Catalyst Fund gets $15M from JP Morgan, UK Aid to back 30 EM fintech startups

The Catalyst Fund has gained $15 million in new support from JP Morgan and UK Aid and will back 30 fintech startups in Africa, Asia, and Latin America over the next three years.

The Boston based accelerator provides mentorship and non-equity funding to early-stage tech ventures focused on driving financial inclusion in emerging and frontier markets.

That means connecting people who may not have access to basic financial services — like a bank account, credit or lending options — to those products.

Catalyst Fund will choose an annual cohort of 10 fintech startups in five designated countries: Kenya, Nigeria, South Africa, India and Mexico. Those selected will gain grant-funds and go through a six-month accelerator program. The details of that and how to apply are found here.

“We’re offering grants of up to $100,000 to early-stage companies, plus venture building support…and really…putting these companies on a path to product market fit,” Catalyst Fund Director Maelis Carraro told TechCrunch.

Program participants gain exposure to the fund’s investor networks and investor advisory committee, that include Accion and 500 Startups. With the $15 million Catalyst Fund will also make some additions to its network of global partners that support the accelerator program. Names will be forthcoming, but Carraro, was able to disclose that India’s Yes Bank and University of Cambridge are among them.

Catalyst fund has already accelerated 25 startups through its program. Companies, such as African payments venture ChipperCash and SokoWatch — an East African B2B e-commerce startup for informal retailers — have gone on to raise seven-figure rounds and expand to new markets.

Those are kinds of business moves Catalyst Fund aims to spur with its program. The accelerator was founded in 2016, backed by JP Morgan and the Bill & Melinda Gates Foundation.

Catalyst Fund is now supported and managed by Rockefeller Philanthropy Advisors and global tech consulting firm BFA.

African fintech startups have dominated the accelerator’s companies, comprising 56% of the portfolio into 2019.

That trend continued with Catalyst Fund’s most recent cohort, where five of six fintech ventures — Pesakit, Kwara, Cowrywise, Meerkat and Spoon — are African and one, agtech credit startup Farmart, operates in India.

The draw to Africa is because the continent demonstrates some of the greatest need for Catalyst Fund’s financial inclusion mission.

By several estimates, Africa is home to the largest share of the world’s unbanked population and has a sizable number of underbanked consumers and SMEs.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

Collectively, these numbers have led to the bulk of Africa’s VC funding going to thousands of fintech startups attempting to scale payment solutions on the continent.

Digital finance in Africa has also caught the attention of notable outside names. Twitter/Square CEO Jack Dorsey recently took an interest in Africa’s cryptocurrency potential and Wall Street giant Goldman Sachs has invested in fintech startups on the continent.

This lends to the question of JP Morgan’s interests vis-a-vis Catalyst Fund and Africa’s financial sector.

For now, JP Morgan doesn’t have plans to invest directly in Africa startups and is taking a long-view in its support of the accelerator, according to Colleen Briggs — JP Morgan’s Head of Community Innovation

“We find financial health and financial inclusion is a…cornerstone for inclusive growth…For us if you care about a stable economy, you have to start with financial inclusion,” said Briggs, who also oversees the Catalyst Fund.

This take aligns with JP Morgan’s 2019 announcement of a $125 million, philanthropic, five-year global commitment to improve financial health in the U.S. and globally.

More recently, JP Morgan Chase posted some of the strongest financial results on Wall Street, with Q4 profits of $2.9 billion. It’ll be worth following if the company shifts its income-generating prowess to business and venture funding activities in Catalyst Fund markets such as Nigeria, India and Mexico.

A look at Latin America’s emerging fintech trends

Although the 2008 global financial crisis sparked the fintech movement, in Latin America, the rise of ecommerce was responsible for the first wave of fintech startups.

Because digital payments were key to enabling the growth of ecommerce, investors funded companies like Braspag, PagSeguro, PayU, Mercado Pago and Moip in the early 2000s to take advantage of this opportunity.

Payment is still the most relevant segment, with successful cases like Stone and PagSeguro, but after the financial crisis, we started to see the rise of financial technology in lending and neobanking, generating impressive cases like Nubank, Neon, Creditas, Credijusto and Ualá.

As the ecosystem evolves and expands, let’s take a closer look at emerging trends in Latin America that might give us a hint about where to expect its next fintech unicorns.

Financial services for the gig economy

Latin America has seen explosive growth in ride-hailing and food delivery platforms such as Uber, Didi, Rappi and iFood, creating a totally new market opportunity — many gig economy workers can’t access basic financial services such as bank accounts, personal loans and insurance. Even those who have access often struggle with financial products that that don’t suit their needs because they were designed for full-time workers.

Spotting this opportunity, Uber Money launched at Money 2020, focusing on providing drivers with financial services. As 50% of the population in Latin America is unbanked where Uber has more than 1 million drivers, the region is definitely a ripe market. Cabify is going even farther by spinning off Lana, its company that provides financial services, so it can expand its market beyond Cabify drivers to include other gig economy professionals.

Although established players in this sector have a clear advantage, they aren’t the only ones looking to explore this opportunity; Brazilian YC alumni Zippi is offering personal loans to ride-hailing drivers based on their driving earnings. As the gig economy tends to keep growing in the region, I believe we will start to see more solutions for those professionals.

Rethinking insurance

As the banking world has been shaken by fintechs, insurance companies are growing aware that high regulatory barriers won’t protect their industry from disruption.

Insurance penetration in Latin America has been historically low compared to developed markets — 3.1%, compared to 8% — but the insurance market is growing well and tends to close this gap. Adding this to bad services and complex products that insurances provide, insurtech has an immense opportunity to grow.

Because purchasing insurance is historically a complicated and painful experience, the first insurtechs in the region focused on providing a better experience by digitizing the process and using online channels to acquire customers. Those insurtechs worked together with the insurance companies and operating as online broker, but now, we’re starting to see startups providing new insurance products, as well as traditional insurances in different models.

Some are partnering with insurance companies while others are competing directly with them; Think Seg and Miituo partnered with larger players to provide a pay-as-you-go model for car insurance, while Mango Life and Kakau are offering a better purchasing experience. On the other end, Crabi and Pier are rethinking the insurance model from the ground up.

As insurtechs emerge as a potential threat, incumbents are more willing to work with startups that can improve their services to enable them to compete on better grounds, which is exactly what companies such as Bdeo, Lisa, and HelloZum are doing.

Although penetrating the insurance industry is more complicated than other financial services due to high regulatory demands and steep initial operating costs, insurtechs fueled by VC investment will without any doubt try to do it. And, if we’ve learned anything from other fintech segments, it’s that entrepreneurs will find ways to overcome initial challenges.

Brazil’s new fintech startup Cora raised $10 million on the strength of its founding team

It didn’t take much for the founders of Cora, Brazil’s newest startup to tackle some aspect of the broken financial services industry in the country, to raise their first $10 million.

Igor Senra and Leo Mendes had worked together before — founding their first online payments company, MOIP, in 2005. That company sold to WireCard in 2016 and after three years the founders were able to strike out again.

They built their initial business servicing the small and medium sized businesses that make up roughly two-thirds of the Brazilian economy and represent some trillion dollars worth of transactions. But at WireCard, they increasingly were told to approach larger customers that didn’t have the same kind of demand for their services, according to Mendes.

So they built Cora — a technology enabled lender to the small and medium-sized businesses that they knew sowell.

The round was led by Kaszek Ventures, one of Latin America’s largest and most successful investment funds, with participation from Ribbit Capital — one of the most influential early-stage fintech investment firms globally.

“We created Cora to pursue our life purpose, which is to solve the financial problems faced by small and medium businesses. These businesses produce 67% of the Brazilian GDP but are totally underserved by the traditional banks”, said Senra, the company’s chief executive, in a statement.

The company is currently operating in closed beta and plans to launch its first product, a free SME-only mobile account in the first half of 2020, according to the statement. Cora will later release a portfolio of payments, credit related products, and financial management tools that are currently being developed.

“So far, large financial institutions have mainly built products that focus either on individuals or on large corporate clients and have totally ignored small and medium sized enterprises, who are the most relevant creators of value in our economies,” said Mendes in a statement. “We want to offer a high-quality, customer-centric suite of financial products that address the specific underserved needs of our clients’ businesses.”

This debut venture firm, backed by an Argentine conglomerate, is investing $60 million in far-flung U.S. startups

Nico Berardi considers himself to be a citizen of the world, with a penchant for travel and a wide range of interests. Unlike many other VCs, who’ve increasingly specialized their mandates as the market has grown more crowded, Berardi is nearly as wide-ranging in his approach to venture capital, too.

Somewhat counterintuitively, it’s paying off. At least, Berardi’s venture firm, Animo Ventures, has been investing a $60 million debut vehicle since closing it in July of last year.

It’s an impressive, surprising, amount for someone raising a fund for the first time, but then, Berardi’s trajectory into the world of venture capital hasn’t been completely straightforward, either. To wit, Berardi grew up in Argentina, where his professional life began at a community-focused nonprofit Techo, a kind of Habitat for Humanity focused on Latin America. He was so good at his development job, in fact, that he was moved to Miami as the CEO of Techo’s U.S operations.

It was there, over his six year career with the organization, that he was first introduced to the world of investing. Specifically, encouraged by several board members who were angel investors — and aided by some backing from the Knight Foundation — Berardi left the nonprofit world in 2014 to launch a still-active angel investor group called Miami Angels that funnels around $3.5 million into roughly 10 local companies each year.

In quick succession, he then applied to and was accepted into the tuition-based Kauffman Fellows Program, fell in love with a medical student in Boston, and headed to Harvard Business School to be closer to her, spending his summers with the Boston (and San Francisco-based) early-stage firm Resolute Ventures.

He imagined he’d land in San Francisco afterward, to work with Resolute. But when that medical student — now his wife — wound up landing a job back in Miami, he headed there instead and decided to launch his own venture firm. Enter Animo, a Latin word that means with intention or purpose and also, notes Bernardi, “sounds international.”

The latter matters because while Berardi is the sole general partner of the firm, he’s running it with two colleagues, neither of whom lives in the U.S. One of these is partner Antonio Osio, a native Mexican who was running his own firm, Capital Invent, when he first met Berardi through Kauffman Fellows. (“I poached him,” says Berardi.) They also have an operations partner in Caro Acevedo, who worked with Berardi as his COO at Techo and who still lives in Argentina.

As for the money, Berardi says it “mostly comes from Latin America and Europe,” including from anchor investor Techint. It’s a 60,000-person Argentine conglomerate that owns steel, construction, oil, gas, and healthcare businesses around the world and whose CEO, Paulo Rocco, sees Animo as a way to put the company’s resources into new materials sciences and manufacturing technology and machine learning startups, says Berardi.

“We want to make a dent in the universe, and there aren’t a lot of Latinx investors around and we want to carry that flag,” he offers.

To date, Animo has announced 12 deals, all in the U.S., including six investments in New York and six others in other places, including Scottsdale, Az.; Toronto, Ontario; Miami; and Richmond, Va.

Notably, Animo does not have plans to invest in Latin American companies, though it has backed a number of Latin American founders in the U.S. “I think every investor has their own set of biases,” says Berardi. “Our diversity numbers point in that way, but it hasn’t been a conscious effort. That’s just who we are.” He suggests that a much bigger focus for the firm is using its connections in “tier one ecosystems” like San Francisco and New York to “help [founders] outside the bubble enter it.”

Berardi does say there are a few things Animo won’t consider. “We stay away from FDA-regulated stuff because we don’t understand it well enough and therefore can’t be useful.” Mostly, however, he’s open to anyone and everyone who appreciates hard work, he suggests. “We’re younger, we’re hungry. We work 100-hour weeks and travel like crazy people.”

To underscore his point, Berardi tells a story about Intello, a SaaS operations platform that helps companies manage their SaaS spend, usage and compliance data and an Animo portfolio company. The startup had rented a booth at a conference organized by Okta, the publicly traded identity and access management company. “They didn’t have enough people to man the booth,” says Berardi, “and I was in town, so I was like, ‘I’ll man the booth with you in a cloud suit.’ They thought I was joking and I made an idiot of myself, but it drew a lot of people to the booth.”

Pictured above from left to right, Animo founders Nico Berardi, Caro Acevedo, and Antonio Osio.

VTEX, an e-commerce platform used by Walmart, raises $140M led by SoftBank’s LatAm fund

E-commerce now accounts for 14% of all retail sales, and its growth has led to a rise in the fortunes of startups that build tools to enable businesses to sell online. In the latest development, a company called VTEX — which originally got its start in Latin America helping companies like Walmart expand their business to new markets with an end-to-end e-commerce service covering things like order and inventory management; front-end customer experience and customer service — has raised $140 million in funding, money that it will be using to continue taking its business deeper into more international markets.

The investment is being led by SoftBank, specifically via its Latin American fund, with participation also from Gávea Investimentos and Constellation Asset Management. Previous investors include Riverwood and Naspers, and Riverwood continues to be a backer, too, the company said.

Mariano Gomide, the CEO who co-founded VTEX with Geraldo Thomaz, said the valuation is not being disclosed, but he confirmed that the founders and founding team continue to hold more than 50% of the company. In addition to Walmart, VTEX customers include Levi’s, Sony, L’Oréal and Motorola . Annually, it processes some $2.4 billion in gross merchandise value across some 2,500 stores, growing 43% per year in the last five years.

VTEX is in that category of tech businesses that has been around for some time — it was founded in 1999 — but has largely been able to operate and grow off its own balance sheet. Before now, it had raised less than $13 million, according to PitchBook data.

This is one of the big rounds to come out of the relatively new SoftBank Innovation Fund, an effort dedicated to investing in tech companies focused on Latin America. The fund was announced earlier this year at $2 billion and has since expanded to $5 billion. Other Latin American companies that SoftBank has backed include online delivery business Rappi, lending platform Creditas, and proptech startup QuintoAndar.

The common theme among many SoftBank investments is a focus on e-commerce in its many forms (whether that’s transactions for loans or to get a pizza delivered) and VTEX is positioned as a platform player that enables a lot of that to happen in the wider marketplace, providing not just the tools to build a front end, but to manage the inventory, ordering and customer relations at the back end.

“VTEX has three attributes that we believe will fuel the company’s success: a strong team culture, a best-in-class product and entrepreneurs with profitability mindset,” said Paulo Passoni, managing investment partner at SoftBank’s Latin America fund, in a statement. “Brands and retailers want reliability and the ability to test their own innovations. VTEX offers both, filling a gap in the market. With VTEX, companies get access to a proven, cloud-native platform with the flexibility to test add-ons in the same data layer.”

Although VTEX has been expanding into markets like the US (where it acquired UniteU earlier this year), the company still makes some 80% of its revenues annually in Latin America, Gomide said in an interview.

There, it has been a key partner to retailers and brands interested in expanding into the region, providing integrations to localise storefronts, a platform to help brands manage customer and marketplace relations, and analytics, competing against the likes of SAP, Oracle, Adobe, and Salesforce (but not, he said in answer to my question, Commercetools, which builds Shopify -style API tools for mid- and large-sized enterprises and itself raised $145 million last month).

E-commerce, as we’ve pointed out before, is a business of economies of scale. Case in point, while VTEX processes some $2.5 billion in transactions annually, it makes a relative small return on that: $69 million, to be exact. This, plus the benefit of analytics on a wider set of big data (another economy of scale play), are two of the big reasons why VTEX is now doubling down on growth in newer markets like Europe and North America. The company now has 122 integrations with localised payment methods.

“At the end of the day, e-commerce software is a combination of knowledge. If you don’t have access to thousands of global cases you can’t imbue the software with knowledge,” Gomide said. “Companies that have been focused on one specific region and now realising that trade is a global thing. China has proven that, so a lot of companies are now coming to us because their existing providers of e-commerce tools can’t ‘do international.'” There are very few companies that can serve that global approach and that is why we are betting on being a global commerce platform, not just one focused on Latin America.”

PalmPay launches in Nigeria on $40M round led by China’s Transsion

Africa focused payment startup PalmPay has launched in Nigeria after raising a $40 million seed-round led by Chinese mobile-phone maker Transsion.

The investment came via Transsion’s Tecno subsidiary, with participation from China’s NetEase and Taiwanese wireless comms hardware firm Mediatek a Transsion spokesperson confirmed to TechCrunch.

PalmPay had piloted its mobile fintech offering in Nigeria since July, before going live today at a launch in Lagos.

The startup aims to become Africa’s largest financial services platform, according to a statement. 

As part of the investment, PalmPay enters a strategic partnership with mobile brands Tecno, Infinix, and Itel that includes pre-installation of the startup’s app on 20 million phones in 2020.

The UK headquartered venture — that was also founded with Chinese seed investment — offers a package of mobile based financial services, including no fee payment options, bill pay, rewards programs, and discounted airtime.

In Nigeria, PalmPay will offer 10% cashback on airtime purchases and bank transfer rates as low as 10 Naira ($.02).

In addition to Nigeria, PalmPay will use the $40 million seed funding to grow its financial services business in Ghana. The payments startup has plans to expand to additional countries in 2020, PalmPay CEO Greg Reeve told TechCrunch on a call.

PalmPay received its approval from the Nigerian Central Bank as a licensed mobile money operator in July. During its pilot phase, the payments venture registered 100,000 users and processed 1 million transactions, according to a company spokesperson.

With its payments focus, the startup enters Africa’s most promising digital sector, but also one that has become notably competitive and crowded  — particularly in the continent’s largest economy and most populous nation of Nigeria. 

By a number of estimates, Africa’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population.

An improving smartphone and mobile-connectivity profile for Africa (see GSMA) turns this scenario into an opportunity for mobile-based financial products.

That’s why hundreds of startups are descending on Africa’s fintech space, looking to offer scalable solutions for the continent’s financial needs. By stats offered WeeTracker, fintech now receives the bulk of VC capital and deal-flow to African startups.

Nigeria has multiple new digital-payments entrants — see Chippercash — and several firmly rooted later stage fintech players, such as Paga and recently confirmed unicorn Interswitch.

PalmPay CEO Greg Reeves believes the company can compete in Nigeria and across Africa based on several strategic advantages. A big one is the startup’s support from Transsion and partnership with Tecno.

Transsion Tecno Store Africa“On channel and access, we’re going to be pre-installed on all Tecno phones. Your’e gonna find us in the Tecno stores and outlets. So we get an immediate channel and leg up in any market we operate in,” said Reeve.

Tecno’s owner and PalmPay’s lead investor, Transsion, is the largest seller of smartphones in Africa and maintains a manufacturing facility in Ethiopia. The company raised nearly $400 million in a Shanghai IPO in September and plans to spend roughly $300 million of that on new R&D and manufacturing capabilities in Africa and globally.

In addition to Transsion’s support and network, Reeves names PalmPay’s partnership with Visa . “We signed a strategic alliance with Visa so now I can deliver Visa products on top of my wallet, link my wallet to Visa products and give access to someone who’s completely unbanked to the whole of the Visa network,” he said.

Another strategic advantage PalmPay may have as a newcomer in Africa’s fintech space is Reeve’s leadership experience. He comes to the CEO position after serving as Vodaphone’s global head of M-Pesa — one of the world’s most recognized mobile-money products. Reeve was also a GM for Millicom‘s fintech products across Africa and Latin America.

“I’ve had my fingers in mobile financial services for the last 10 years,” he said.

Reeve confirmed that PalmPay has local teams (and is hiring) in Nigeria and Ghana.

With the company’s launch and $40 million raise — which is potentially the largest seed-round for an Africa focused startup in 2019 — PalmPay’s bid to gain digital payment market share is on.

The Transsion led investment also serves as a big bold marker for China’s pivot to African tech in 2019. It follows several big moves by Chinese actors in the continent’s digital space.

These include Opera’s $50 million investment in multiple online verticals in Nigeria and a major investment by Chinese investors in trucking logistics startup Lori Systems this week.

Latin America Roundup: Uber acquires Cornershop, SoftBank invests in Buser and Olist

Brazil continued to churn out unicorns this month, with Curitiba-based Ebanx becoming the first startup from the southern part of the country to top a $1 billion valuation. U.S.-based FTV Capital provided the investment but did not disclose the amount invested nor the exact valuation of Ebanx after the investment.

Ebanx is an end-to-end payment processor that helps international companies receive payments in the Latin American market, similar to Stripe. Their clients include Airbnb, AliExpress, Pipedrive, Spotify, Uber and Wish, and more than 50 million Latin Americans have conducted transactions with more than 1,000 companies through the Ebanx platform. This investment comes on the heels of exciting partnerships with Uber Pay, Shopify, Spotify and Visa to expand cross-border payment processing across the region.

Ebanx has operations in Brazil, Mexico, Argentina, Colombia, Chile, Peru, Ecuador and Bolivia, and will expand their local payment solution, Ebanx Pay, into Colombia in 2020. The company has grown its user base by offering a full-service product that includes market research, 24/7 customer service and anti-fraud technology.

The Ebanx investment is part of a growing interest in Latin American payments startups. Brazil’s PagSeguro and StoneCo had successful IPOs last year, while Mexico’s Conekta and Ecuador’s Kushki have raised large rounds to try to unite the region under a single processor as Latin America rapidly adopts e-commerce.

Uber acquires Cornershop, takes off where Walmart left off

The acquisition of the Chilean-Mexican grocery delivery startup Cornershop has been an emotional roller coaster for Latin American entrepreneurs and investors throughout 2019. First Walmart announced a $225 million deal that would be one of the bigger exits of the region, then the acquisition was blocked by Mexican antitrust institution COFECE. This announcement dealt a blow to the ecosystem as entrepreneurs and VCs had eagerly awaited this boost in liquidity in the local market.

Last-mile delivery and logistics became a very competitive space in Latin America in 2018.

Then in mid-October 2019, Uber announced it would take a 51% stake in Cornershop for a reported $450 million, quadrupling the startup’s value in the four months since the COFECE decision. This deal will consist of cash, investment in Cornershop’s growth and stock in Uber, which IPO’d earlier this year.

However, this deal must also be approved by the Chilean and Mexican antitrust boards, which are expected to release their decisions within the next two weeks. In the meantime, Cornershop will continue its expansion into the Colombian market after it added Peru and Canada in 2019.

Last-mile delivery and logistics became a very competitive space in Latin America in 2018, and many of the players are sitting on enormous pools of capital. Colombia’s Rappi raised $1 billion from SoftBank in early 2019, breaking records for startup investment for the region. Brazil’s iFood raised $500 million from Naspers at the end of 2018. However, delivery continues to be a cash-intensive business, with many of these companies burning through capital quickly to gain market share. Cornershop was an exception and had raised less than $50 million before the acquisition.

Brazil’s Buser, Olist, raise funding from SoftBank

Despite the WeWork crash, SoftBank has continued investing consistently in Brazilian startups. In early October 2019, the Japanese investor led an undisclosed Series B round for Brazilian collaborative bus chartering startup Buser. Buser’s team will invest more than $73 million in growth over the next 12 months to create new alliances for their network of operating partners.

Buser helps coordinate groups of people to charter buses at convenient times and lower prices, disrupting the bureaucratic, anti-competitive and inefficient bus system. The company has grown 1,500% over the past nine months and serves more than 3,000 people per day. While Buser has been popular with locals, traditional bus drivers are calling for regulation to slow the company’s meteoric growth. Buser plans to add more than 100 direct jobs in 200 cities over the next 12 months, and SoftBank’s most recent investment will help power this growth.

Brazil’s e-commerce marketplace integrator Olist also received investment from SoftBank for its Series C, coming in around $46 million. Redpoint eVentures and Valor Capital also participated in the round. 

This investment signals the increased interest by traditional retailers in startups that are slowly chipping away at their market share across the region.

Olist connects small businesses to larger product marketplaces to help entrepreneurs sell their products to a larger customer base. They will reportedly use this investment to investigate the development of financial products and look for collaboration with SoftBank’s other companies, like Rappi and Loggi. Based in Curitiba, Olist was founded in 2015 to help small merchants gain market share across the country through a SaaS licensing model to small brick and mortar businesses.

Today, Olist has more than 7,000 customers and uses a drop-shipping model to send products directly from stores to clients around the country, allowing them to grow with a capital-light model. They will use the investment to add up to 100 new employees.

Carrefour Brazil acquires 49% of Ewally

Grocery chain Carrefour acquired a large stake in Brazil-based Ewally after it completed Village Capital’s first regional acceleration program.

Ewally improves financial inclusion in Brazil through a mobile wallet app that allows unbanked clients to pay bills and make purchases online through the blockchain. Carrefour will reportedly use the acquisition to accelerate digital transformation and improve online payment mechanisms throughout Brazil.

Carrefour did not disclose the amount invested and the deal is still subject to approval by Brazilian financial regulation authorities. However, this investment signals the increased interest by traditional retailers in startups that are slowly chipping away at their market share across the region.

News and Notes: Early-stage rounds are getting bigger

Startups in Brazil, Colombia and Argentina raised several rounds this month, ranging from $1.5 million to $13 million. Brazil’s Xerpa, Colombia’s Sempli, Brazil’s Gorilla and Argentina’s Bitso and Worcket were among those that raised capital from local and international investors in October 2019.

Brazilian human resource management platform Xerpa raised $13 million from Vostok Emerging Finance to continue to help companies like MercadoLibre, iFood and QuintoAndar provide benefits for their employees. Previous investors include Nubank’s David Velez, Kaszek Ventures and QED Investors.

Sempli, an online lending platform for small businesses in Colombia, raised an $8 million Series A from new investors Oikocredit and Incofin CVSO, as well as previous investors BID LAB, XTPI Fund, Generación Exponencial, and Impulsum Ventures. To date, Sempli has raised more than $24 million in equity funding. The founders will use this round to grow their portfolio and improve their risk assessment technology to provide more small business loans in Colombia.

Brazil’s Quicko, an alternative mobility startup that uses big data, raised $10 million in October from Brazilian transport company CCR. Quicko’s technology integrates all mobility options — from bicycles to Uber and 99 — to help people get where they need to go as quickly and inexpensively as possible.

Also in Brazil, startup Gorilla Invest raised $8.4 million from Ribbit Capital, Monashees and Iporanga. Gorilla aggregates financial assets so that investors can review all their commitments in one place, and currently manages more than $1.2 billion for 40,000 clients.

Mexican cryptocurrency exchange Bitso raised an undisclosed round from Argentine startup Ripple to expand into the Southern Cone, especially Argentina and Brazil. Other investors in the round included Pantera Capital, Digital Currency Group, Jump Capital and Coinbase.

Looking ahead to November, with unsettled politics in several countries across the region, tech startups are growing despite governmental changes. Some of these changes will likely have a positive effect on the regional ecosystem as people push for more sustainable and equal economic growth.

What to watch next? Last year, Q4 was marked by a wave of large investments as funds and startups look to end the year strong. IFood raised its record-breaking $500 million round in December 2018. We may well see a similar uptick this year as mega-funds like SoftBank have been consistently investing multi-million dollar rounds since June. There is no sign international investment in Latin America will slow through the end of the year, so we can likely look forward to several more growth-stage rounds before the year is out.

Zubale, founded in Mexico City by two HBS grads, just raised $4.4 million to put locals to work over their phones

A year ago, at a demo day south of San Francisco, we watched a number of recently formed startups pitch investors on their companies. One that stood out to us at the time was Zubale, a Mexico City-based outfit whose founders were looking to connect big corporations with Latin Americans eager to address tasks on their behalf. A person could conduct on-the-ground market research for a brand, for example, then earn mobile phone credits or other redeemable digital rewards.

Fast-forward and Zubale, which had 10 employees at the time, now has 40 full-time employees, and has completed 170,000 tasks on behalf of the consumer brands on which it is squarely focused — and for two reasons.

First, according to Zubale co-founder Allison Campbell, the retail industry across Latin America is generating $2 trillion per year, but companies are also shelling out $40 billion on “super painful and high spend” that includes employees who complete in-store tasks like stocking shelves, checking prices and building displays.

Campbell says Zubale can save — even make — these companies money by crowdsourcing the same tasks to independent contractors who can choose from an inventory of similar jobs near them.

Campell and her co-founder, Sebastian Monroy, also know a few things about retail in emerging markets. Before heading to HBS, Campbell spent nearly eight years with Walmart, first as a merchandise manager, then as a  director of international strategic initiatives, roles that placed her in Gurgaon, India, then Shanghai and Shenzhen, China. Monroy’s path was similar; he spent more than seven years working in a variety of sales roles for Proctor & Gamble in Mexico before heading to Harvard, where he met Campbell on their first day of business school. (“We realized we were wearing the same exact glasses and took a picture together,” she says with a laugh. They decided to team up on Zubale a year later.)

Indeed, though one could see Zubale using its platform to crowdsource any number of tasks, à la TaskRabbit, the opportunity is so massive in catering to retailers that the startup plans to stay in its lane for the foreseeable future.

If anything, says Campell, Zubale — which plans to eventually expand from Mexico into other countries, including Brazil, Chile and Peru — may end up offering the contractors more in the way of financial services products, given that there remains a dearth of these and that these individuals are constantly checking the app anyway.

It makes sense. While 85% of Mexico’s population of 125 million now has a smart phone — giving rise to more app-driven startups like Zubale — only 10% have a credit card, and only 35% have a checking account. It’s for that reason that many of the people who work for Zubale still choose to earn mobile phone credit and other digital rewards that they can redeem through making online purchases.

They “love us,” too, says Campbell, because they can “increase their income by 40%” by performing work for Zubale. In fact, she suggests Zubale hasn’t had to do much in the way of marketing, thanks to Facebook Groups where the company is discussed, as well as through other word of mouth, including workers’ friends who want more jobs and find it easier to find and complete jobs in 30-minute increments at the same store location rather than run from store to store or job to job. (On average, she adds, they complete 20 jobs for the company per week.)

Certainly, investors like the company. Campbell and Monroy say they had a lot of inbound interest when they began seeking seed funding more recently. They chose the venture firm NFX to lead the $4.4 million round, given its expertise in marketplaces and network effects-driven businesses. Other participants in the round include Industry Ventures, Joe Montana’s Liquid 2 Ventures and XFactor Fund, along with individual investors Jonathan Swanson (who is the chairman of Thumbtack), Sergio Romo (the CEO of Grow Mobility) and Bob White (the founder and a former managing director of Bain Capital).

Meanwhile, the company’s very first check came from the seed-stage firm Pear, which had hosted that demo day.

Brazilian unicorn Ebanx will hit $2 billion in payments processed by the end of the year

Ebanx, the newly minted Brazilian financial services unicorn, expects to process $2 billion in payments by the end of the year and is looking to expand its offerings into domestic payments as it grows.

Since its launch in 2012, Ebanx has primarily focused on helping international merchants sell locally in Brazil. The Brazilian business accounts for nearly 90% of the company’s revenue, but as it expands into other markets the company is also broadening its suite of services.

The company moved into local payment processing in Brazil in April of this year, and recently closed on a new financing round from previous investors FTV and Endeavor Catalyst that values the company north of $1 billion, according to chief executive Alphonse Voigt. 

The money will be used to continue an aggressive hiring push in new markets and the launch of the company’s local payment services in other geographies, beginning with Colombia in the new year.

As credit cards penetrate the Latin American market, approval rates for local companies are increasing, which represents an attractive new source of revenue, Voigt says.

In addition to the local payment processing, Ebanx recently announced that it became a payment partner for the Uber Pay ecosystem in Latin America and would start processing cash voucher and bank transfer payments for Uber in Brazil and across Latin America. The company also inked deals with Coursera, Scribd, and Shopify throughout Latin America. Finally, the company partnered with Visa* on an initiative to increase electronic payments in the Brazilian state of Parana.

*This story has been updated to reflect that Ebanx is partnering with Visa in Parana.

Latin America roundup: SoftBank bets on Brazilian unicorns and Konfio raises $250M for lending plans

SoftBank did not let up the flow of capital to Brazil this month, staying busy despite the WeWork debacle. With two more $100 million-plus rounds in QuintoAndar and MadeiraMadeira, the Japanese investor has funded at least one more unicorn in the Brazilian ecosystem. Their investments in Brazil from the past two months alone far outstrip Latin America’s venture capital funding in all of 2016.

In early September, SoftBank backed QuintoAndar for a $250 million Series D round alongside Dragoneer, General Atlantic and Kaszek Ventures, which recently made headlines for raising $600 million to invest in Latin America. QuintoAndar is a real estate rental startup that simplifies the process of locating and renting an apartment in Brazil. Although the startup only has 2% of the rentals market share in Brazil, QuintoAndar’s tech solution enabled them to scale rapidly, beating out traditional incumbents in the region’s bureaucratic rental structure.

QuintoAndar’s founders ideated the business model while they were struggling to find an apartment in São Paulo after finishing their MBAs at Stanford. They have seen property rentals grow 5x on their platform since raising a $70 million Series C just nine months ago.

SoftBank stayed bullish in Brazil with a $110 million investment in home goods marketplace Madeira Madeira, which has been described as the “Wayfair of Brazil.” This drop-shipping business has grown to sell thousands of products online with a relatively capital-light model that connects buyers directly with warehouses, saving on overhead costs. The SoftBank investment dwarfs all of Madeira Madeira’s previous capital raised — $38.8 million — by almost a factor of three.

Madeira Madeira plans to use the capital to expand across Latin America, as well as improve logistics and customer service.

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David Arana, Konfio founder and CEO

Mexico’s Konfio receives $250 million credit line from Goldman Sachs, Victory Park Capital

Konfio provides unsecured loans to small and medium businesses in Mexico that are currently underserved by the traditional banking sector. Goldman Sachs contributed up to $100 million in secured credit to Konfio to allow them to make up to $250 million in loans to 25,000 companies over the next 12 months. Victory Park Capital also contributed to this debt round, bringing Konfio’s total raised to $43 million in equity and $260 million in debt.

This capital mints Konfio as one of the largest fintech startups in the region. It will also allow them to take on larger loan sizes. Konfio’s average loan size hovers around $20,000. Konfio uses credit ratings to calculate risk and disburse loans within 24 hours, and at half the rate of a traditional bank loan.

To date Konfio has served over 1 million clients in what is currently a $100 billion market in Mexico. Mexico’s access to credit is still significantly lower than the rest of Latin America, so Konfio is well-placed to grow within this market, especially with this new funding.

Klar, Mexico’s newest challenger bank, raises $57.5 million from U.S. investors

Mexican challenger bank Klar, a Chime clone, recently raised over $57.5 million in debt and equity in one of Mexico’s largest seed rounds. The $50 million credit line came from San Francisco’s Arc Labs, while Quona Capital led the $7.5 million equity round with support from Santander InnoVentures, aCrew Capital, FJ Labs and Western Technology Investment.

Klar was founded less than 10 months ago to help Mexicans access free and fair financial services through digital banking. Currently Klar offers a debit and a credit product with transparent fees; today, only 15% of Mexicans have access to credit cards, most of which have +60% interest rates and a lot of hidden fees. Klar wants to make banking accessible for everyone in Mexico through their free digital platform.

This startup will be one to watch over the coming months as it competes with Nubank and other local neobanks to bank Mexico’s unbanked.

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U.S. and Mexican investors back Flat, an Opendoor clone in Mexico

Mexican property-tech startup Flat is taking the Opendoor model to Latin America. This startup raised an unprecedented $4.6 million in their pre-seed round led by ALL VP, with support from Liquid2 Ventures, Next Billion, Picus Capital and angels.

Besides Mexican e-scooter giant, Grin, Flat’s pre-seed is the largest ever for Mexico. Flat’s founders, Victor Noguera and Bernardo Cordero, are betting on a $25 billion home sales market in Mexico that is currently stuck in the 20th century. Flat will allow homeowners and buyers to gain access to accurate information about home prices (think Zillow in the U.S.), as well as managing the slow process of notarizing the purchase after the fact. With Flat, the startup manages everything from valuation to ownership transfer, all through their platform, and within 72 hours of purchase.

Flat will use this investment to vertically integrate within the Mexican market, rather than expanding across Latin America.

News and notes: Mexican fintechs in focus, more VC funds opening in LatAm

  • Other deals in September included Mutuo Financiera’s $100 million credit facility granted by Crayhill Capital Management, a New York-based alternative asset management firm, at the beginning of the month. Mutuo Financiera is a vehicle fleet leasing company that focuses on clean energy transportation. The investment will help the startup acquire new compressed natural gas vehicles to serve increased demand in Mexico for clean transportation alternatives.
  • Brazilian growth-stage VC fund Base Partners closed a further $135 million to invest in scaling Latin American startups. The fund, founded by Fernando Spnola and Arthur Mizne and backed by over 43 limited partners, has previously invested in companies like ByteDance and Stripe, recently crowned the U.S.’ third most valuable startup. Base Partners will now compete against investment giants like Kaszek and SoftBank to participate in Latin America’s top expansion stage deals.
  • Mexico’s Credijusto, which offers asset-backed loans and equipment leases to SMEs, raised their Series B this month, topping $42 million led by Goldman Sachs and Point72 Ventures. Credijusto has processed more than $90 million in loans since they were founded in 2015 and closed a $100 million credit agreement with Goldman Sachs just months before this round.
  • Looking ahead to October, SoftBank is said to be evaluating several investments in Brazil and will likely continue deploying capital rapidly in Latin America’s largest market. We may see a few more unicorns in Brazil before the year is out. It is also likely that the Innovation Fund will make its way out of Brazil to other big markets like Colombia or Mexico, where SoftBank has invested in the past.
  • Accion Venture Lab launched a social impact fund and Ewa Capital began raising capital for a female-focused fund in September, so hopefully investment in female founders and inclusive tech will rise in coming months.
  • Mexico’s Square clone, Billpocket, also recently announced an undisclosed round from Axon Capital Partners. Billpocket has been accelerating e-payments in Mexico at a triple-digit pace since it started, carving out a name for itself in a competitive space where incumbent Clip has already received funding from SoftBank.