promised, and our faith in them continues to grow,” said Paulo Passoni, Managing Investment Partner to SoftBank Latin America fund.

On the diversity front, 2020 may prove a tipping point

Since Minneapolis police officers killed George Floyd in May and kicked off months of nationwide protests, the corporate world — including venture capitalists — have attempted to respond to the Black Lives Matter movement.

Indeed, many quickly took to social media to voice their support, broadcast their new diversity-focused networking groups and pledge to do better, particularly when it comes to finding and funding more Black founders and other underrepresented entrepreneurs.

As of 2018, 81% of venture firms still lacked a single Black investor.

It was tempting to dismiss it as so much hot air, given that VCs have talked about diversity for eons without doing much about it.

As of February 2020, according to a report by All Raise, an organization that promotes female founders, 65% of VC firms still had no female partners. As of 2018, 81% of venture firms still lacked a single Black investor, per an analysis by Equal Ventures partner Richard Kerby.

Those numbers are comparatively rosy when considering the percentage of women and Black investors in senior decision-making roles. According to recent PitchBook data, at the start of this year, just 12.4% of decision-makers at U.S. venture firms were women (up slightly from the 9.65% at the start of 2019). As for for the number of Black investors in senior positions, it has long hovered around just 2%.

But here’s the good news: While it remains an ongoing challenge to get these numbers in sync with other industries, there were two developments specifically in 2020 that may beget more action in 2021.

We’d first point to the decision this fall by Yale’s endowment to require its asset managers to do better when it comes to diversity. Specifically, the school’s $32 billion endowment — led since 1985 by investor David Swensen — told its 70 U.S. money managers that from here on out, they will be measured annually on their progress in increasing the diversity of their investment staff, from hiring to training to mentoring to their retention of women and minorities.

Brazilian lending company Creditas raises $255 million as Latin America’s fintech explosion continues

Creditas, the Brazilian lending business, has raised $255 million in new financing as financial services startups across Latin America continue to attract massive amounts of cash.

The company’s credit portfolio has crossed 1 billion reals ($196.66 million) and the new round will value the company at $1.75 billion thanks to $570 million raised in outside financing over five rounds.

Creditas is the latest company to benefit from a boom in financial services startup investing across the region. As the year dawned, venture investments into fintech startups in Latin America had grown from $50 million in 2014 to top $2.1 billion in 2020 across 139 deals, according to a report from CB Insights.

Investors in the round include new investors like LGT Lightstone, Tarsadia Capital, Wellington Management, e.ventures and an affiliate of Advent International, Sunley House Capital. Previous investors including SoftBank Vision Fund 1, SoftBank Latin America DFund, VEF, Kaszek and Amadeus Capital Partners also returned to put more money into the company.

“Creditas is still in the early innings of penetrating the huge untapped secured lending market in Brazil and Mexico” says Paulo Passoni, managing partner of SoftBank Latam fund, in a statement.

The company’s growth is a testament both to the need for new lending products across Latin America and the perspicacity of investors like Kaszek Ventures, whose portfolio has included several massive wins from bets on startups tackling financial services in Latin America.

“The journey since our investment in the Series A has been absolutely extraordinary. The team has executed on its vision, and Creditas has evolved into an asset-light ecosystem that resolves key financial needs of its customers throughout their lifetimes,” says Nicolas Szekasy, managing partner of Kaszek Ventures, in a statement.

Another big winner is Redpoint’s e.ventures fund, which has focused on investments in Latin America for the last several years.

“By empowering Brazilians to take control of their lending needs at reasonable rates, Creditas creates a beloved consumer product that will drive significant value for customers and investors. Having been involved since the seed stage through Redpoint e.ventures, we’re thrilled to support the company with our Global Growth Fund as well, as they change the Brazilian fintech landscape,” said Mathias Schilling, co-founder and managing partner of e.ventures.

Creditas has plans to use the cash to expand its home and auto lending as well as a payday lending service based on customers’ salaries and a retail option to sell through buy now, pay later loans based on a customer’s salary.

The company is also looking to expand to other markets, with an eye toward establishing a foothold in the Mexican market.

Founded in 2012, when the founders worked out of a five-square-meter office on Berrini Avenue in São Paulo, the company now boasts a robust business with hundreds of employees and a business resting on a secured lending marketplace and independent home and auto lending operations.

The company also released quarterly results for the first time, showing losses narrowing from 74.9 million Brazilian reals to 40.5 million reals in the year ago quarter.

Will Brazil’s Roaring 20s see the rise of early-stage startups?

Since 2007, the number of publicly listed companies in Brazil has decreased from 400 to just a little over 300.

In the past six years there were only 21 IPOs — an average of just 3.5 public exits per year; by 2019, even Iran had more listed companies than Brazil. Global capital markets are heated given pandemic stimulus packages and low interest rates worldwide, but in Brazil the boom comes with a special feature: in Q3 2020, there were 25 primary and secondary equity offerings, and this year is on track to be the most active in history both in number of deals and dollar volume.

The most important event, however, is not necessarily the reversal of a shrinking public market but the fact that startups are issuing stocks for the first time, a dramatic change for a market previously dominated by industries like commodities and utilities.

Growth versus value: Revert the shrinking market and internet companies

Not only is Brazil’s IPO market roaring, the waitlist is even more impressive: More than 47 companies have filed at CVM (equivalent to the the Securities and Exchange Commission) to issue equity and are waiting for approval. In other words, the IPO is equivalent to more than 15% of the number of publicly listed companies. In the first half of October, six companies were approved to issue equity. Obviously construction and retail names are still predominant as they take advantage of the lower rates, but the main novelty are new entrants in internet and technology.

In the past decade, there were 56 IPOs in Brazil and only two were in the software space, both in 2013. That is a reflection of the profile of the investors who dominate local markets, which are used to allocating assets to companies in sectors like oil, paper and cellulose, mining or utilities. Historically, publicly listed companies in the country were value plays, as few of them had significant exposure to the domestic market and derived a significant share of revenue from commodities and exports.

As a result, companies that focused on the domestic market or on growth were never quite embraced by local investors. Many investors deploying capital in Brazil were mostly foreign and very risk-averse to the dynamics of the domestic market; in 2007, when Brazil went through a similar IPO boom, 70 percent of the demand for equity offerings came from foreign investors.

Along with an undervalued currency, growth companies struggled to find attractive valuations on the local exchange. As a result, growth companies such as Stone Payments, Netshoes, PagSeguro, Arco Educação and XP Investimentos did their IPOs in New York where they attained higher valuations. It’s ironic that there were three times more IPOs of Brazilian growth companies in the U.S. in the past five years than there were in the domestic market in the last decade.

Roaring 20s: New investors and massive portfolio relocations

Index ventures into Latin America to back Sofia, a Mexico City-based telemedicine and health insurer

Arturo Sanchez and his co-founders have spent the past two years developing the telemedicine and insurance platform, Sofia, as a way to give customers across Mexico better access to quality healthcare through their insurance plan.

Along with his co-founders, Sebastian Jimenez, a former Google employee who serves as the company’s chief product officer, and Manuel Andere an ex-Patreon employee who’s now Sofia’s chief technology officer, Sanchez  (a former Index Ventures employee) is on a path to provide low-cost insurance for middle class consumers across Latin America, starting in Mexico City.

Backing that vision are a clutch of regional and international investors including Kaszek Ventures, Ribbit Capital, and Index Ventures. When Index Ventures came in to lead the company’s $19 million round earlier this year, it was the first commitment that the venture firm had made in Latin America, but given the strength of the market, it likely won’t be their last.

In Sofia, Index has found a good foothold from which to expand its activity. The company which initially started as a telemedicine platform recently received approvals to operate as an insurer as well — part of a long-term vision for growth where it provides a full service health platform for customers.

Founded by three college friends who graduated from the Instituto Tecnológico Autónomo de México (Mexico’s version of MIT), the company initially launched with COVID-19 related telemedicine service as the pandemic took hold in Mexico.

That service was a placeholder for what Sanchez said was the broader company vision. And while that product alone had 10,000 users signed up for it, the new vision is broader.

“We registered as an insurance company because we want to go deeper into people’s health. We have built a telemedicine solution, which is a core component of the product. The goal is to be an integrated provider that provide primary care and handles more significant types of illnesses,” said Sanchez.

The company already has a core group of 100 physicians in Mexico City and initially will be serving the city with 70 different specialist areas.

All the virtual consultations are covered without an additional payment and in-person or specialty consultations come at a 30% reduced rate to an out-of-pocket payment, according to Sanchez.

Fees depend on age and gender, but Sanchez said a customer would typically pay around $500 per-year or roughly between $40 and $50 per-month.

The company covers 70% of the cost of most treatments that’s capped at $2,000 per-year and coverage maxes out at $75,000. “In Mexico that covers north of 98% of all illnesses or treatment episodes,” said Sanchez.

In Mexico, insurance is even less common than in the US.

90% of private health spend happens out of pocket. The problem that we’re trying to solve is for these people that are already spending money on healthcare but doing it in an unpredictable and risky way,” said Sanchez. “They buy [our service] and they have access to great quality healthcare that they buy it and it’s a significant step up from what they’ve been living with.”

 

Apeel gets more cash to fight poverty and food insecurity in emerging markets with its food-preserving tech

In the first real test of the potentially transformative power of its food-preserving technology, the Santa Barbara, Calif.-based Apeel Sciences is bringing its innovative food treatment and supply chain management services to distribution centers in select markets in Asia, Africa and Latin America.

The goal is to alleviate food insecurity among farmers, who comprise one of the most susceptible populations to issues of malnutrition, according to Apeel’s chief executive James Rogers.

“The majority of fruits and vegetables grown on this planet are grown by small farmers and two thirds of the people who are food insecure are also farmers,” said Rogers. 

The reason why farmers are more at-risk than other populations stems from their inability to get the most value out of their crops, because of the threat of spoilage, Rogers said

By introducing its preservative technologies that deter spoilage and providing willing buyers among existing Apeel customers in markets like the U.S., Denmark, Germany and Switzerland Rogers said the company can have an outsized impact to improve the amount of money going into a farmer’s pocket.

“The program with the IFC is to build supply chains out,” he said. “The value is not just in the longer-lasting produce, it’s in the market access for that longer lasting produce.”

The initial markets will be in Mexico, Costa Rica, Peru, South Africa, Kenya, Uganda and Vietnam where Appeal’s tech will treat avocados, pineapples, asparagus, and citrus fruits like lemons, limes, and oranges.

In some ways it’s the culmination of the work that Appeal has been doing for the past several years, getting grocers around the world to buy into its approach to reducing waste.

The company has always put smallholder farmers at the center of its company mission — ever since Appeal was founded in partnership with the Bill & Melinda Gates Foundation and the Department for International Development. The intention was always to extend the shelf life of fruits and vegetables produced by farmers without access to the modern refrigerated supply chain. It’s just that for the past several years, the company had to refine its technology and build out a retail network.

To further that aim, Apeel has raised over $360 million, including a $250 million round of funding which closed earlier this year.

The fruition of Rogers’ plans will be as the company brings demand from international markets to these local growers through regional exporters.

Without access to a refrigerated supply chain, much of what small farmers produce can only reach local markets where supply exceeds demand. The perishability of crops creates market conditions where these fruits and vegetables can’t make it to export, creating market dynamics that exacerbate poverty and increase food loss and food waste among the people who make their living farming, Appeal said.

“With extra time we can link those small producers into the global food system and help them collect the economic value that’s intrinsic to that natural resource,” said Rogers. 

The introduction of new demand from international markets, which can be fulfilled if crops are treated with Appeal’s technology can create a virtuous cycle that will ideally increase prices for crops and bring bigger payouts to farmers. At least that’s the vision that Rogers has for the latest implementations of Appeal’s technology at regional distribution hubs.

There’s the potential that the middle men who’re distributing the produce to foreign buyers may collect most of the value from the introduction of Appeal’s technology, but Rogers dismisses that scenario.

“The work is to incorporate those small producers more directly into the supply chain of the exporter. Now that there’s familiarity with the technology you can utilize the tech to create cooperative value and use those cooperatives to unlock value for the very small producers,” he said. “By growing the demand for produce in those markets that supply has to come from somewhere. The exporters earn their cut on a volume basis. The way they increase their value is to grow their volume. They want to grow the volume that’s suitable for export and the demand. Then the challenge flips and it becomes not a demand challenge but a supply challenge. And they have to incentivize people to feed into that supply.” 

To finance this international rollout, Appeal has raised another $30 million in funding from investors including the International Finance Corp., Temasek and Astanor Ventures .

“Innovative technologies can change the course of development in emerging markets and save livelihoods, economies, and in this case, food,” said Stephanie von Friedeburg, interim Managing Director and Executive Vice President, and Chief Operating Officer, of IFC, in a statement. “We are excited to partner with Apeel to invest in a game-changing technology that can limit food waste by half, enhance sustainability, and mitigate climate change.”

Which neobanks will rise or fall?

The neobank, or digital bank, phenomenon continues to take the world by storm, with global winners, from Brazil’s Nubank valued at $10 billion and Berlin’s N26 valued at $3.5 billion, to Chime, now valued at $14.5 billion as the most valuable consumer fintech in the United States.

Neobanks have led the charge of the $3.6 billion in venture capital funding for consumer fintech startups this year. And as the coronavirus-fueled acceleration of digital transformation continues, it seems the digital bank is here to stay, with some estimates pointing to neobanks reaching 60 million customers in North America and Europe by the end of 2020, and surpassing 145 million by 2024.

The space is also becoming more crowded, a trend which will only accelerate with fintech eating the world and creating greater infrastructure that enables any company to include a bank account as a product extension.

As a result, neobanks are not a monolithic model and not all are created equal. Looking underneath the hood of business models across the globe reveals remarkable operational differences and highlights specific features that are more likely to succeed in the long-term.

Five global models of neobanks

Today there are five distinct models that are leading globally:

Interchange-led: Relies on payments revenue, sourced through interchange as the revenue driver. Every time a customer uses the neobank’s card as a payment method they get paid [e.g. Chime / US; Neon (hybrid of 1 & 2) / Brazil].

Credit-led: Leverages a credit-first model, starting off with a credit card or similar offering, and later providing a bank account [e.g. Nubank, Neon (hybrid of 1 & 2) / Brazil].

Latin America’s digital transformation is making up for lost time

“Gradually, then suddenly.” Hemingway’s words succinctly capture the recent history of tech in Latin America. After more than a decade of gradual progress made through fits and starts, tech in Latin America finally hit its stride and has been growing at an accelerating pace in recent years.

The region now boasts 17 unicorns up from zero just three years ago. For the first time, the most valuable company in the region isn’t a state-controlled oil or mining behemoth, but rather e-commerce platform MercadoLibre.

We are only in the first chapter of this long story, however. When we compare the penetration of tech companies in Latin America to both developed and developing markets, we estimate that the market could grow nearly tenfold over the next decade. The value to be unlocked will be measured in trillions of dollars and the lives improved in the hundreds of millions.

Our venture capital fund, Atlantico, conducts a thorough annual analysis of market data from Latin America in what we call the Latin America Digital Transformation Report. The report consists of hundreds of data-rich slides based off of original studies, surveys and models constructed from a combination of public and proprietary data shared by many of the region’s leading tech companies. This year, for the first time, we have decided to make the report public and here we highlight some of the findings from this year.

Global venture capitalists, the likes of Sequoia, Benchmark and a16z have planted their flags through key investments in companies like Nubank, Wildlife and Loft. Those are not isolated incidents – venture capital investments in the region have nearly doubled annually for the last three years according to the Latin American Venture Capital Association (LAVCA). In order to understand what investors are seeing in the region, we analyzed the market through a simple framework we apply throughout our report.

The starting point for this framework is the socioeconomic foundation in place. The context in which transformation occurs is important in shaping its possible outcome. The same ingredients applied in different contexts and time periods will produce very different results. Thus, we believe that Latin America is unique globally, and the types of companies that will flourish (and to what extent) will be different than in other parts of the world. Trying to shoehorn foreign business models and products is unlikely to yield good results.

In the case of Latin America, it’s key to remember the region boasts a population twice that of the United States and a GDP half that of China’s (but similar on a per capita basis). In short: Latin America is big, a central factor that has the power to attract capital and talent. However, also critical to note is that economic inequality is severe. While a quarter of the region’s population lives in poverty, the wealthy in Mexico City and São Paulo enjoy living standards in line with their peers in New York and London.

This unique mix of large opportunity and critical problems waiting to be solved has provided fertile ground for the gig economy to flourish. Case-in-point: Brazil is Uber’s largest market globally in volume of rides, with São Paulo its largest city. Rappi, a major food delivery player in the region, valued at over $3 billion, grew its sales by 113% over the first five months of the pandemic. When taken together, the largest ride-hailing and food-delivery services in Brazil are already the largest private employer in Brazil, a formidable contribution to reducing high unemployment.

When we track technology company value as a percent of the economy (tech company market cap as a % of GDP) we clearly see that Latin America, at 2.2% penetration, has a ways to go. Our estimate is that it is 10 years behind China (at 27% penetration), which itself is five years behind current U.S. levels (39% penetration).

Image Credits: Atlantico

However, it is important to note that Latin America is making up for lost time. This metric for tech company penetration or share has been growing on average at 65% per year since 2003. In comparison, the growth in U.S. tech company penetration has grown at 11% annually in the same period, while China’s has expanded at 40%.

https://www.atlantico.vc/latin-america-digital-transformation-report

Image Credits: Atlantico

Drivers of digital transformation

Within the socioeconomic context of the region, we advance to looking at the three drivers of change in our framework: people, capital and regulation.

On the people front, the greater visibility of successful role models has catalyzed a desire to follow entrepreneurial footsteps. People like Mike Krieger (co-founder of Instagram), Marcos Galperin (founder/CEO of Mercado Libre) and Henrique Dubugras (founder/co-CEO of Brex) have shown that local talent can go on to build global companies.

In a survey we conducted with nearly 1,700 college students from the top universities in Brazil, 26% of students voiced a desire to work at startups or big tech companies. A whopping 39% expressed plans to start a company in the future, that number rising to 60% when we consider only computer science students. As more and more of the region’s top graduates flock to tech, it gives us confidence in the accelerating growth of the sector over many years to come.

On the capital front, the growth of venture funding in the region has been frequently written about. Last year, it hit a peak of $4.6 billion after doubling from the year before. However, what perhaps is more surprising is that despite this rapid growth, we are still far from the ceiling. When we view venture capital investments as a proportion of GDP, we see Latin America as only one-seventh of the U.S. level and a quarter of the level in India.

Jüsto adds another $5 million in funding to build its online, delivery-only grocery store for Latin America

As it begins expanding beyond its home base in Mexico City, the on-demand, online only grocery store Jüsto has  added another $5 million in early stage funding.

The new money came from Bimbo Ventures, the strategic investment arm of one of the world’s largest bakery companies, Bimbo, and Sweet Capital, the investment fund from the founders of King.com.

Over the summer, the company expanded its services beyond Mexico City to Carretaro and saw explosive growth. According to Jüsto co-founder and company spokesman Manolo Fernandez. With sales in the first week equaling what had taken the company 200 days to achieve in Mexico City. Tavarez said it was an indicator of the demand for the company’s service across the country.

The $5 million top-up comes only a few months after Jüsto raised $12 million in funding from a slew of well-known global and Latin American investors and shows just how robust the early stage investment scene in Latin America is becoming.

As the company expands it may look to engage in some joint ventures with delivery services in other countries to expand its footprint, according to Fernandez, but for now, the focus is on growing its footprint independently.

The company will look to open operations in cities in Colombia, Peru, and potentially Ecuador in the next year, Fernandez said.