#021: How will LatAm grow its lending businesses?
Wall Street loves LatAm, and Travis Kalanick makes a shadowy return
Hola technopolists,
Hate to say it, but gringos are hot this week. With monster equity fundraises out of vogue for now, Goldman Sachs is plugging the gap as the key financier behind huge debt vehicles to LatAm unicorns (more on LatAm’s lending in this week’s stat column).
Plus, Uber’s embattled ex-CEO Travis Kalanick is back in the headlines; this time, it's about his ‘dark kitchens’ rather than dark behaviour.
What’s hot
🇺🇸 American debt. Total VC funding may have dropped from last year, but New York’s giants are still happily ploughing venture debt into LatAm. Last week, Goldman Sachs announced a $140mn credit facility to Xepelin, the Chilean fintech unicorn that offers a suite of accounting and lending services to small businesses across the region. It’s the latest in a long list of LatAm darlings now on Goldman’s balance sheet: Clara bagged a $150mn credit facility last month, Mercado Libre secured a $233mn loan, and Nubank announced a $650mn credit line from a Goldman-backed consortium. Then there’s Clip, the Mexican fintech that announced a $50mn credit facility provided by Morgan Stanley, JPMorgan, and HSBC. The Americans seem to be zigging when others are zagging, unfazed by cautionary tales like StoneCo’s downfall and Credito Real’s collapse. (Bloomberg Linea)
🍔 Uber’s long shadow. Travis Kalanick, Uber’s controversial founder and ex-CEO, has spent his time as one of tech’s personae non grata quietly amassing an empire of ‘dark kitchens’ powering food delivery providers across LatAm. In the last 3 years, Kalanick’s US-based CloudKitchens has made deep inroads in LatAm, expanding to over 50 locations in 11 cities across Brazil, Mexico, and Colombia to provide cooking, packing, and purchasing infrastructure for brands like Rappi and iFood. Now, fresh funding from investors including Microsoft is fuelling the next push. CloudKitchens is mega, having reached a $15bn valuation in November after bagging an $850mn fundraise. Despite immense scale, they have largely operated in the shadows — an intentional strategy of Kalanick’s following his very public vilification for allegations of unethical corporate culture and sexual harassment at Uber. (FT)
🇦🇷 Inorganic growth. Some good news coming from Argentina this week with Ualá, the Argentine fintech unicorn, making two expansion moves. At home in Buenos Aires they acquired Ceibo Creditos, a consumer loan and BNPL platform, for an undisclosed amount. Further north, Ualá partnered with ABC Capital, a Mexican bank, to tap into Mexico’s $60bn remittance industry by allowing locals receive money from abroad. The fintech is clearly taking advantage of the market correction by growing through partnership and acquisition; don’t forget, the unicorn bought Argentine digital bank Wilobank three short months ago. However, it seems more like catch-up moves than innovation; Ualá isn’t the first to arrive at the BNPL or remittances parties, and the undisclosed amounts for both deals leave us wondering whether they’re too small to shout about. (Reuters)
What’s not
📉 Brazilian fundraising. Brazilian startups raked in $174mn in total funding in August, an -80% drop from the $880mn raised in August ‘21. Only 43 rounds were announced this past month compared to 77 last year, with the average round size plummeting from $11.4mn to $4mn. These latest figures confirm that the correction is still thoroughly ongoing in LatAm’s venture hub, with valuations contracting and mega-rounds becoming more scarce (compare to mega-rounds in August ‘21 from QuintoAndar, Omie, PetLove, and Cora). Aggregate funding numbers from around the region are yet to be confirmed, but with Brazil typically leading the charge, we should expect a similar trend elsewhere. (Startups Brasil)
🎂 Bukele’s Bitcoin birthday. Last week marked a year of legal Bitcoin in El Salvador, the linchpin behind President Nayib Bukele’s experimental crypto policy platform. But one year on,‘nobody really talks about Bitcoin anymore’. While 50% of the country signed up for Chivo, the government-backed digital wallet, over 80% have since abandoned the app, with consistent complaints about functionality and fraud. Bukele’s buy-the-dip Bitcoin purchases have created a $58mn hole in public funds (for now), and his administration’s other plans, like issuing Bitcoin-backed ‘volcano bonds’ and building a tax-free Bitcoin City, have stalled, per Reuters. The government has a few wins, like small gains in financial inclusion and support from big-name crypto optimists, but the population begs to differ: in recent polls, Salvadorans rate Bukele’s crypto policy as his biggest failure, only behind controlling inflation. Yet the Polo-wearing, self-anointed “world’s coolest dictator” still benefits from over three-quarters of the country’s approval, largely thanks to his tough-on-crime gang policies. (Fortune)
Stat of the week
Lending is still one of the hottest sectors in LatAm, despite the aforementioned collapses at big non-bank lenders and looming concerns about the shifting credit cycle. If you’re sceptical, just look at Xepelin’s big credit facility from Goldman this week.
Yet in emerging markets like LatAm, access to credit is stunted by data gaps. Lenders and ratings agencies have a hard time assessing risk because the informal economy is so heavily relied upon. Fewer paper trails and higher fraud rates make banks skittish.
TransUnion’s latest report on consumer credit sentiment around the world draws the need for innovation into sharp focus. Consumers around the world were asked whether they believed that new types of data, like rental payments and BNPL loans, would improve their credit scores.
Here are the results, including LatAm’s:
So what? Everyone loses when good data gets ignored set: good borrowers without a long track record get blocked, and lenders miss out on growth and profitability. Fortunately, there’s already a wave of fintechs making it big using new types of data to properly assess risk (e.g., Belvo, Konfio, Credijusto), though they’re heavily concentrated in business lending. The TransUnion poll underscores that LatAm consumers are itching for the same innovation to reach them, too.
Smart links
Argentine startups hit by less global liquidity
Argentina’s 4chan analogue taken down after VP assassination attempt
After a $260mn Series B, JOKR seeks a $50mn fundraise at a basically flat valuation
Colombia’s creators decry proposed tax reforms
Revolut accelerates its entry into Brazil
UAE fintech Optasia targets the unbanked in LatAm and emerging markets
Platanus Ventures strengthens Mexican presence with new hire Rogelio Rea
Shopee shutters operations across LatAm but spares Brazil
Binance bolsters team with ex-presidents of Mexican Securities Commission and Brazilian central bank
Nubank launches “caixinhas” in Brazil, with similar functionality to Pots and Vaults
Opinion: Latin America is ready for crypto — just integrate it with their payment systems
EY Brazil launches a startup innovation hub
IDB increases financing to Argentina as foreign reserves dwindle
Apple to appeal Brazil sales ban of iPhone without charger
The Rise of Nayib Bukele, El Salvador’s authoritarian president
Opinion: Chile’s rejection of populism is an example for the world
Deals (September 5-11, 2022)
Disclaimer: ‘Fundraising’ is getting re-branded as ‘Deals’ to include M&A activity.
M&A
🇦🇷 Ualá, the Argentine fintech unicorn, acquired Ceibo Créditos, a BNPL fintech, for an undisclosed amount
Series A
🇧🇷 Credix, a Brazilian DeFi platform, raised a $11.3mn Series A led by Motive Partners & ParaFi Capital with participation from Valor Capital, Victory Park Capital, MGG Investment Group, Circle Ventures, Abra, Fuse Capital, Claure Group, and angels
🇲🇽 Plenna, a Mexican femtech, raised a $5.4mn round from undisclosed investors
Seed & pre-seed
🇲🇽 Cuéntame, a Mexican anti-burnout healthtech, raised a $1.1mn pre-seed round led Impacta VC with participation from Colectivo Jaguara, 99 Startups, Fondation Botnar & New Ventures, Pareto20, and Investo
🇲🇽 Haro, a Mexican fintech, raised a $1mn round from angel investors
🇧🇷 B4waste, a Brazilian foodtech, raised a $400k round from GLOCAL
Ad hoc
🇨🇱 Xepelin, a Chilean fintech lender unicorn, raised a $140mn credit facility from Goldman Sachs
🇲🇽 Clip, a Mexican fintech unicorn, raised a $50mn credit facility from Morgan Stanley, J.P Morgan, and HSBC
🇧🇷 E-ctare, a Brazilian agtech/fintech, raised a $9.7mn credit facility from Banco Alfa
🇧🇷 Vox Capital, a Brazilian impact investment fund, raised $9.6mn in new investment from Brazil’s National Bank for Economic and Social Development
Did I miss any deals? Let me know!