During his campaign, Gustavo Petro proposed major reforms if he was elected. After winning Sunday’s presidential election, he’ll now have to prove he can carry out those changes.
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SoftBank Group Corp. is doubling down on its commitment to Latin America.
Today, the Japanese investment conglomerate is announcing the launch of the SoftBank Latin America Fund II, its second dedicated private investment fund focused on tech companies located in LatAm. SoftBank is launching the new fund with an initial $3 billion commitment.
“Fund II will explore options to raise additional capital,” SoftBank said in a statement.
The new fund builds upon SoftBank’s $5 billion Latin America Fund, which was first announced in March 2019 and was formerly called the Innovation Fund with an initial $2 billion in committed capital.
According to the firm, that fund has generated a net IRR of 85% — with SoftBank having invested $3.5 billion in 48 companies with a fair value of $6.9 billion as of June 30. SoftBank has invested in 15 unicorns out of that fund, including proptech startup QuintoAndar, Rappi, Mercado Bitcoin, Gympass and MadeiraMadeira. Recently, it co-led a $350 million Series D round in Argentine personal finance management app Ualá.
The firm also claims to have “created significant value uplift” for portfolio companies, including 4.4x each for Kavak and VTEX; 2.6x for QuintoAndar and 3.5x for Banco Inter (as of June 30).
It has backed companies across the region including in Brazil, Mexico, Chile, Colombia, Argentina and Ecuador.
Marcelo Claure, Executive VP and COO of SoftBank Group, leads the SoftBank Latin America Funds. Managing Partners Shu Nyatta and Paulo Passoni run the region’s investment team. Operating Partner Alex Szapiro, also head of Brazil for SoftBank, leads the fund’s operations team.
Combined, the investment and operations teams total over 60 people who operate out of Miami, São Paulo and Mexico City.
Fund II intends to back technology-enabled companies across countries and industries at every stage of their development, from seed to public, throughout Latin America, with a focus on e-commerce, digital financial services, healthcare, education, blockchain and enterprise software, among others.
In a statement, SoftBank Chairman and CEO Masayoshi Son described Latin America as “one of the most important economic regions in the world.”
“SoftBank will continue to drive technology adoption that will benefit hundreds of millions of people in this part of the world,” he said. “There is so much innovation and disruption taking place in Latin America, and I believe the business opportunities there have never been stronger. Latin America is a critical part of our strategy – this is why we are expanding our presence and doubling down on our commitment with Marcelo at the helm.”
Claure said the success and returns from the SoftBank Latin America Fund “far exceeded” the firm’s expectations. Looking ahead, he expects that 2022 will be the “biggest IPO year” in the region’s history.
Earlier this year, TechCrunch looked at why global investors were flocking to Latin America. At that time, Nyatta told me that 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.”
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.
President Nayib Bukele has promoted the cryptocurrency as a path to financial freedom, but economic experts and many Salvadorans worry the move brings great risks.
Barcelona-based gaming video platform Gamestry has snatched up $5 million in seed funding, led by Goodwater Capital, Target Global and Kibo Ventures — turning investors’ heads with a 175x growth rate over the past 12 months.
While the (for now) Spanish-language gaming video platform launched a few years back, in 2018, last year the founders decided to shift away from an initial focus on curating purely learning content around gaming — allowing creators to upload and share entertainment-focused games videos, too.
The switch looks to have paid off as a growth tactic. Gamestry says it now has 4M monthly active users (MAUs) and 2,000 active creators in Spain and Latin America (its main markets so far) — and is gunning to hit 20M MAUs by the end of the year.
While Twitch continues to dominate the market for live-streaming games — catering to the esports boom — Gamestry, which says it’s focused on “non-live video content”, reckons there’s a gap for a dedicated on-demand video platform that better supports games-focused video creators and provides games fans with a more streamlined discovery experience than catch-all user-generated content giants like YouTube.
For games video creators, it’s dangling the carrot of a better revenue share than other UGC video platforms — talking about having “a fair ads revenue share model”, and a plan to add more revenue streams for creators “soon”. It also pledges “full transparency on how the monetization structure works”, and a focus on supporting creators if they have technical issues.
So, basically, the sorts of issues creators have often complained that YouTube fails them on.
For viewers, the pitch is a one-stop-shop for finding and watching videos about games and connecting with others with the same passion (gaming chat) — so the platform structures content around individual games titles.
The startup also claims to present viewers with better info about a video to help them decide whether or not to click on it (aka, tools to help them find “quality instead of clickbait”), beyond basics like title, thumbnail and videos. (Albeit to my admittedly unseasoned eye for assessing the calibre of games video content, there is no shortage of clickbaity-looking stuff on Gamestry. But I am definitely not the target audience here…). So the viewer pitch also sounds like another little dig at YouTube.
“Despite being the de-facto place for uploading content, YouTube is a generic platform that is not optimized for gaming and therefore doesn’t cater to the needs of gaming creators,” argue founders — brothers Alejo and Guillermo Torrens — adding: “Vertical or specialized platforms emerge whenever markets become large enough that current platforms can’t serve their users’ needs and we believe that’s exactly what’s happening today.”
Target Global’s Lina Chong led the international fund’s investment in Gamestry. Asked what piqued her interest here, she flagged the recent growth spurt and the platform having onboarded scores of highly engaged games content creators in short order.
“The problem Gamestry is addressing is that the vast majority of creators don’t make much money on those platforms because they are ads/eyeball driven businesses,” she told TechCrunch. “Gamestry provides a space where creators, despite audience size, can find new ways to engage with their audience and make a living. This problem among creators is so big that Gamestry now has over 2k highly engaged creators uploading multiple content pieces and millions of their viewers on the platform every month.”
It will surely surprise no one to learn that the typical Gamestry user is a male, aged between 18 and 24.
The startup also told us the “most trending” games on its platform are Minecraft, Free Fire, and Fortnite, adding that “IRL (In Real Life) content is also very successful”.
As well as YouTube Gaming, other platforms competing for similar games-mad eyeballs include Facebook Gaming and Booyah.
In March 2019, SoftBank Group International made headlines when it announced the SoftBank Innovation Fund, which started out with a $2 billion commitment to invest in tech startups in Latin America.
A lot has changed since then. SoftBank changed the name of the fund to the SoftBank Latin America Fund, or LatAm Fund for short. The Japanese investment conglomerate has dramatically ramped up its investing in the region, and so have a number of other global investors. In fact, venture capitalists poured an estimated $6.2 billion into Latin American startups in the first half of 2021.
As evidence of its continued commitment to the region, SoftBank Group announced today that it has added two new managing partners to its LatAm Fund team: Rodrigo Baer and Marco Camhaji. The two will focus on “identifying and supporting” early-stage companies across the Latin American region, SoftBank told TechCrunch exclusively.
Baer and Camhaji will report to SoftBank Executive President & COO Marcelo Claure, who points out that the firm’s LatAm fund has invested in more than two-thirds of the nearly two dozen unicorns currently operating in the region. He said that SoftBank is today “one of the largest and most active” technology investors in the region.
The move is significant in that the hires represent an expansion of SoftBank LatAm Fund’s mandate and means that the firm is now backing companies at all stages in the region.
By bringing Baer and Camhaji on board, Claure said in a statement, SoftBank will “be better able to identify high-growth companies and support them at every step of their lifecycle.”
SoftBank describes Baer as one of the pioneers of Brazil’s venture capital industry. He has invested in more than 20 companies since 2010. According to Crunchbase, he co-founded Warehouse Investimentos in 2010, where he led deal-sourcing efforts. He joined the investment team of Redpoint eVentures, a LatAm-based early-stage VC fund, in June 2014. He also was previously an engagement manager at McKinsey and worked at Aurora Funds, a healthcare-services focused fund based in the US. He is also active with Endeavor and multiple angel groups.
Prior to joining SoftBank, Camhaji was a business development principal at Amazon, establishing strategic partnerships with fintechs in Latin America. He also served as the CEO of Adianta, a Brazilian B2B invoice financing company. Previously, Camahji was a founder and partner at Yellow Ventures, making seed investments in technology startups. He was also a partner and CFO of Redpoint eVentures.
In August, 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 told TechCrunch. “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.
Some recent SoftBank investments in the region include:
- Kavak, a used car marketplace born in Mexico but now also operating in Brazil and Argentina. “Think of Carvana, but for emerging markets.”
- Rappi, where “DoorDash-meets-Instacart,” operating across Latin America.
- QuintoAndar, a Brazilian real estate marketplace.
- Creditas unlocks the equity trapped in homes and cars and other important assets for Brazilians.
- Gympass is a marketplace for fitness and wellness, provided through the enterprise to employees.
As global investors continue to flood the region with capital, it’s clear that SoftBank is getting even more aggressive about backing startups in Latin America.
On the heels of Heroes announcing a $200 million raise earlier today, to double down on buying and scaling third-party Amazon Marketplace sellers, another startup out of London aiming to do the same is announcing some significant funding of its own. Olsam, a roll-up play that is buying up both consumer and B2B merchants selling on Amazon by way of Amazon’s FBA fulfillment program, has closed $165 million — a combination of equity and debt that it will be using to fuel its M&A strategy, as well as continue building out its tech platform and to hire more talent.
Apeiron Investment Group — an investment firm started by German entrepreneur Christian Angermayer — led the Series A equity round, with Elevat3 Capital (another Angermayer firm that has a strategic partnership with Founders Fund and Peter Thiel) also participating. North Wall Capital was behind the debt portion of the deal. We have asked and Olsam is only disclosing the full amount raised, not the amount that was raised in equity versus debt. Valuation is also not being disclosed.
Being an Amazon roll-up startup from London that happens to be announcing a fundraise today is not the only thing that Olsam has in common with Heroes. Like Heroes, Olsam is also founded by brothers.
Sam Horbye previously spent years working at Amazon, including building and managing the company’s Business Marketplace (the B2B version of the consumer Marketplace); while co-founder Ollie Horbye had years of experience in strategic consulting and financial services.
Between them, they had also built and sold previous marketplace businesses, and they believe that this collective experience gives Olsam — a portmanteau of their names, “Ollie” and “Sam” — a leg up when it comes to building relationships with merchants; identifying quality products (versus the vast seas of search results that often feel like they are selling the same inexpensive junk as each other); and understanding merchants’ challenges and opportunities, and building relationships with Amazon and understanding how the merchant ecosystem fits into the e-commerce giant’s wider strategy.
Olsam is also taking a slightly different approach when it comes to target companies, by focusing not just on the usual consumer play, but also on merchants selling to businesses. B2B selling is currently one of the fastest-growing segments in Amazon’s Marketplace, and it is also one of the more overlooked by consumers.”It’s flying under the radar,” Ollie said.
“The B2B opportunity is very exciting,” Sam added. “A growing number of merchants are selling office supplies or more random products to the B2B customer.”
Estimates vary when it comes to how many merchants there are selling on Amazon’s Marketplace globally, ranging anywhere from 6 million to nearly 10 million. Altogether those merchants generated $300 million in sales (gross merchandise value), and its growing by 50% each year at the moment.
And consolidating sellers — in order to achieve better economies of scale around supply chains, marketing tools and analytics, and more — is also big business. Olsam estimates that some $7 billion has been spent cumulatively on acquiring these businesses, and there are more out there: Olsam estimates that there are some 3,000 businesses in the UK alone making more than $1 million each in sales on Amazon’s platform.
(And to be clear, there are a number of other roll-up startups beyond Heroes also eyeing up that opportunity. Raising hundreds of millions of dollars in aggregate, others have made moves this year include Suma Brands ($150 million); Elevate Brands ($250 million); Perch ($775 million); factory14 ($200 million); Thrasio (currently probably the biggest of them all in terms of reach and money raised and ambitions), Heyday, The Razor Group, Branded, SellerX, Berlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia.)
“The senior team behind Olsam is what makes this business truly unique,” said Angermayer in a statement. “Having all been successful in building and selling their own brands within the market and having worked for Amazon in their marketplace team – their understanding of this space is exceptional.”
Heroes, one of the new wave of startups aiming to build big e-commerce businesses by buying up smaller third-party merchants on Amazon’s Marketplace, has raised another big round of funding to double down on that strategy. The London startup has picked up $200 million, money that it will mainly be using to snap up more merchants. Existing brands in its portfolio cover categories like baby, pets, sports, personal health and home and garden categories — some of them, like PremiumCare dog chews, the Onco baby car mirror, gardening tool brand Davaon and wooden foot massager roller Theraflow, category best-sellers — and the plan is to continue building up all of these verticals.
Crayhill Capital Management, a fund based out of New York, is providing the funding, and Riccardo Bruni — who co-founded the company with twin brother Alessio and third brother Giancarlo — said that the bulk of it will be going towards making acquisitions, and is therefore coming in the form of debt.
Raising debt rather than equity at this point is pretty standard for companies like Heroes. Heroes itself is pretty young: it launched less than a year ago, in November 2020, with $65 million in funding, a round comprised of both equity and debt. Other investors in the startup include 360 Capital, Fuel Ventures and Upper 90.
Heroes is playing in what is rapidly becoming a very crowded field. Not only are there are tens of thousands of businesses leveraging Amazon’s extensive fulfillment network to sell goods on the e-commerce giant’s Marketplace; but some days it seems we are also rapidly approaching a state of nearly as many startups launching to consolidate these third-party sellers.
Many a roll-up play follows a similar playbook, which goes like this: Amazon provides the Marketplace to sell goods to consumers, and the infrastructure to fulfill those orders, by way of Fulfillment By Amazon and its Prime service. Meanwhile, the roll-up business — in this case Heroes — buys up a number of the stronger companies leveraging FBA and the Marketplace. Then, by consolidating them into a single tech platform that they have built, Heroes creates better economies of scale around better and more efficient supply chains, sharper machine learning and marketing and data analytics technology, and new growth strategies.
What is notable about Heroes, though — apart from the fact that it’s the first roll-up player to come out of the UK, and continues to be one of the bigger players in Europe — is that it doesn’t believe that the technology plays as important a role as having a solid relationship with the companies it’s targeting, key given that now the top Marketplace sellers are likely being feted by a number of companies as acquisition targets.
“The tech is very important,” said Alessio in an interview. “It helps us build robust processes that tie all the systems together across multiple brands and marketplaces. But what we have is very different from a SaaS business. We are not building an app, and tech is not the core of what we do. From the acquisitions side, we believe that human interactions ultimately win. We don’t think tech can replace a strong acquisition process.”
Heroes’ three founder-brothers (two of them, Riccardo and Alessio, pictured above) have worked across a number of investment, finance and operational roles (the CVs include Merrill Lynch, EQT Ventures, Perella Weinberg Partners, Lazada, Nomura and Liberty Global) and they say there have been strong signs so far of its strategy working: of the brands that it has acquired since launching in November, they claim business (sales) has grown five-fold.
Collectively, the roll-up startups are raising hundreds of millions of dollars to fuel these efforts. Other recent hopefuls that have announced funding this year include Suma Brands ($150 million); Elevate Brands ($250 million); Perch ($775 million); factory14 ($200 million); Thrasio (currently probably the biggest of them all in terms of reach and money raised and ambitions), Heyday, The Razor Group, Branded, SellerX, Berlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia.
The picture that is emerging across many of these operations is that many of these companies, Heroes included, do not try to make their particular approaches particularly more distinctive than those of their competitors, simply because — with nearly 10 million third-party sellers today on Amazon globally — the opportunity is likely big enough for all of them, and more, not least because of current market dynamics.
“It’s no secret that we were inspired by Thrasio and others,” Riccardo said. “Combined with Covid-19, there has been a massive acceleration of e-commerce across the continent.” It was that, plus the realization that the three brothers had the right e-commerce, fundraising and investment skills between them, that made them see what was a “perfect storm” to tackle the opportunity, he continued. “So that is why we jumped into it.”
In the case of Heroes, while the majority of the funding will be used for acquisitions, it’s also planning to double headcount from its current 70 employees before the end of this year with a focus on operational experts to help run their acquired businesses.
Osana Salud, which aims to transform the healthcare infrastructure in Latin America, has closed on a $20 million Series A round of funding led by General Catalyst.
The Argentina-based, yet fully remote, startup was founded in 2019 — just a few months before the pandemic. Since launching less than a year ago, Osana says it has secured contracts with health insurance firms and providers that collectively serve more than 6 million patients in the region. For example, it is working with Sanatorio Güemes and PAMI, which has a network of 5 million patients, among others.
Quiet Capital, Preface Ventures, FJ Labs, AforeVC and K50 Ventures also put money in the latest round, which brings Osana’s total raised over its lifetime to $26.5 million. Lee Fixel’s Addition is also an investor.
CEO Andre Lawson told TechCrunch he was inspired to start Osana Salud because an estimated 50% of Latin America does not have access to quality healthcare. So he teamed up with COO Jorge Lopez to found the company to help change that. President Charu Sharma (the only staffer who is U.S.-based) and CTO Hugo Martin joined at a later date.
“Our vision is to enable affordable and accessible healthcare for every person in Latin America by leveraging technology,” Lawson said.
Specifically, Osana Salud is building an API-connected infrastructure to help the region’s healthcare industry offer a patient experience that offers “greater convenience, outcomes and value,” Lawson told TechCrunch. Its initial focus is on building solutions for telehealth, pharmacy and diagnostics.
For example, he said, Osana wants to make it faster and cheaper for healthcare players to build solutions that are “safe, secure and interact well” with other health systems. With that in mind, the company has tapped doctors and engineers to design that infrastructure.
“The goal is to empower the next generation of healthcare providers in building patient-centric solutions with the potential to positively impact the healthcare experiences and outcomes for hundreds of millions of people,” Lawson said.
In the past eight months, Osana has grown from four to about 50 people, and it expects to have over 250 employees in the next year. Despite not quite being two years old, the startup believes it’s already grown to be Latin America’s biggest telehealth company.
Sharma told TechCrunch that despite living in Silicon Valley, she was drawn to the company’s mission and found the potential to “massively transform healthcare for a whole continent” appealing.
“In the U.S. tech ecosystem, we focus on first-world problems a lot, but an emerging market like LatAm gave me the opportunity to make a meaningful impact at a very basic human need level,” she said. “As the saying goes, talent is equally distributed but opportunity is not.”
In fact, as evidence that remote work will never be the same after COVID, neither Sharma nor Martin have met Lawson or Lopez in person.
The new capital will in part go toward accelerating the company’s product roadmap, Lawson said, and helping it expand to Brazil and Mexico, where it has seen “strong inbound interest.” But primarily, it will be used for hiring.
The timing of the company’s inception was good. The pandemic shed light on the fractures of the healthcare system in Latin America, Lawson believes. It also gave the industry the opportunity to show the benefits of a “virtual first” approach, he added. And once people got a taste of it, they wanted more.
As a result, Osana says it has seen a big bump both in the number of clients and in the usage of its technology platform amongst existing ones.
“Furthermore, COVID-19 created urgency for healthcare providers, which resulted in very short sales cycles for us,” Lawson said.
Hemant Taneja of General Catalyst said the startup’s thesis aligns “perfectly” with his firm’s thesis around healthcare. Taneja himself is also a co-founder and executive chairman of San Francisco-based Commure, a venture-backed startup which is also building software infrastructure aimed at transforming the healthcare space.
“The healthcare infrastructure landscape in Latin America is highly fragmented,” he told TechCrunch. Most software vendors are small or medium-sized local vendors, who have not crossed into other Latin American geographies, Taneja pointed out.
“Osana has a variety of solutions for providers, payors and the pharmaceutical industry that are customizable and modular to create truly personalized experiences — regardless of the region in Latin America,” he said. “They can be an important unifier in a really fractured marketplace.”
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.
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.”
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.
Tuna, which means “fine tune” in Portuguese, is on a mission to “fine tune” the payments space in Latin America and has raised two seed rounds totaling $3 million, led by Canary and by Atlantico.
Alex Tabor, Paul Ascher and Juan Pascual met each other on the engineering team of Peixe Urbano, a company Tabor co-founded and he referred to as a “Groupon for Brazil.” While there, they came up with a way to use A/B testing to create a way of dealing with payments in different markets.
They eventually left Peixe Urbano and started Tuna in 2019 to make their own payment product which enables merchants to use A/B testing of credit card processors and anti-fraud providers to optimize their payments processing with one integration and a no-code interface.
Tabor explained that the e-commerce landscape in Latin America was consolidated, meaning few banks controlled more of the market. The address verification system merchants use to verify a purchaser is who they say they are, involves sending information to a bank that is returned to the merchant with a score of whether that match is legitimate.
“In the U.S., that score is used to determine if the purchaser is legit, but they didn’t implement that in Latin America,” he added. “Instead, merchants in Latam have to tap into other organizations that have that data.”
That process involves manual analysis and constant adjusting due to fraud. Instead, Tuna’s A/B tests between processors and anti-fraud providers in real time and provides a guarantee that a decision to swap providers is based on objective data that considers all components of performance, like approval rates, and not just fees.
Over the past year, the company added 12 customers and saw its revenue increase 15%. It boasts a customer list that includes the large Brazilian fashion chain Riachuelo, and its platform integrates with others including VTEX, Magento and WooCommerce.
The share of e-commerce in overall retail is less than 10 percent in Latin America. Marcos Toledo, Canary’s managing partner, said via email that e-commerce in Latam is currently at an inflexion point: not only has the global pandemic driven more online purchases, but also fintech innovation that has occurred in recent years.
In Brazil alone, e-commerce sales grew 73.88% in 2020, but Toledo said there was much room for improvement. What Tuna is building will help companies navigate the situation and make it easier for more customers to buy online.
Toledo met the Tuna team from his partner, Julio Vasconcellos, who was one of the co-founders of Peixe Urbano. When the firm heard that the other Tuna co-founders were starting a business that was applying some of the optimization methods they had created at Peixe Urbano, but for every company, they saw it as an opportunity to get involved.
“The vast tech expertise that Alex, Paul and Juan bring to a very technical business is something that we really admire, as well as their vision to create a solution that can impact companies throughout Latin America,” Toledo said. “The no-code solution that Tuna is building is exciting because it is scalable and can help companies not only get better margins, but also drive their developers to other efforts — and developers have been a very scarce workforce in the region.”
To meet demand for an e-commerce industry that surpassed $200 billion in 2020, Tuna plans to use the new funding to build out its team and grow outbound customer success and R&D, Tabor said.
Up next, he wants to be able to show traction in payments optimization and facilitators in Brazil before moving on to other countries. He has identified Mexico, Colombia and Argentina as potential new markets.
Flink, a Mexico City-based neobroker, has raised $57 million in a Series B round of funding led by Lightspeed Venture Partners.
The financing comes just over six months after Flink raised $12 million in a Series A round led by Accel. Existing backers Accel, ALLVP, Clocktower and new investor Mantis Venture Capital (founded by The Chainsmokers) also put money in the Series B. Since its 2017 inception, the startup has raised nearly $70 million.
Neobrokers are defined as startups that are disrupting the investment industry by providing a platform for a wider range of consumers to partake in the stock market by offering them more incremental investment options and modern and easy mobile-based interfaces to manage their money. There is a growing number of them globally, including Scalable Capital, Bitpanda and Trade Republic in Europe.
For Mexico City-born Sergio Jiménez Amozurrutia, the fact that in his country of more than 120 million people, only a tiny fraction of the population has the ability to invest in the capital markets felt unfair. To him, the lack of widespread participation in investing is an example of the rich getting richer as part of an infrastructure “that is built for the wealthy.” The result of the imbalance is that a lot of people have historically been locked out of making potentially wealth-building investments.
So after selling Easy Credit, a consumer lending platform he’d built with Rick Rafael Bueno (whom he met in 2015 at a hackathon at Tech de Monterrey), Amozurrutia set out to give Mexicans access to something he believed they’d never had access to: an app-based consumer trading platform.
Flink launched its app in 2018 with a wallet service, a digital and physical global debit card backed by Mastercard and, last year, it began offering the ability to buy and sell fractional shares from 30 pesos, without commissions, for NYSE-listed stocks.
“Users can invest as little as US$1 and with zero commissions,” Amozurrutia said. “We want Flink to be the easiest way to invest, save and use your money.”
The demand for what the startup has to offer is clearly there. Since launching its first brokerage product in July of 2020, Flink has 1.6 million users, up from 1 million users at the time of its February raise. Over 85% of its users are first-time investors. GenZers seem to be the most interested in investing — 27% of the app’s clients are between 18 and 25 years old, while 22% are millennials, execs say.
“Most legacy Mexican banks cater to less than 1% of the population — meaning most Mexicans don’t have a bank account, let alone a brokerage account,” Amozurrutia said at the time of the company’s last raise. “At Flink, we’re guided by the belief that Mexico’s financial system should work for everyone — not only a select few.”
The company is growing its user base by 38% per month and revenue by 31% per month, according to Amozurrutia, and touts a user acquisition cost of 62 cents. It is currently the largest retail brokerage service in Mexico, he said. Flink has 110 employees, up from 25 people a year ago today.
The startup plans to use its new capital to keep growing its team, toward product development and to expand its service to different countries in Latin America.
“The lack of access for retail investing is all over LATAM, and at Flink we want to change that,” Amozurrutia told TechCrunch. “We are focused on offering the opportunity to invest and grow their money to everyone in LATAM.”
Lightspeed Partner Mercedes Bent said her firm “fell in love” with Flink’s mission and impact on the country’s “financial ecosystem.” It was also impressed by the company’s unique features, including allowing Mexican investors to access the U.S. stock market and invest fractional shares.
“Many equities platforms only let you invest in equities in your own country,” she said. “Flink also has a big focus on education and creating an investment experience that makes it easy for their users to onboard.” For example, Bent noted, Flink has a podcast dubbed “Finanzas en órbita” that provides financial and stock market education in México.
In a blog post, Bent and Will Kohler wrote that they could feel the company’s passion and vision for creating more financial inclusion in Mexico, even via a Zoom call.
“The excitement leapt through the video screen,” the pair wrote. “…Flink’s vision for the future goes beyond accessing stocks, and we wanted to be a part of it.”
Flink marks Lightspeed’s third investment in Mexico, alongside Stori and Frubana, and Bent and Kohler say there is “more to come.”
“We are big believers in México, and bullish on LATAM,” they wrote.
Venture capital firm Myelin on Wednesday launched its second fund, Myelin II, that will invest in some 40 early-stage technology companies in North America, Europe and Latin America.
The firm was started in 2020 by serial entrepreneurs Matías Nisenson, Martin Varsavsky and Alec Oxenford, who lead the firm remotely from Latin America. They are joined by Cesar Levene, an international tax and law expert.
Nisenson previously founded and sold two startups, Tiempy, a social media tool, and Experimental, a blockchain-based online gaming company, while Varsavsky has founded eight companies, and currently is founder of Goggo Network, developer of autonomous mobility networks.
“As an entrepreneur, I build ‘unicorns,’ and now I’m searching for them with Myelin,” said Varsavsky in a written statement.
Meanwhile, Oxenford is founder and former CEO of letgo, an online secondhand marketplace. He told TechCrunch that Nisenson and Varsavsky were good friends that were successful and smart, so it made sense to join them in the firm. He had not been an investor prior, but as a founder, said he wanted to help other entrepreneurs not make the same mistakes he did.
The firm aims to raise between $25 million and $50 million for the second fund, Oxenford said. The fund is industry agnostic, but they are attracted to seed and Series A startups in biotech, fintech, proptech, femtech and food tech.
It also partners with large portfolios and networks for leads. An average check size for the firm is $250,000 to $500,000 for a first check, and $1 million to $3 million for follow-on funding.
However, Oxenford sees check sizes increasing as valuations, especially in Latin America, are rising and more capital is flowing. This also makes it more difficult to identify the companies with substance.
“Having been founders — all three of us — we can understand a bit better than others whether there is substance, and the projects have true potential,” he added. “We look for unicorn potential, some revenue, a serial entrepreneur and a good culture that is data-driven. We are taking a special approach that is founders helping founders in various stages of their careers.”
The new fund follows Myelin I, which invested several millions into 23 startups, including CookUnity and Buenbit. Nisenson says the first fund was “mostly proof-of-concept,” and was his first time as a fund manager, though Varsavsky had worked on other funds. They decided to have a very small fund and co-invest with larger funds.
“We found that nano funds can outperform big funds because you can invest in every deal,” Nisenson added. “The big funds don’t care because you are not competing with them.”
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.”
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.
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.