Overblown fears that the coronavirus could be transmitted through surfaces have created a stigma around handling nonhazardous trash, experts say. Some recyclable waste has been junked or burned.
President Jair Bolsonaro had issued rules forbidding social networks from removing many posts that the sites considered misinformation. On Tuesday, Brazil’s Senate and top court killed the policy.
His totalitarian aims are now unmistakable.
The company realized months ago that it could be running afoul of pay laws in a number of countries but has been slow to fix the problem, according to internal documents.
By eliminating walls and color, the architect Marcio Kogan takes the form of a Trancoso fishing cottage to its most natural — yet elevated — ideal.
The new rules in Brazil appear to be the first national policy that restricts how tech companies can control their sites, analysts say.
Buy now, pay later is officially everywhere, and Latin America is no exception.
Today, one startup in the region, Addi, is announcing a $75 million extension to its Series B, bringing the total round size to $140 million. In late May, the startup announced it had raised $35 million in an equity round led by Union Square’s Opportunity Fund, and $30 million in debt funding from Architect Capital.
The company, which has dual headquarters in Bogota, Colombia, and São Paulo, Brazil, declined to reveal its new valuation other than to say it is “nearly triple” what it was 90 days ago when it closed on the first tranche of its Series B, and that it is now in the “hundreds of millions” of dollars range.
New York-based Greycroft led the extension, which also included participation from new backers GGV Capital, Citius Capital and Intersection Growth Partners, as well as existing investors Union Square’s Opportunity Fund, Andreessen Horowitz, Endeavor Catalyst, Foundation Capital, Monashees and Quona Capital.
With the latest financing, Addi has now raised a total of $220 million in debt and equity since its September 2018 inception — $140 million of that in equity and over $80 million in debt.
Addi co-founder and CEO Santiago Suarez, says he, Daniel Vallejo and Elmer Ortega started the company with a vision of making digital commerce a reality in Latin America — a region where an estimated fewer than 25% of people have a credit card.
“To do this, we had to solve the payment problem,” he said. “We wanted to make frictionless payments possible while allowing customers to afford what they wanted.”
Addi started with a buy now, pay later offering, which allowed consumers to make purchases in minutes with “just a few clicks.” Today, the company allows customers to pay for their purchases over three months at no cost. For bigger purchases, Addi lets them pay for up to 24 months at what it describes as “competitive and fair rates.”
Addi is currently available for e-commerce, mobile and brick-and-mortar purchases in Brazil and Colombia, with plans to expand across Latin America in the coming years. In particular, it plans to enter the Mexican market in 2022.
Since the beginning of this year alone, Addi has grown its GMV (gross merchandise volume) by 13x, according to Suarez.
“And our ARR has seen similar growth,” he said.
Like many other companies, Addi temporarily saw a slowdown in business as a result of the COVID-19 pandemic. But it quickly bounced back.
“We lost 99% of our GMV in 20 days when the pandemic hit. We had to make some painful decisions, including letting go of many of our colleagues at a very difficult time,” Suarez recalled. “We also refocused the business on e-commerce and digital payments, and we haven’t looked back since then.”
As a result, Addi reached its pre-COVID high again in March/April of 2021, and has grown by about 3x since.
For now, the company is more focused on growth than profitability, Suarez added.
“This round has increased our focus on making digital commerce ubiquitous and accessible across Latin America,” he said.
Indeed, Latin America led the world in e-commerce sales growth last year. For its part, Addi currently has more than 150,000 customers, a number that is growing at 30% to 40% month over month. On the merchant side, it has close to 500 merchant partners, including brands such as Arturo Calle, Mario Hernandez, Keep Running and Claro. Earlier this year, it inked a strategic partnership with Banco Santander.
Addi currently has over 260 employees (or as Suarez put it, partners), up from less than 120 a year ago. The company prides itself as being “one of the few Latin American startups” that grants equity to everyone on staff.
“And we make it a point of speaking about partners and co-owners rather than employees,” Suarez told TechCrunch.
The company plans to use the new capital to speed up its product roadmap and geographic expansion. On the product side, it will be launching “a one-click checkout solution” for its merchant partners and customers by year’s end. Addi will also be accelerating its entry into Mexico, as mentioned previously, where it’s aiming to launch in early 2022.
Greycroft’s Thabet Mahayni said that prior to investing in Addi, his firm had been tracking the startup “for a long time.”
“In addition to an exceptional team, we believe the BNPL value proposition is stronger in LatAm than anywhere else in the world,” Mahayni told TechCrunch.” We…believe they have an opportunity to fundamentally reshape the entire consumer payments experience in the region.”
That is in part because currently, consumers in Latin America have very few alternatives when it comes to credit, he points out. Card penetration is very low and those who apply for credit “face a cumbersome and frustrating application process,” Mahayni added.
And those who do have credit cards are often given very low limits with high interest rates.
“It’s easy to see how this dynamic makes it difficult and expensive for consumers to access safe and reliable credit,” he said.
Addi, according to Mahayni, has “rebuilt the entire onboarding, underwriting and fraud stack so they can provide safer credit alternatives to consumers while enabling merchants to meaningfully increase their basket sizes and GMV.”
It’s the second LatAm investment for Greycroft, which previously invested in Rocket.chat, a Brazilian enterprise communication and collaboration platform.
In Mexico next year, Addi will join existing player, Nelo. That startup raised $3 million in April, and at the time, was live with more than 45 merchants and over 150,000 users. Also, Alchemy earlier this year entered the Mexican market.
The live streaming boom is driving a significant uptick in the creator economy, as a new forecast estimates consumers will spend $6.78 billion in social apps in 2021. That figure will grow to $17.2 billion annually by 2025, according to data from mobile data firm App Annie, which notes the upward trend represents a five-year compound annual growth rate (CAGR) of 29%. By that point, the lifetime total spend in social apps will reach $78 billion, the firm reports.
Initially, much of the livestream economy was based on one-off purchases like sticker packs, but today, consumers are gifting content creators directly during their live streams. Some of these donations can be incredibly high, at times. Twitch streamer ExoticChaotic was gifted $75,000 during a live session on Fortnite, which was one of the largest ever donations on the game streaming social network. Meanwhile, App Annie notes another platform, Bigo Live, is enabling broadcasters to earn up to $24,000 per month through their live streams.
Apps that offer live streaming as a prominent feature are also those that are driving the majority of today’s social app spending, the report says. In the first half of this year, $3 out every $4 spend in the top 25 social apps came from apps that offered live streams, for example.
During the first half of 2021, the U.S. become the top market for consumer spending inside social apps with 1.7x the spend of the next largest market, Japan, and representing 30% of the market by spend. China, Saudi Arabia, and South Korea followed to round out the top 5.
While both creators and the platforms are financially benefitting from the live streaming economy, the platforms are benefitting in other ways beyond their commissions on in-app purchases. Live streams are helping to drive demand for these social apps and they help to boost other key engagement metrics, like time spent in app.
One top app that’s significantly gaining here is TikTok.
Last year, TikTok surpassed YouTube in the U.S. and the U.K. in terms of the average monthly time spent per user. It often continues to lead in the former market, and more decisively leads in the latter.
In other markets, like South Korea and Japan, TikTok is making strides, but YouTube still leads by a wide margin. (In South Korea, YouTube leads by 2.5x, in fact.)
Beyond just TikTok, consumers spent 740 billion hours in social apps in the first half of the year, which is equal to 44% of the time spent on mobile globally. Time spent in these apps has continued to trend upwards over the years, with growth that’s up 30% in the first half of 2021 compared to the same period in 2018.
Today, the apps that enable live streaming are outpacing those that focus on chat, photo or video. This is why companies like Instagram are now announcing dramatic shifts in focus, like how they’re “no longer a photo sharing app.” They know they need to more fully shift to video or they will be left behind.
The total time spent in the top five social apps that have an emphasis on live streaming are now set to surpass half a trillion hours on Android phones alone this year, not including China. That’s a three-year CAGR of 25% versus just 15% for apps in the Chat and Photo & Video categories, App Annie noted.
Thanks to growth in India, the Asia-Pacific region now accounts for 60% of the time spent in social apps. As India’s growth in this area increased over the past 3.5 years, it shrunk the gap between itself and China from 115% in 2018 to just 7% in the first half of this year.
Social app downloads are also continuing to grow, due to the growth in live streaming.
To date, consumers have downloaded social apps 74 billion times and that demand remains strong, with 4.7 billion downloads in the first half of 2021 alone — up 50% year-over-year. In the first half of the year, Asia was the largest region region for social app downloads, accounting for 60% of the market.
This is largely due to India, the top market by a factor of 5x, which surpassed the U.S. back in 2018. India is followed by the U.S., Indonesia, Brazil and China, in terms of downloads.
The shift towards live streaming and video has also impacted what sort of apps consumers are interested in downloading, not just the number of downloads.
A chart that show the top global apps from 2012 to the present highlights Facebook’s slipping grip. While its apps (Facebook, Messenger, Instagram and Facebook) have dominated the top spots over the years in various positions, TikTok popped into the number one position last year, and continues to maintain that ranking in 2021.
Further down the chart, other apps that aid in video editing have also overtaken others that had been more focused on photos or chat.
Video apps like YouTube (#1), TikTok (#2) Tencent Video (#4), Bigo Live (#5), Twitch (#6), and others also now rank at the top of the global charts by consumer spending in the first half of 2021.
But YouTube (#1) still dominates in time spent compared with TikTok (#5), and others from Facebook — the company holds the next three spots for Facebook, WhatsApp and Instagram, respectively.
This could explain why TikTok is now exploring the idea of allowing users to upload even longer videos, by increasing the limit from 3 minutes to 5, for instance.
In addition, because of live streaming’s ability to drive growth in terms of time spent, it’s also likely the reason why TikTok has been heavily investing in new features for its TikTok LIVE platform, including things like events, support for co-hosts, Q&As and more, and why it made the “LIVE” button a more prominent feature in its app and user experience.
App Annie’s report also digs into the impact live streaming has had on specific platforms, like Twitch and Bigo Live, the former which doubled its monthly active user base from the pre-pandemic era, and the latter which saw $314.2 million in consumer spend during H1 2021.
“The ability of social media users to communicate with each other using live video – or watch others’ live broadcasts – has not only maintained the growth of a social media app market, but contributed to its exponential growth in engagement metrics like time spent, that might otherwise have saturated some time ago,” wrote App Annie’s Head of Insights, Lexi Sydow, when announcing the new report.
The full report is available here.
Critics see in the rhetoric of the leader, who is seeing declining poll numbers and mounting legal challenges, a parallel to former President Donald J. Trump’s.
Factorial, a startup out of Barcelona that has built a platform that lets SMBs run human resources functions with the same kind of tools that typically are used by much bigger companies, is today announcing some funding to bulk up its own position: the company has raised $80 million, funding that it will be using to expand its operations geographically — specifically deeper into Latin American markets — and to continue to augment its product with more features.
CEO Jordi Romero, who co-founded the startup with Pau Ramon and Bernat Farrero — said in an interview that Factorial has seen a huge boom of growth in the last 18 months and counts more than anything 75,000 customers across 65 countries, with the average size of each customer in the range of 100 employees, although they can be significantly (single-digit) smaller or potentially up to 1,000 (the “M” of SMB, or SME as it’s often called in Europe).
“We have a generous definition of SME,” Romero said of how the company first started with a target of 10-15 employees but is now working in the size bracket that it is. “But that is the limit. This is the segment that needs the most help. We see other competitors of ours are trying to move into SME and they are screwing up their product by making it too complex. SMEs want solutions that have as much data as possible in one single place. That is unique to the SME.” Customers can include smaller franchises of much larger organizations, too: KFC, Booking.com, and Whisbi are among those that fall into this category for Factorial.
Factorial offers a one-stop shop to manage hiring, onboarding, payroll management, time off, performance management, internal communications and more. Other services such as the actual process of payroll or sourcing candidates, it partners and integrates closely with more localized third parties.
The Series B is being led by Tiger Global, and past investors CRV, Creandum, Point Nine and K Fund also participating, at a valuation we understand from sources close to the deal to be around $530 million post-money. Factorial has raised $100 million to date, including a $16 million Series A round in early 2020, just ahead of the Covid-19 pandemic really taking hold of the world.
That timing turned out to be significant: Factorial, as you might expect of an HR startup, was shaped by Covid-19 in a pretty powerful way.
The pandemic, as we have seen, massively changed how — and where — many of us work. In the world of desk jobs, offices largely disappeared overnight, with people shifting to working at home in compliance with shelter-in-place orders to curb the spread of the virus, and then in many cases staying there even after those were lifted as companies grappled both with balancing the best (and least infectious) way forward and their own employees’ demands for safety and productivity. Front-line workers, meanwhile, faced a completely new set of challenges in doing their jobs, whether it was to minimize exposure to the coronavirus, or dealing with giant volumes of demand for their services. Across both, organizations were facing economics-based contractions, furloughs, and in other cases, hiring pushes, despite being office-less to carry all that out.
All of this had an impact on HR. People who needed to manage others, and those working for organizations, suddenly needed — and were willing to pay for — new kinds of tools to carry out their roles.
But it wasn’t always like this. In the early days, Romero said the company had to quickly adjust to what the market was doing.
“We target HR leaders and they are currently very distracted with furloughs and layoffs right now, so we turned around and focused on how we could provide the best value to them,” Romero said to me during the Series A back in early 2020. Then, Factorial made its product free to use and found new interest from businesses that had never used cloud-based services before but needed to get something quickly up and running to use while working from home (and that cloud migration turned out to be a much bigger trend played out across a number of sectors). Those turning to Factorial had previously kept all their records in local files or at best a “Dropbox folder, but nothing else,” Romero said.
It also provided tools specifically to address the most pressing needs HR people had at the time, such as guidance on how to implement furloughs and layoffs, best practices for communication policies and more. “We had to get creative,” Romero said.
But it wasn’t all simple. “We did suffer at the beginning,” Romero now says. “People were doing furloughs and [frankly] less attention was being paid to software purchasing. People were just surviving. Then gradually, people realized they needed to improve their systems in the cloud, to manage remote people better, and so on.” So after a couple of very slow months, things started to take off, he said.
Factorial’s rise is part of a much, longer-term bigger trend in which the enterprise technology world has at long last started to turn its attention to how to take the tools that originally were built for larger organizations, and right size them for smaller customers.
The metrics are completely different: large enterprises are harder to win as customers, but represent a giant payoff when they do sign up; smaller enterprises represent genuine scale since there are so many of them globally — 400 million, accounting for 95% of all firms worldwide. But so are the product demands, as Romero pointed out previously: SMBs also want powerful tools, but they need to work in a more efficient, and out-of-the-box way.
Factorial is not the only HR startup that has been honing in on this, of course. Among the wider field are PeopleHR, Workday, Infor, ADP, Zenefits, Gusto, IBM, Oracle, SAP and Rippling; and a very close competitor out of Europe, Germany’s Personio, raised $125 million on a $1.7 billion valuation earlier this year, speaking not just to the opportunity but the success it is seeing in it.
But the major fragmentation in the market, the fact that there are so many potential customers, and Factorial’s own rapid traction are three reasons why investors approached the startup, which was not proactively seeking funding when it decided to go ahead with this Series B.
“The HR software market opportunity is very large in Europe, and Factorial is incredibly well positioned to capitalize on it,” said John Curtius, Partner at Tiger Global, in a statement. “Our diligence found a product that delighted customers and a world-class team well-positioned to achieve Factorial’s potential.”
“It is now clear that labor markets around the world have shifted over the past 18 months,” added Reid Christian, general partner at CRV, which led its previous round, which had been CRV’s first investment in Spain. “This has strained employers who need to manage their HR processes and properly serve their employees. Factorial was always architected to support employers across geographies with their HR and payroll needs, and this has only accelerated the demand for their platform. We are excited to continue to support the company through this funding round and the next phase of growth for the business.”
Notably, Romero told me that the fundraising process really evolved between the two rounds, with the first needing him flying around the world to meet people, and the second happening over video links, while he was recovering himself from Covid-19. Given that it was not too long ago that the most ambitious startups in Europe were encouraged to relocate to the U.S. if they wanted to succeed, it seems that it’s not just the world of HR that is rapidly shifting in line with new global conditions.
South America was the epicenter of the Covid-19 pandemic early this year. Experts are trying to find out why new infections and deaths are falling so fast.
Roberto Wagner Fernandes, who died in a plane crash in Paraguay in 2005, killed three women whose bodies were found in Miami and Broward County in 2000 and 2001, the authorities said.
There has been significant hype around Latin America’s startup success. For good reason, too: Startups have raised $9.3 billion in just the first half of 2021, almost double the amount in all of 2020, and mega-rounds are a growing trend.
But while the industry hails the rise of the region’s ecosystem and its growing fleet of unicorns, Latin America’s startup story has a far longer past. And it’s one we should keep in mind as entrepreneurs and investors around the world forge the region’s future.
People often ask me: How are consumers different in Brazil? How does the Peruvian market behave compared to the United States? These questions don’t really see each country for its inherent value, but instead gear people up to expect the unexpected from a historically economically disadvantaged region.
In fact, the evolution of business shares far more similarities across countries than we might expect. Latin America’s market has evolved over a very long time — as long as Silicon Valley and any other hub. This region has a global outlook, spectacular universities, a diverse population and an army of entrepreneurs.
It’s important for investors outside of Latin America to get involved in fundraising at earlier stages, when founders need extra support from everyone around.
That’s why the unicorns and megadeals should come as no surprise: They’re the natural evolution of the ecosystem, of more capital generating more success after years of hard work.
As Latin America has grown, competition has grown even more intense in the United States. VCs have more money than ever, and it’s getting increasingly expensive to invest in North America. So they’re looking to diversify their investments with high-potential opportunities abroad. Big funds are now dedicating resources to exclusively targeting Latin America, from SoftBank creating a region-specific fund, to Sequoia saying it will pay more attention to the region.
These incoming investors must bring more than money to ensure that entrepreneurship continues to grow in a healthy manner, rather than set it off balance. Investors should bring a local strategy that makes them an asset to Latin America’s startup ecosystem.
Investors should look for younger markets
Most Latin American companies reaching unicorn status and going public now were started around 2012. This is not very different from the timeline of businesses in other markets such as the United States. For instance, e-commerce giant MercadoLibre launched in Argentina around the time eBay was emerging.
What this tells us is that foreign investors would do well to keep a sharp eye on emerging opportunities beyond heavily covered markets like Brazil and Mexico. There is a huge opportunity to do what local investors did in Brazil and Mexico years ago, and play a significant role in the next chapter of countries with blossoming markets like Colombia, Peru or Uruguay.
U.S. investors remain shy
The amount of VC capital being funneled into Latin American startups has surged since 2017, with angel investment close behind. However, much of this investment comes from local and regional investors. Every top university in Brazil has a pool of angels. Investors in the Andean region cover Peru, Chile and Colombia. If today’s ecosystem is flourishing, it’s largely because native investors are lighting the spark.
Meanwhile, U.S. investor presence at the early stages is still low and risk averse. It’s much harder for a pre-seed or seed startup to get foreign investor interest than when they’ve already reached Series A or B. Investors also tend to come in on an ad hoc basis or as outliers brought about by a mutual contact. Foreign investors are the exception, not the rule.
It’s important for investors outside of Latin America to get involved in fundraising at earlier stages, when founders need extra support from everyone around. Investors should be pursuing a long-term strategy that will bring more consistency to the local ecosystem as a whole.
Money is not enough, investors should bring dedicated resources
Your contribution as an investor is largely about the resources you can offer. That’s especially challenging for a foreigner who has less of an understanding of the local industry and lacks a network and people on the ground.
While investors may say their your regular value offering is enough — network and U.S. customers — in truth, this won’t necessarily be of much use. Your hiring network might not be ideal for a Latin American company, and your thorough understanding of the U.S. market might not reflect developments in Latin America.
Remember that the region has a plethora of VC organizations who have worked with local startups over the course of a decade. Latin America is a very welcoming and open market, and local investors and accelerators will happily work with foreign investors, including in deal-sharing opportunities.
It’s crucial to create incentives within the ecosystem, which — like in the United States — largely means matching founders with unique opportunities. In North America, this often happens organically, because people are on the ground and actively engaged with what’s happening in the region, from networking events, to awards, and grants and partnership opportunities.
To create this in Latin America, foreign investors need to dedicate a team and money to their regional commitments. They will have to understand the local industry and be available to mentor founders with diverse perspectives.
In my experience helping EA, Pinterest and Facebook land in Latin America, we always had someone on the ground or working remotely but fully dedicated to the region. We had people focused on localizing the product, and we had research teams studying similarities and differences in user behavior. That’s how corporations land their products; it’s how VCs should land their money.
Only disrupt when it adds value
The idea is for foreign investors to strike a balance locally while creating disruptions when it helps startups look outward rather than attempting to overhaul steady, positive internal growth. That can mean encouraging companies to incorporate in the United States to make it easier for investors from anywhere to invest or preparing the company to go global. Local investors can help investors new to the region understand the balance of things that should or shouldn’t be disrupted.
Don’t be surprised when Latin America’s apparent “boom” starts happening in other emerging markets like Africa and Asia. This isn’t about a secret hack coming in from the outside. It’s just about creating the right environment for local talent to flourish and ensuring it maintains healthy growth.
The assault was the latest launched by well-trained and heavily-armed bands on robbers targeting small cities at night.
Petlove&Co, a São Paulo-based digital platform for products and services for the pet market, announced today that it has raised about $150 million (R$750 million) today in a funding round led by Riverwood Capital.
The round is nearly double that of what Petlove has raised in its history. The company started its life as PetSuperMarket when it was founded in 1999 in the early days of the internet. Today, the company continues to operate an online store offering a wide range of pet products and services.
Tarpon, SoftBank, L Catterton, Porto Seguro and Monashees also participated in the funding round, which brings the company’s total raised to a known $225.8 million over its lifetime, according to Crunchbase. Since January 2020 alone, Petlove has raised over $192 million. The company has declined to reveal at what valuation this last round was raised.
Petlove CEO Talita Lacerda said the company will use the new capital in part to further expand its logistics network with the goal of accelerating its delivery capabilities. In particular, it plans to expand its express delivery service, Petlove Já, which allows products to be delivered within 4 hours of placing their order, to other geographies. Currently it is only available in a few cities in Brazil, such as São Paulo and Belo Horizonte.
The funding will also go toward growing Petlove’s subscription program, which Lacerda said is the first of its kind in the country, and one of the company’s flagship services.
“The Brazilian pet market is one of the largest in the world and Brazilian consumers are increasingly demanding digitally native products and services with a high level of customer-centricity,” said Francisco Alvarez-Demalde, co-founding partner and managing partner at Riverwood Capital, in a written statement.
The company has evolved and grown after a recent integration with DogHero, the acquisitions of Vetus and VetSmart and the launch of Porto.Pet.
“We have built an increasingly comprehensive and inclusive platform to meet the needs of all stakeholders in this rapidly expanding market,” Lacerda said.
Brazil is the 4th largest pet market in total spend, the company says. According to the Instituto Pet Brasil, total sales of the Brazilian pet market surpassed US$7 billion (R$40 billion) in 2020, growing 13.5% compared to the previous year, while Petlove grew 65%. Overall, pet ownership in the country is high, with 60% of Brazilians owning pets compared to 50% in the US.
Petlove has over 400 employees, according to Pitchbook.
Alex Szapiro, head of Brazil and operating partner of SoftBank Latin America Fund described the work that Petlove has done to help “form the largest ecosystem in Latin America” as “one of the most extraordinary in the segment and in the entire retail sector.”
Among the 3,000 fossils seized at a Brazilian port in 2013 was an almost complete skeleton from the pterosaur species Tupandactylus navigans, preserved in six limestone slabs.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Natasha and Alex and Grace and Chris were joined by none other than TechCrunch’s own Mary Ann Azevedo, in her first-ever appearance on the show. She’s pretty much the best person and we’re stoked to have her on the pod.
And it was good that Mary Ann was on the show this week as she wrote about half the dang site. Which meant that we got to include all sorts of her work in the rundown. Here’s the agenda:
- Funding rounds from: Ramp, which raised $300 million at a $3.9 billion valuation; NoRedInk which put together an impressive $50 million Series B; and Playbook, which is building a sort of Dropbox for designers. Each company gave us something different to noodle on, be it the diverging strategies at Ramp and Brex, how NoRedInk is different from Grammarly, and why Dropbox is not the Dropbox for designers.
- Then we spun the globe to narrow our focus to Latin America, a booming startup scene that Mary Ann recently profiled for Extra Crunch. In a nutshell, venture capital is helping drive an enormous wave of startup activity in the region — or perhaps a wave of startup activity is driving a boom in venture investment? — leading to huge companies, and perhaps some tech-powered inclusion of more folks into the modern banking, and digital economy. (For more, here are notes on the Brazilian market’s rising exit tally! And Flink raised, which was worth chewing on as well.)
- We quickly pivoted to the hot button issue of the moment for every startup (and business): hiring. Natasha noted how startups used to focus on runway, and now they are looking to fill empty seats amid the great resignation.
- Finally, we nattered about huge venture results from Boston, big numbers from Austin, and what increasingly feels like an everything bubble. Chicago is doing well, too. Pick a city, it’s putting up big numbers.
The UK government has named the person it wants to take over as its chief data protection watchdog, with sitting commissioner Elizabeth Denham overdue to vacate the post: The Department of Digital, Culture, Media and Sport (DCMS) today said its preferred replacement is New Zealand’s privacy commissioner, John Edwards.
Edwards, who has a legal background, has spent more than seven years heading up the Office of the Privacy Commissioner In New Zealand — in addition to other roles with public bodies in his home country.
He is perhaps best known to the wider world for his verbose Twitter presence and for taking a public dislike to Facebook: In the wake of the 2018 Cambridge Analytica data misuse scandal Edwards publicly announced that he was deleting his account with the social media — accusing Facebook of not complying with the country’s privacy laws.
An anti-‘Big Tech’ stance aligns with the UK government’s agenda to tame the tech giants as it works to bring in safety-focused legislation for digital platforms and reforms of competition rules that take account of platform power.
If confirmed in the role — the DCMS committee has to approve Edwards’ appointment; plus there’s a ceremonial nod needed from the Queen — he will be joining the regulatory body at a crucial moment as digital minister Oliver Dowden has signalled the beginnings of a planned divergence from the European Union’s data protection regime, post-Brexit, by Boris Johnson’s government.
Dial back the clock five years and prior digital minister, Matt Hancock, was defending the EU’s General Data Protection Regulation (GDPR) as a “decent piece of legislation” — and suggesting to parliament that there would be little room for the UK to diverge in data protection post-Brexit.
But Hancock is now out of government (aptly enough after a data leak showed him breaching social distancing rules by kissing his aide inside a government building), and the government mood music around data has changed key to something far more brash — with sitting digital minister Dowden framing unfettered (i.e. deregulated) data-mining as “a great opportunity” for the post-Brexit UK.
For months, now, ministers have been eyeing how to rework the UK’s current (legascy) EU-based data protection framework — to, essentially, reduce user rights in favor of soundbites heavy on claims of slashing ‘red tape’ and turbocharging data-driven ‘innovation’. Of course the government isn’t saying the quiet part out loud; its press releases talk about using “the power of data to drive growth and create jobs while keeping high data protection standards”. But those standards are being reframed as a fig leaf to enable a new era of data capture and sharing by default.
Dowden has said that the emergency data-sharing which was waived through during the pandemic — when the government used the pressing public health emergency to justify handing NHS data to a raft of tech giants — should be the ‘new normal’ for a post-Brexit UK. So, tl;dr, get used to living in a regulatory crisis.
A special taskforce, which was commissioned by the prime minister to investigate how the UK could reshape its data policies outside the EU, also issued a report this summer — in which it recommended scrapping some elements of the UK’s GDPR altogether — branding the regime “prescriptive and inflexible”; and advocating for changes to “free up data for innovation and in the public interest”, as it put it, including pushing for revisions related to AI and “growth sectors”.
The government is now preparing to reveal how it intends to act on its appetite to ‘reform’ (read: reduce) domestic privacy standards — with proposals for overhauling the data protection regime incoming next month.
Speaking to the Telegraph for a paywalled article published yesterday, Dowden trailed one change that he said he wants to make which appears to target consent requirements — with the minister suggesting the government will remove the legal requirement to gain consent to, for example, track and profile website visitors — all the while framing it as a pro-consumer move; a way to do away with “endless” cookie banners.
Only cookies that pose a ‘high risk’ to privacy would still require consent notices, per the report — whatever that means.
“There’s an awful lot of needless bureaucracy and box ticking and actually we should be looking at how we can focus on protecting people’s privacy but in as light a touch way as possible,” the digital minister also told the Telegraph.
The draft of this Great British ‘light touch’ data protection framework will emerge next month, so all the detail is still to be set out. But the overarching point is that the government intends to redefine UK citizens’ privacy rights, using meaningless soundbites — with Dowden touting a plan for “common sense” privacy rules — to cover up the fact that it intends to reduce the UK’s currently world class privacy standards and replace them with worse protections for data.
If you live in the UK, how much privacy and data protection you get will depend upon how much ‘innovation’ ministers want to ‘turbocharge’ today — so, yes, be afraid.
It will then fall to Edwards — once/if approved in post as head of the ICO — to nod any deregulation through in his capacity as the post-Brexit information commissioner.
We can speculate that the government hopes to slip through the devilish detail of how it will torch citizens’ privacy rights behind flashy, distraction rhetoric about ‘taking action against Big Tech’. But time will tell.
Data protection experts are already warning of a regulatory stooge.
While the Telegraph suggests Edwards is seen by government as an ideal candidate to ensure the ICO takes a “more open and transparent and collaborative approach” in its future dealings with business.
In a particularly eyebrow raising detail, the newspaper goes on to report that government is exploring the idea of requiring the ICO to carry out “economic impact assessments” — to, in the words of Dowden, ensure that “it understands what the cost is on business” before introducing new guidance or codes of practice.
All too soon, UK citizens may find that — in the ‘sunny post-Brexit uplands’ — they are afforded exactly as much privacy as the market deems acceptable to give them. And that Brexit actually means watching your fundamental rights being traded away.
In a statement responding to Edwards’ nomination, Denham, the outgoing information commissioner, appeared to offer some lightly coded words of warning for government, writing [emphasis ours]: “Data driven innovation stands to bring enormous benefits to the UK economy and to our society, but the digital opportunity before us today will only be realised where people continue to trust their data will be used fairly and transparently, both here in the UK and when shared overseas.”
The lurking iceberg for government is of course that if wades in and rips up a carefully balanced, gold standard privacy regime on a soundbite-centric whim — replacing a pan-European standard with ‘anything goes’ rules of its/the market’s choosing — it’s setting the UK up for a post-Brexit future of domestic data misuse scandals.
You only have to look at the dire parade of data breaches over in the US to glimpse what’s coming down the pipe if data protection standards are allowed to slip. The government publicly bashing the private sector for adhering to lax standards it deregulated could soon be the new ‘get popcorn’ moment for UK policy watchers…
UK citizens will surely soon learn of unfair and unethical uses of their data under the ‘light touch’ data protection regime — i.e. when they read about it in the newspaper.
Such an approach will indeed be setting the country on a path where mistrust of digital services becomes the new normal. And that of course will be horrible for digital business over the longer run. But Dowden appears to lack even a surface understanding of Internet basics.
The UK is also of course setting itself on a direct collision course with the EU if it goes ahead and lowers data protection standards.
This is because its current data adequacy deal with the bloc — which allows for EU citizens’ data to continue flowing freely to the UK — was granted only on the basis that the UK was, at the time it was inked, still aligned with the GDPR. So Dowden’s rush to rip up protections for people’s data presents a clear risk to the “significant safeguards” needed to maintain EU adequacy. Meaning the deal could topple.
Back in June, when the Commission signed off on the UK’s adequacy deal, it clearly warned that “if anything changes on the UK side, we will intervene”.
Add to that, the adequacy deal is also the first with a baked in sunset clause — meaning it will automatically expire in four years. So even if the Commission avoids taking proactive action over slipping privacy standards in the UK there is a hard deadline — in 2025 — when the EU’s executive will be bound to look again in detail at exactly what Dowden & Co. have wrought. And it probably won’t be pretty.
The longer term UK ‘plan’ (if we can put it that way) appears to be to replace domestic economic reliance on EU data flows — by seeking out other jurisdictions that may be friendly to a privacy-light regime governing what can be done with people’s information.
Hence — also today — DCMS trumpeted an intention to secure what it billed as “new multi-billion pound global data partnerships” — saying it will prioritize striking ‘data adequacy’ “partnerships” with the US, Australia, the Republic of Korea, Singapore, and the Dubai International Finance Centre and Colombia.
Future partnerships with India, Brazil, Kenya and Indonesia will also be prioritized, it added — with the government department cheerfully glossing over the fact it’s UK citizens’ own privacy that is being deprioritized here.
“Estimates suggest there is as much as £11 billion worth of trade that goes unrealised around the world due to barriers associated with data transfers,” DCMS writes in an ebullient press release.
As it stands, the EU is of course the UK’s largest trading partner. And statistics from the House of Commons library on the UK’s trade with the EU — which you won’t find cited in the DCMS release — underline quite how tiny this potential Brexit ‘data bonanza’ is, given that UK exports to the EU stood at £294 billion in 2019 (43% of all UK exports).
So even the government’s ‘economic’ case to water down citizens’ privacy rights looks to be puffed up with the same kind of misleadingly vacuous nonsense as ministers’ reframing of a post-Brexit UK as ‘Global Britain’.
Everyone hates cookies banners, sure, but that’s a case for strengthening not weakening people’s privacy — for making non-tracking the default setting online and outlawing manipulative dark patterns so that Internet users don’t constantly have to affirm they want their information protected. Instead the UK may be poised to get rid of annoying cookie consent ‘friction’ by allowing a free for all on citizens’ data.
The Latin America startup ecosystem is having a great year, with mega-rounds being announced at breakneck speed and new unicorns minted almost monthly. This is mostly due to the clearly maturing startup scene in the region, with proven successes such as Nubank, Cornershop, Gympass and Loggi helping to bolster LatAm’s credibility.
Interestingly, many of the region’s rounds are led by or saw participation from investors based elsewhere. Firms such as SoftBank, Tiger Global Management, Tencent, Accel, Ribbit Capital and QED Investors are pouring money into LatAm. Some are even seeing more opportunity than in the U.S. — Latin America, they believe, has historically been ripe for disruption, especially in the fintech and proptech sectors, due to the significant underbanked and unbanked population in the region and the relatively unstructured real estate industry.
Last month, my colleagues Anna Heim and Alex Wilhelm found that structural factors such as strong digital penetration and quick e-commerce growth are among the key reasons Latin America is breaking venture capital records this year. One Mexico-based VC even declared that the story was about “talent, not capital.”
Local VCs are raving about the human capital in the region, but for some global investors, the appeal of Latin America extends beyond the talent to the general populace. Shu Nyatta, a managing partner at SoftBank who co-leads its $5 billion Latin America Fund, pointed out a dynamic that might seem obvious but is rarely articulated: Technology in LatAm is often more about inclusion rather than disruption.
“The vast majority of the population is underserved in almost every category of consumption. Similarly, most businesses are underserved by modern software solutions,” Nyatta explained. “There’s so much to build for so many people and businesses. In San Francisco, the venture ecosystem makes life a little better for individuals and businesses who are already living in the future. In LatAm, tech entrepreneurs are building the future for everyone else.”
Accel Partner Ethan Choi says the region’s consumer markets are growing rapidly thanks to a fast-growing middle class and “technology permeating through every aspect of consumers’ lives.” This has spurred demand for digital offerings, which has led to more startups, and consequently, investor interest.
Brazil and Mexico riding the gravy train
One look at the dollars pouring into LatAm this year is enough to convince anyone of the skyrocketing interest.
Latin America saw a total of $6.2 billion in incoming venture capital in the first half of 2021, more than double the $2.6 billion in the same period last year, and even beating the $4.1 billion invested across all of 2020, according to preliminary data from LAVCA (the Association for Private Capital Investment in Latin America — LAVCA used a different methodology than CB Insights, in case you’re wondering).
Cora, a Brazilian digital lender to small-and-medium-sized businesses, has raised $116 million in a Series B round led by Greenoaks Capital.
This is a large Series B by any standards, but particularly so for a Latin American startup. It’s also notable that São Paulo-based Cora only raised its $26.7 million Series A round — led by Silicon Valley VC firm Ribbit Capital — in early April. The startup has now raised a total of $152.7 million since its 2019 inception.
The company wasn’t actively in the market, according to CEO and co-founder Igor Senra, but was approached by existing backer Greenoaks and other investors.
In fact, Tiger Global and Tencent are first-time backers in Cora with this latest round, joining existing investors Greenoaks, Kaszek, QED and Ribbit Capital.
“Greenoaks came to us and said they were very impressed, and ready to lead our Series B,” Senra said. “Their main goal was they didn’t want us to spend time on fundraising, but instead stay focused on building the company.”
The pattern is similar to previous ones for Cora, which saw existing backers lead its previous rounds as well, which the company sees as a “strong signal that everything is going in the right direction.” The company declined to comment on valuation.
Last year, Cora got its license approved from the Central Bank of Brazil, making it a 403 bank. The fintech then launched its product in October 2020 and today offers a checking account combined with a software layer that aims to help SMBs manage their financials. It is currently in beta with a limited group of users for a corporate credit card.
“Credit limits in general increase as customers use their accounts to receive money and pay their expenses,” he said. “We see this product evolving over time to solve all the financial needs that a small business owner could have.”
Since its launch last October, Cora has been growing its customers 40% per month, according to Senra. During that same period, the company has seen its transaction value/revenue grow by nearly 60% monthly. Today, the startup has more than 120,000 customers.
“It’s nice to see that volume is growing even higher than our customer base,” Senra told TechCrunch. “Our business must gain trust in order to gain volume. Once our customer base believes we are doing a good job serving them, the way to demonstrate that is to give us more volume.”
The company says it is not yet profitable because it’s focused on growth.
“But we already have a positive unit economics per customer,” Senra added.
Like a number of other fintechs, Cora’s model is that most of its offerings are free for its customers but it mostly makes money off of interchange fees.
For now, the company is focused on growing in Brazil, which is large and complex enough, Senra noted. It may consider going abroad in three to four years, he said.
Currently, Cora has 150 employees, up from 68 at the end of last year and 40 a year ago. About 130 of its employees are “partners” in the company, Senra said.
Looking ahead, the startup plans to use its new capital toward product development, growth, operations and building out a credit offering. It is using the data it is generating “to provide way better credit” for its customers, Senra said, starting with credit cards, then receivables and other kinds of credit such as emergency credit or credit for investments.
“We’re trying to deeply understand our customers’ needs and trying to create products they love,” Senra told TechCrunch. “We consider ourselves the opposite of traditional banks, which are usually not good at taking care of their customers.”
For now, Cora is focused on the B2B service providers, but Senra expects that by the beginning of next year, it can start exploring “other segments” such as other kinds of SMBs.
“There is a total addressable market of 5 million companies, so there is a lot of room to grow,” he added. “But we are pushing ourselves to expand other verticals.”
For its part, Patrick Backhouse of Greenoaks Capital believes that Brazil has an “enormous” SME economy that has historically been “underserved by incumbent banks.”
“Existing services are expensive and inefficient, creating opportunities for technology enabled service providers to offer better and cheaper services,” he said. “We believe Cora is a once in a generation company building efficient digital finance tools for small businesses. Since investing in the company’s Series A, we’ve seen accelerated momentum and proof that this is an enormous addressable market.”
If you’re a founder who finds yourself in a meeting with a VC, try to remember two things:
- You’re the smartest person in the room.
- Investors are looking for a reason to say “yes.”
Even so, many entrepreneurs squander this opportunity, often because they direct questions or fail to understand their BATNA (best alternative to a negotiated agreement).
“As the venture landscape becomes more a meritocratic environment where resumes and institutional affiliations matter less, these strategies can make the difference between a successful fundraise and a fruitless meeting,” says Agya Ventures co-founder Kunal Lunawat.
Whether you’re already in the fundraising process or plan to be in the future, be sure to read “A crash course on corporate development” that Venrock VP Todd Graham shared with us this week.
“If you’re going to get acquired, chances are you’re going to spend a lot of time with corporate development teams,” says Graham. “With a hot stock market, mountains of cash and cheap debt floating around, the environment for acquisitions is extremely rich.”
Full Extra Crunch articles are only available to members.
Use discount code ECFriday to save 20% off a one- or two-year subscription.
On Wednesday, August 24 at 3 p.m. PDT/6 p.m. EDT/11 p.m GMT, Managing Editor Danny Crichton will host a conversation on Twitter Spaces with Eric Dean Wilson, author of “After Cooling: On Freon, Global Warming, and the Terrible Cost of Comfort.”
Wilson’s book explores the history of freon, a common refrigerant that was later banned due to its devastating impact on the ozone layer. After their discussion, they’ll take questions from the audience.
Thanks very much for reading Extra Crunch this week! I hope you have an excellent weekend.
Senior Editor, TechCrunch
Apple is changing Mail Privacy Protection and email marketers must prepare
Apple iPhone, Apple Mail and Apple iPad account for nearly half of all email opens, but the privacy features included with iOS 15 will allow consumers to block marketers from seeing their physical location, IP address and tracking data like invisible pixels.
Email marketers rely heavily on these and other metrics, which means they should prepare now for the changes to come, advises Litmus CMO Melissa Sargeant.
In a detailed post, she shares several action items that will help marketing teams leverage their email analytics so they can “continue delivering personalized experiences consumers crave.”
Let’s make a deal: A crash course on corporate development
Venrock Vice President Todd Graham has some frank advice for founders at venture-backed startups: “It would be wise to generate a return at some point.”
With that in mind, he authored a primer on corporate development that lays out the three most common categories of acquisitions, tips for dealing with bankers, and explains why striking a partnership with a big company isn’t always the best way forward.
Regardless of the path you choose, “you need to take the meeting,” advises Graham.
“In the worst-case scenario, you’ll get a few new LinkedIn connections and you’re now a known quantity. The best-case scenario will be a second meeting.”
When VCs turned to Zoom, Chicago startups were ready for their close-up
The pandemic failed to slow the momentum of venture capitalists pouring money into startups, but Chicago stands out as an “outlying benefactor of accelerating venture capital activity and the rise of remote investing,” Alex Wilhelm and Anna Heim write for The Exchange.
When the world shut down and it didn’t matter if you were in NYC or SF (because everyone was on Zoom), the Windy City was ready to present itself as the venture champion of the Midwest.
What does Brazil’s new receivables regulation mean for fintechs?
The Brazilian Central Bank made a major reform to the way payments are processed that may throw the doors open for e-commerce in South America’s largest market.
Historically, merchants who accepted credit card payments had two options: Receive the full payment distributed over two to 12 installments, or offer a deep discount to receive a smaller sum up front.
But in June 2021, the BCB created new “registration entities” that permit “any interested receivables buyer/acquirer to make an offer for those receivables, forcing buyers to become more competitive in their discount offers,” says Leonardo Lanna, head of payment products at Monkey Exchange.
The new framework benefits consumers and sellers, but for the region’s startups, “it opens the door to a plethora of opportunities and new business models, from payments to credit.”
As its startup market accelerates, Brazil could be in for an IPO bonanza
An inflow of VC dollars, notable acquisitions and rising unicorn counts are all features of the Brazilian tech startup market, Anna Heim and Alex Wilhelm note in The Exchange.
“The IPO market in Brazil is changing,” they write. “TechCrunch noted last year that in the decade leading up to 2020, just two of the 56 IPOs in Brazil were technology companies. More recently, the number of technology companies listed in the country has swelled to at least 16, up from just four in 2019.”
Insider hacks to streamline your SOC 3 certification application
“For good reason, security certifications like the SOC 3 really put you through the wringer,” Waydev CEO Alex Cercei writes in a guest column.
Waydev, a Git analytics tool that helps engineering leaders measure team performance automatically, just attained the SOC 3 certification.
“We learned so much from the process, we felt it was right to share our experience with others that might be daunted by the prospect,” Cercei writes.
“So here’s our advice on how teams can smoothly reach an SOC 3 while simultaneously balancing workloads and minimizing disruption to users.”
Dear Sophie: Tips on EB-1A and EB-2 NIW?
I’m on an H-1B living and working in the U.S. I want to apply for a green card on my own. I’m concerned about only relying on my current employer and I want to be able to easily change jobs or create a startup. I’ve been looking at the EB-1A and EB-2 NIW.
I’m not sure if I would qualify for an EB-1A, but since I was born in India, I face a much longer wait for an EB-2 NIW.
Any tips on how to proceed?
— Inventive from India
How to establish a health tech startup advisory board
Most startups could use an advisory board, but in health tech, it’s a core requirement.
Founders seeking to innovate in this area have a unique need for mentors who have experience navigating regulations, raising capital and managing R&D, to name just a few areas.
Based on his own experience, Patrick Frank, co-founder and COO of PatientPartner, shared some very specific ideas about who to recruit, where to find them and how to fit them into your cap table.
“You want to leverage these individuals so you are able to focus on the full view of the company to ensure it is something that both the market and investors want at scale,” says Frank.
Crypto world shows signs of being rather bullish
There’s no shortage of tech news to analyze, Alex Wilhelm notes, but this week, he took a fresh look at crypto.
“Because there are some rather bullish trends that indicate the world of blockchain is maturing and creating a raft of winning players,” he writes.
4 common mistakes startups make when setting pay for hybrid workers
In one recent survey, 58% of workers said they plan to quit if they’re not allowed to work remotely.
Startups that don’t offer employees work-from-home flexibility are at a competitive disadvantage, but figuring out how to pay hybrid workers raises a complex set of questions:
- Should you localize salaries for workers in different areas?
- How should you pay workers who have the same job when one is WFH and the other is at their desk?
- Are you being transparent with your staff about how their compensation is set?
Less than three months after announcing a $300 million Series E, Brazilian proptech QuintoAndar has raised an additional $120 million.
New investors Greenoaks Capital and China’s Tencent co-led the round, which included participation from some existing backers as well. São Paulo-based QuintoAndar is now valued at $5.1 billion, up from $4 billion at the time of its last raise in late May. With the extension, the startup has now raised more than $700 million since its 2013 inception. Ribbit Capital led the first tranche of its Series E.
QuintoAndar describes itself as an “end-to-end solution for long-term rentals” that, among other things, connects potential tenants to landlords and vice versa. Last year, it also expanded into connecting home buyers to sellers. Its long-term plan is to evolve into a one-stop real estate shop that also offers mortgage, title insurance and escrow services.
To that end, earlier this month, the startup acquired Atta Franchising, a 7-year-old São Paulo-based independent real estate mortgage broker. Specifically, acquiring Atta is designed speed up its ability to offer mortgage services to its users. QuintoAndar also plans to explore the possibility of offering a product to perform standalone transactions outside of its marketplace in partnership with other brokers, according to CEO and co-founder Gabriel Braga.
This year, QuintoAndar expanded operations into 14 new cities in Brazil. Eventually, QuintoAndar plans to enter the Mexican market as its first expansion outside of its home country but it has not yet set a date for that step. Today, the company has more than 120,000 rentals under management and about 10,000 new rentals per month. Its rental platform is live in 40 cities across Brazil, while its home-buying marketplace is live in four (Sao Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre) and seeing more than 10,000 sales in annualized terms.
QuintoAndar, he said, is open to acquiring more companies that it believes can either help it accelerate in a particular way or add something it had not yet thought about.
“We’re receptive to the idea but our core strategy is to focus on organic growth and our own innovation and accelerate that,” Braga said.
Why raise more money so soon?
The Series E was oversubscribed with investors who got in and “some who could not join,” according to Braga.
Greenoaks and Tencent, he said, couldn’t participate because of “timing issues.”
“We kept talking and they came back to us after the round, and wanted to be involved so we found a way to have them on board,” Braga said. “We did not need the money. But we have been constantly overachieving on the forecast that we shared with our investors. And that’s part of the reason why we had this extension.”
Greenoaks’ long-term time horizon was appealing because the firm’s investment was designed to be “perpetual capital with no predefined timeframe,” Braga said.
“We’re doing our best to build an enduring company that will be around for many, many years, so it’s good to have investors who share that vision and are technically aligned,” he added.
Greenoaks Partner Neil Shah said his firm believes that what QuintoAndar is building will “fundamentally reshape real estate transactions, enhancing transparency, expanding options for Brazilians seeking housing, dramatically simplifying the experience for landlords and driving increased investment into real estate across the country.” He also believes there is big potential for the company to take its offering to other parts of Latin America.
“We look forward to being partners for decades to come,” he added.
Tencent’s experience in China is something QuintoAndar also finds valuable.
“We believe we can learn a lot from them and other Chinese companies doing interesting stuff there,” Braga said.
QuintoAndar isn’t the only Brazilian prop tech firm raising big money: In March, São Paulo digital real estate platform Loft announced it had closed on $425 million in Series D funding led by New York-based D1 Capital Partners. Then, about one month later, it revealed a $100 million extension that valued the company at $2.9 billion.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Danny was back, joining Natasha and Alex and Grace and Chris to chat through the week’s coming and goings. But, before we get to the official news, here’s some personal news: Danny is stepping back from his role as co-host of the Friday show! Yes, Mr. Crichton will still take part in our mid-week, deep dive episodes, but this is the conclusion of his run as part of the news roundup. We will miss him, glad that his transitions and wit will continue to be part of the Equity universe.
Who will take the third chair? Well, stay tuned. We have some neat things planned.
Now, the rundown:
- Funding rounds: Maven has built a women’s health unicorn, Monte Carlo raised $60 million for data observability, and Launch House wants to scale venture community with a fresh $3 million in its accounts. The last round is probably the most controversial one of them all, so each of us took a side and discussed what’s new and old about hacker homes.
- The next crop of key IPOs: Please say hello to the rising seniors of the startup world, companies that are the next IPOs that we are excited about. The list includes Discord, Databricks, Chime and Carta, which made headlines this week after setting its own valuation with its own tool. Will investors and startups turn to a third-party to value companies? What happens if secondary investors aren’t as into your product as you are? We had a ton of questions.
- Brazil’s burgeoning startup and exit market: In the wake of Nuvemshop raising a zillion dollars, it was time to sit down and talk about Brazil. Alex and Anna Heim have been rigorous in their reporting on the fascinating exit market. Who knew dual-listings were so dramatic?
- After traveling overseas, we went very close to home to speak about the news industry. Danny had a piece about informed., which a trio of media veterans believe could fix the economics that plague subscription-based publications. The nuts and bolts are in the episode, but prepare to debate if you’re the kind of reader that likes a snack, or the whole lip smackin’ meal.
- Finally, we discuss the wack reality that YikYak is indeed back.
Informed by the utopian architecture of Brasília, an expansive weekend house honors and melds with the vanishing landscape of the Cerrado.
Last fall, Spotify introduced a new format that combined spoken word commentary with music, allowing creators to reproduce the radio-like experience of listening to a DJ or music journalist who shared their perspective on the tracks they would then play. Today, the company is making the format, which it calls “Music + Talk,” available to global creators through its podcasting software Anchor.
Creators who want to offer this sort of blended audio experience can now do so by using the new “Music” tool in Anchor, which provides access to Spotify’s full catalog of 70 million tracks that they can insert into their spoken-word audio programs. Spotify has said this new type of show will continue to compensate the artist when the track is streamed, the same as it would elsewhere on Spotify’s platform. In addition, users can also interact with the music content within the shows as they would otherwise — by liking the song, viewing more information about the track, saving the song, or sharing it, for example.
The shows themselves, meanwhile, will be available to both free and Premium Spotify listeners. Paying subscribers will hear the full tracks when listening to these shows, but free users will only hear a 30-second preview of the songs, due to licensing rights.
The format is somewhat reminiscent of Pandora’s Stories, which was also a combination of music and podcasting, introduced in 2019. However, in Pandora’s case, the focus had been on allowing artists to add their own commentary to music — like talking about the inspiration for a song — while Spotify is making it possible for anyone to annotate their favorite playlists with audio commentary.
Since launching last year, the product has been tweaked somewhat in response to user feedback, Spotify says. The shows now offer clearer visual distinction between the music and talk segments during an episode, and they include music previews on episode pages.
The ability to create Music + Talk shows was previously available in select markets ahead of this global rollout, including in the U.S., Canada, the U.K., Ireland, Australia, and New Zealand.
With the expansion, creators in a number of other major markets are now gaining access, including Japan, India, the Philippines, Indonesia, France, Germany, Spain, Italy, the Netherlands, Sweden, Mexico, Brazil, Chile, Argentina, and Colombia. Alongside the expansion, Spotify’s catalog of Music + Talk original programs will also grow today, as new shows from Argentina, Brazil, Colombia, Chile, India, Japan, and the Philippines will be added.
Spotify will also begin to more heavily market the feature with the launch of its own Spotify Original called “Music + Talk: Unlocked,” which will offer tips and ideas for creators interested in trying out the format.
We sometimes take for granted that most anyone who wishes to become say, an Uber driver, can do so. But that assumption is a narrow view considering there are many people who would love to earn income in that way but can’t because of lack of car ownership (and all that goes with it) — especially in countries outside of the United States.
In an attempt to remedy that problem, São Paulo-based Kovi was founded in 2018 to give those people access to those opportunities.
Kovi today is announcing it has raised $104 million in a Series B round of funding co-led by Valor Capital Group and Prosus Ventures. Quona, GFC, Monashees, UVC Investimentos and Globo Ventures also participated in the financing, in addition to Tinder co-founder Justin Mateen and PayPal co-founder Peter Thiel through his family office. The round takes Kovi’s total equity raised since inception to about $145 million. The company also recently closed on a $20 million debt facility. It is not yet a unicorn, according to execs, who declined to reveal valuation.
Two former 99 (Brazil’s first tech unicorn, and also known as Didi) executives, Adhemar Milani Neto and João Costa, started the company, which rents vehicles to on-demand drivers who work for ride-hailing companies such as Uber, Didi and Lyft. It then expanded from on-demand drivers to food delivery workers.
Kovi operates its “all inclusive” car subscription model under the premise that more people in Latin America would work for these companies if they could afford to operate the necessary vehicle. In fact, an estimated 75% of Latin Americans cannot own a vehicle because of the high cost of acquisition and maintenance. Cars are significantly more expensive in countries like Brazil than in the U.S. and the difference is even greater when it comes to the average income of the population. Also, financing is often difficult and expensive to obtain, as credit is difficult to access in most Latin American countries. When applying for loans, 60% of applications are denied by traditional banking institutions, according to Kovi co-founder and CEO Adhemar Milani Neto. And even when approved, customers pay high interest rates that are up to 30% per year.
Kovi gives drivers who don’t necessarily want, or cannot afford, to own a vehicle “quick access to quality cars” at what it says is “a fair price.” It operates an asset-light model, in that it does not buy vehicles but instead has inked rental agreements with OEMs such as Toyota and Volkswagen to offer vehicles to gig workers, including insurance and maintenance.
“Our mission is to promote a revolution in this market, making car ownership affordable, less complicated and accessible to an underserved population,” Neto said. “We want to offer a range of options to create a platform for urban mobility and create more possibilities for our customers.”
In 2020, the startup saw its number of customers grow by more than 70%, and it now has more than 11,000 users in Brazil and Mexico. The company has 12,000 cars in its fleet and aims to add another 20,000 cars by the end of 2021. The company says its ARR (annual recurring revenue) is now roughly around $45 million, and that it is growing by at least 15% month over month. Kovi is “very close” to breaking even and plans to this year, according to Neto.
“Our mission is to make car ownership more inclusive, human and efficient using technology and financial innovation,” he said.
What sets Kovi apart from competitors is that its cars are connected, so it uses data science and analytics to be able to offer “a better user experience and competitive prices,” believes Kovi co-founder João Costa.
The company also over time has shifted from offering insurance through third parties to offering insurance.
“We basically built an insurance company from scratch,” Neto said.
When the pandemic hit in 2020, Kovi — as did many other companies — at first saw its business slow. So the company quickly pivoted by changing its model to a pay-per-mile model so that it could act as a “Root Insurance for car owners,” Neto said.
The model has worked very well for drivers, he added. The company also enhanced its B2C offering so that drivers can access a car, with “everything included,” from insurance to 24-hour road support and preventive maintenance through Kovi.
“Once things got more back to normal, the on-demand economy scaled really fast,” Neto said.
Kovi also in the past year broadened its scope from a short-term car subscription to include a long-term option. That has proven successful so far, with that segment of its business growing to 35% of Kovi’s revenue already since launching in October of last year.
This also creates more profit for the OEMs Kovi is partnered with, Neto added.
“We provide a much better profitability model for them rather than just to sell to rental companies or end consumers. They make recurring revenue for 12-24 months and then resell used cars through their dealerships,” he said. “We’re now taking Kovi to the broader OEM market. We see this as a global business model that extends not only in Brazil and Mexico but across LatAm and to other developing countries.”
Indeed, Kovi will use its new capital to expand its service to new cities in Latin America and double down on existing operations in Brazil and Mexico. The money will also go toward technology development, specifically data management and the company’s pay-per-mile capabilities (which its founders say is unprecedented in Latin America). It also, naturally, plans to add to its 700-person team — including hiring developers, software engineers and data scientists. And, finally, Kovi plans to use some of its fresh capital to launch new financial services and products.
For example, the company began the buildout for some of those products earlier this year, launching its aforementioned auto insurance offering, dubbed Kovi Seguro — a tracked insurance for app drivers. It also plans to launch “to a rent to own” option, Neto said. So that drivers who want to own a vehicle will have a way to work toward that.
Prosus’ Banafsheh Fathieh says that ultimately, Kovi is a financial services company that can offer consumers that may not qualify for credit under traditional models to incrementally work toward owning a car through a subscription plan.
“Because Kovi owns and manages their fleet during the rental period — and therefore can control the fleet remotely — it is able to cater to a severely financially underserved population that’s typically considered higher risk by creditors,” Fathieh told TechCrunch.
Valor co-founder and managing partner Scott Sobel believes that Kovi is “well positioned” to capture three major tailwinds that have the potential to disrupt the multibillion-dollar car ownership market of Latin America.
The first of those tailwinds is ride-hailing.
“Only in Latin America there are approximately 1.5 million on-demand drivers, and this number is expected to grow by ~2-3x this decade,” he said. “Take Uber as an example: three of its biggest markets are São Paulo, Mexico City and Rio de Janeiro.”
The second tailwind is car subscription. Less than 0.5% of Brazilian cars are under subscription offerings, and that number is expected to reach ~10-20% in the next five years due to consumer behavioral changes.
“Being one of the first movers in LatAm gives Kovi an edge,” Sobel told TechCrunch.
The third tailwind is auto insurance, which he thinks will be disrupted by more flexible (such as pay as you go, pay per mile, unbundled policies) customer-centric and tech-driven models.
“These global trends will provide greater access to millions of drivers in the region,” Sobel said. For example, as of now less than 30% of Latin American drivers have an active car insurance policy.
Valor, he added, was impressed with Kovi’s traction and the “strong competitive moats” the company has built, including verticalized maintenance centers designed to reduce idle time and costs, a driver’s wallet, IoT systems integrating the entire fleet and “all the data.”
“Kovi is a very smart company, obsessed with metrics, tech and product innovation,” Sobel added.
Something strange is afoot in Brazil, and it promises great changes for how merchants get paid.
This the story of one regulator, the Brazilian Central Bank, and how it has taken center stage in creating a framework that will have far-reaching effects across merchants and fintechs in this fast-growing Latin American nation.
But first, some background: Unlike in the rest of the world, when a credit card is used for payment in Brazil, the merchant does not receive the funds owed to them all at once. Instead, nearly 50% of card sales are completed in monthly installments, leaving the sellers to manage a difficult cash flow process.
The most common solution for merchants is that they end up selling the remaining receivable at a discount — taking less than they are owed — in order to get their money sooner. And we’re not talking about a small-volume market: Some R$2 trillion (Brazilian Reais) in card transactions were processed in 2020.
This compelling new regulatory framework brings new opportunities for many players willing to participate in receivables discounting operations.
Here’s what this looks like in practice: Let’s say Maria purchases a few articles of clothing from retailer Clothing Incorporated. When paying via her credit card at checkout, Maria can choose to pay in two to 12 installments. Maria decides to pay the balance of R$620 over six installments.
While Maria is happy with the products in hand, Clothing Incorporated is without the full payment — and for small merchants in particular, the difficulties associated with limited working capital can be acute. Clothing Incorporated can either wait the full six months to be paid, receiving payments from their merchant acquirer each month until they are paid in full, or they can choose to dramatically discount the amount they are owed and not have to wait the six months.
Let’s say Clothing Incorporated merchant acquirer is ExMarko — instead of receiving R$620 over six months (net of any merchant discount rates), they could receive R$520 within days after the purchase, with ExMarko pocketing the rest when it comes in. This comes at a steep cost of doing business to the merchant, with an implied annualized interest rate that sometimes can reach ~70% — for a risk-free operation, since the acquirer is only liquidating earlier its own obligation to pay the merchant.
Brazil’s startup market is reaching new heights, and its domestic stock market could benefit from the boom.
According to data from KPMG, Brazilian startups raised the most capital in a single quarter in Q1 2021, when some $1.4 billion flowed into domestic technology upstarts. That record stood until the second quarter of 2021 saw $2.7 billion raised by Brazilian startups.
The Exchange explores startups, markets and money.
Inflows are only half of the startup equation, however. Brazil has seen notable acquisitions in recent years, including Twilio buying Teravoz in January 2020, and Etsy buying Elo7 in June for more than $200 million. Magazine Luiza spent $528 million to buy Kabum, a Brazilian e-commerce player, earlier this year.
Acquisitions are merely one path to liquidity, however. IPOs are another. The good news for Brazil and its startup ecosystem is that despite a historical dearth of technology public offerings on domestic exchanges, the IPO market for Brazilian tech startups could be gearing up for more volume.
GetNinjas, a platform for hiring local labor for household needs like plumbing and painting, went public earlier this year on the B3 exchange, located in São Paulo. And it’s not alone.
The IPO market in Brazil is changing, data indicates. TechCrunch noted last year that in the decade leading up to 2020, just two of the 56 IPOs in Brazil were technology companies. More recently, the number of technology companies listed in the country has swelled to at least 16, up from just four in 2019.
Will the trend of domestic IPOs continue for Brazilian technology companies? Or will U.S. IPOs play a preeminent role for the country’s leading tech startups?
The question is not idle, with São Paulo-based fintech giant Nubank heading toward an eventual public offering and more capital than ever wagered on the country’s current generation of startups, all of which must aspire to the most famous of exit paths. Brazil is also minting new unicorns, with at least four graduating to the valuation threshold this year alone.
But even that data point is outdated: Just this morning, Nuvemshop, a Brazilian e-commerce company, announced a new $500 million round valuing it at more than $3 billion.
To better understand the recently expanding number of domestically listed Brazilian technology offerings, and what could be ahead for the country’s startups, The Exchange spoke to GetNinjas CEO Eduardo L’Hotellier about its IPO and Renata Quintini from Renegade Partners, a venture capital firm, about what’s happening in the country. We’ll lean on data as we go. Let’s explore Brazil!
What’s driving rising technology IPO volume in Brazil?
The number of public companies, overall depressed compared to historical highs in the Brazilian market, is impacted by both sector-specific and more macro trends. When we consider what is driving more technology offerings in Brazil, we’ll want to think about larger macroeconomic factors along with what’s happening in technology more specifically.
Just five months after raising $90M, Brazil’s Nuvemshop announced today it has raised $500 million in a round co-led by Insight Partners and Tiger Global Management.
The financing values Nuvemshop – which some say is Latin America’s answer to Shopify – at $3.1 billion and brings the Sao Paulo-based startup’s total funding in the last 10 months to more than $620 million.
Sunley House Capital and VMG Partners, as well as existing backers Accel, Kaszek, Kevin Efrusy, Qualcomm Ventures LLC and ThornTree Capital also participated in the latest round.
Nuvemshop (also known as Tiendanube in Spanish speaking countries) aims to give entrepreneurs a way to build and grow online businesses. The company’s platform serves more than 90,000 merchants across Brazil, Mexico, and Argentina, ranging from direct-to-consumer (DTC) upstarts to more established brands such as PlayMobil, Billabong, Colombraro, Zaira Beauty, Osram, Lolja, Vitabe and StrappyCo. That’s up from 20,000 merchants at the start of 2020 and 80,000 at the time of its last raise in March.
Rather than selling their goods on existing marketplaces (such as Mercado Libre, the Brazilian equivalent of Amazon), many merchants and entrepreneurs are opting to start and grow their own online businesses, according to Nuvemshop co-founder and CEO Santiago Sosa.
“Most merchants have entered the internet by selling on marketplaces but we are hearing from newer generations of merchants and SMBs that they don’t want to be intermediated anymore,” he said. “They want to connect more directly with consumers and convey their own brand, image and voice.”
Virtually every KPI tripled in the company in 2020 as the world saw a massive transition to online, and Nuvemshop’s platform was home to 14 million transactions last year, according to Sosa.
Earlier this year Nuvemshop launched a beta version of its own payments solution platform for merchants that is designed to allow for “faster and more secure” purchases. It also reflects the Latin American consumers’ approach to paying for retail purchases over time. In fact, the company says that 70% of the credit card transactions on its platform happen via installments. The new product will be made broadly available to all merchants over the course of the next year.
Nuvemshop says that its logistics capabilities allow merchants to deliver directly to consumers via partnerships and integrations with what would otherwise be a highly fragmented network of carriers. The company plans to keep broadening its set of warehouse and carrier partners with the goal of driving down the click-to-delivery time in most regions — now typically 5 to 6 days — to an eventual goal of the 1- or 2-day delivery, which is now standard in the U.S.
“With 650 million consumers, Latin America is not only a huge market, but it is the fastest growing e-commerce market in the world,” said Matt Gatto, managing director at Insight Partners.
Accel Partner Ethan Choi believes the Latin American e-commerce market has the potential to be just as big as the U.S. market in the future.
“Given the rapid adoption of e-commerce, we believe Nuvemshop has the potential to be one of the most important companies in the region,
he told TechCrunch. “Looking at Shopify’s $185 billion market cap gives you a sense of what’s possible if you’re the leading eCommerce player in a big market like the U.S.”
The new capital will go toward growth in Nuvemshop’s existing markets and support expansion into new countries such as Colombia, Chile and Perú. Nuvemshop will also work to expand its capabilities to serve larger merchants by expanding its sales and customer support staff, as well as continuing to invest in resources and support for its app partners and agencies. The company additionally plans to accelerate its payment and logistics capabilities, and will use the fresh capital in part toward some acquisitions.
The company currently has more than 600 employees and offices in Brazil, Mexico and Argentina.
InstaCarro, a digital marketplace that connects used car sellers to dealers in Brazil, has raised $23 million in a Series B round of funding.
Notably, U.S.-based firms co-led the investment, including J Ventures, FJ Labs and Rise Capital. Spain’s All Iron Ventures and Big Sur also participated in the financing, among others. With the latest round, São Paulo-based InstaCarro has now raised more than $56 million since its 2015 inception.
As we all know, the COVID-19 pandemic led to an increase in people all over the world buying and selling things online, with cars being no exception. InstaCarro plans to use its new capital in part to capitalize on the shift and “aggressively” expand its reach within Brazil.
Until this year, the startup operated only in São Paulo. In the first half of this year, it launched operations in eight new cities, and is now also live in Campinas, Curitiba, Joinville, Santos, Brasília, Goiânia, Rio de Janeiro and Belo Horizonte.
For context, the startup compares itself to Carvana in the U.S., Chehaoduo in India and Carro in Indonesia.
CEO Luca Cafici started InstaCarro after having co-founded a car classified startup in Asia with Rocket Internet. That experience, according to Cafici, taught him that “car classifieds were not solving the problems people had when selling their own cars.”
Inspired by the early success of Auto1 in Europe, he decided to return to Latin America to build a similar model, with an exclusive initial focus on Brazil because it is the third largest car market in the world.