#028: How a16z is making 2022 its biggest year yet
An inside look at how the American fund is quietly -- but rapidly -- making its presence known in LatAm
Hola technopolists,
Another week, another data provider reminding us that LatAm VC investment is at pre-pandemic levels. But you’ve already seen that data here, so we won’t linger on it.
Instead, we’ll look at how a non-traditional cornershop is giving fintechs a run for their money, and how exits are still possible, even in this economy.
What’s hot
🏪 Tienditas on the corner. FEMSA, the major Mexican conglomerate, acquired a fintech license last week for Oxxo, its convenience store subsidiary. The cornershop chain announced plans to support remittances, and soon thereafter, small business loans. For anyone who may have missed it: with a brick-and-mortar footprint that boasts more locations than Starbucks, Oxxo launched Spin earlier this year, a basic debit card that has gained traction faster than Nubank. Oxxo has swum up the normal stream of tech innovation, going first for a physical footprint and then providing digital services, unlike new-age digital rivals like Klar and Fondeadora. So far, FEMSA has ruled out plans to apply for a full-fledged banking license. (Bloomberg Linea)
🤑 Exits y éxitos. Selina, the Gen Z hospitality company known for its digital nomad-friendly hostel chains, went public via SPAC on the NYSE last week. The SPAC’s shares began the day around $9 before peaking at $41 for a +318% jump on its first day of trading. The chain’s first location was in Panama, and its strategy has focused tightly on catering to wifi-tribe sunchasers that seek community in adventurous locations (particularly around LatAm); today, they boast 163 locations worldwide. The SPACquisition represents one of the rare public market exits we’ve seen in the current macroeconomic climate; however, many SPACs formed during the 2021 pandemic SPAC craze are now searching for targets as they near the end of their 2-year acquisition window. (Bloomberg Linea)
⚖️ New rules. Ecuador’s legislature passed their “Ley Fintech” bill last week, marking a major step forward for fintech regulation and entrepreneurship. The bill is similar to its Chilean and Mexican counterparts, setting out rules aimed at spurring innovation in areas like payments and lending by creating more flexible and proportionate requirements for fledgling startups. Sergio Fogel, founder of Uruguayan payments unicorn dLocal, coincidentally spoke publicly about the critical role of these types of legislation in an interview. Interestingly, the Ecuadorean bill also restricts investments from existing financial institutions into startups in order to prevent monopolisation. (Bloomberg Linea)
What’s not
🌎 Think global, tax local. Costa Rica has levied a new tax against non-domiciled tech titans that make money in the country. Companies from a variety of industries such as AirBnB, HomeAway, Vrbo, and even Disney Plus will be forced to pay a 13% tax on revenues from customers inside Costa Rica. Hospitality-related companies are in focus, as the country hopes to reclaim more upside from its status as a thriving tourism and digital nomad destination. Major players on the list have yet to comment, and it is unclear how much of the cost they plan to pass on to customers. (Bloomberg Linea)
💬War of words. As Mexico’s Ministry of Labour continues its push to provide greater protections to gig workers, a coalition of mobility companies have begun speaking publicly about the downsides of such regulation. Without giving any hints about the actual counter-proposals being discussed for the labour reforms (which are intended to provide benefits to gig workers), spokespeople at Rappi and Uber have pointed out that greater employee benefits would entail rising costs for consumers. They hold up Spain and Switzerland as cautionary tales, where such reforms caused price increases that turned delivery services into niche businesses; reading between the lines, they are threatening that the new legislation would lead to significant job losses of the half-a-million-strong workforce currently employed in gig work in Mexico. So far, the delivery companies seem to be playing a game of chicken in the mainstream media, hoping the government will blink first. (Bloomberg Linea)
Stat of the week
Recent reports from sources close to a16z claim that the famous American fund is preparing a deeper push into LatAm’s early-stage scene — especially into fintech and healthtech. The news may have seemed normal in last year’s market, but the recent flight of foreign capital makes it worth investigating.
Do the reports hold water? A look at the recent past gives us a big hint.
So what? The recent reports are actually behind the times; a16z’s push into LatAm is thoroughly underway already, so they’re less foreshadowing the future than reacting to a real trend. Before 2022, they invested in 10 companies in LatAm; this year, they have invested in 11 companies – and the year isn’t over yet.
And it seems like a very smart strategy, too. Here’s why:
Network effects. a16z’s investment into Rappi wasn’t just a test investment — it provided essential deal flow into later early-stage companies from the Rappi mafia (see: Morado in 2022). The investment into Latitud this year is the best example: their investment into the accelerator-adjacent company is a network effect on steroids, since Latitud’s fellowship programme is minting some of LatAm’s most promising startups.
Planting seeds. Yes, a16z is a massive fund with huge amounts of growth capital to deploy, but they are not foreign growth funds like Tiger or SoftBank — so we need to be careful to think of them differently. Their sweetspot is $1-5mn early-stage cheques. As we’ve seen already, early-stage investment is actually picking up despite the economic slowdown — so a16z are willing to brave the headlines and find good seed deals just when startups need cash more than ever and other types of capital are in retreat. Increasing demand for their product (money) with shrinking supply (other VCs)? That’s a winning formula for the Americans.
Smart links
How online supermarkets Jokr and Jüsto fight inflation in Mexico (Bloomberg Linea)
Two Colombian startups compete for LatAm’s ghost kitchen market (Latinometrics)
Brazilian fintech Saque e Pague earmarks $50mn for LatAm expansion (Startups Brasil)
Kushki enables cross-border payments with Kushki Mundial (Latam List)
Gympass launches benefits programme for partner gyms (Startups Brasil)
The state of Central Bank Digital Currencies in Latin America (Fintech Nexus)
Is Latin America the next frontier for technology M&A? (White Case)
Nubank records 52% growth in assets under management (Fintechs Brasil)
Deals (October 24 - November 1, 2022)
🌎 Selina Hospitality went public on the NYSE via SPAC for $9.79 and peaked at $41 (+318%)
M&A
🇲🇽 Yaydoo, a Mexican payments fintech, acquired Oyster Financial, another Mexican payments fintech, for an undisclosed amount
Late stage
🇧🇷 Liv Up, a Brazilian ready-meals startup, raised a $5mn investment from the corporate venture arm of Minerva foods; the investment is the second extension on their Series D
Early stage
🇧🇿 MintMe, a Belizean web3 crowdfunding platform, raised a $25mn investment from GEM Digital
🇧🇷 Franq, a Mexican open banking fintech, raised a $12mn Series A extension led by Quona Capital with participation from Globo Ventures, Valor Capital, and Broadhaven Capital
🇲🇽 Mattilda, a Mexican fintech for private schools, raised a $10mn seed round led by FinTech Collective with participation from DILA Capital, QED Investors, GSV Ventures, Picus Capital, Emerge Education, SMP and Xochi Ventures
🇧🇷 Origami, a Brazilian DAO/web3 startup, raised a $6.2mn seed round led by Bloomberg Beta with participation from Betaworks, Protocol Labs, Orange DAO, VC3 DAO, Mirana, AppWorks, BECO, PruVen, Bam Ventures, Monochrome, Chamaeleon, Seity Future Ventures, Dreamers, Wave Financial, Transpose, Matrix DAO, and Portofino
🇲🇽🇺🇸 Cicada, a US-based fixed income investment platform for LatAm, raised a $4mn seed extension co-led by DILA Capital and Kaszek
🇧🇷 Oriba, a Brazilian men’s clothing brand, raised a $3.4mn seed round from Shoulder
🇧🇷 DigiCash, a Brazilian digital bank, raised a $3.2mn round from undisclosed investors
🇧🇷 Vixtra, a Brazilian foreign exchange fintech, raised a $3mn pre-Series A led by Valor Capital with participation Fontes II (a QED fund)
🇲🇽 Nopalera, a Mexican beauty brand, raised a $2.7mn seed round led by L’Attitude with participation
🇧🇷 Faster, a Brazilian design services platform, raised a $1.4mn seed round led by DOMO Invest with participation from angels
🇨🇴 Ubanku, a Colombian neobank, raised a $1mn seed round from Newtopia VC, Irie VC, EF Venture Capital, and angels
Ad hoc
🇲🇽 Crediclub, a Mexican lending platform, announced an $80mn investment partnership with L Catterton
🇧🇷 Red Ventures announced a $13.5mn investment into a joint venture with Boa Vista to create a consumer fintech marketplace in Brazil
Did I miss any deals? Let me know!