#029: Where is the bottom of the startup funding market?
Playing the dicey prediction game using some early data. Are we there yet?
Olá technopolists,
FEMSA is loving the spotlight — but this week, make sure not to confuse Oxxo with Oxio (even if they both sell SIM cards).
The ongoing polemic about digital nomad gentrification reached a new crescendo this week, with a tangible impact on the 800-pound gorilla enabling so much remote working: AirBnB.
Plus, a look at the tea leaves to see if we might be at the bottom of the funding market. Is there further to fall?
What’s hot
🏦 Fintech FEMSA. FEMSA, the Mexican retail conglomerate and Coca-Cola bottler, has bought payments aggregator Netpay for an undisclosed sum. The acquisition is the third chapter in FEMSA’s push to turn Oxxo, its ubiquitous convenience store chain, into a fintech rivalling the neobanks and payments processors in the region; just last week, FEMSA announced that it received a fintech license for Oxxo, which will soon process remittances, personal loans, and business loans. (Bloomberg Linea)
💰Debt is the new black. Venture debt has been incredibly in vogue, with a record $1.3bn of credit facilities issued to LatAm startups in Q3 alone. The fiesta is rolling on. Kapital, the Mexican startup hoping to provide rapid venture debt to LatAmn startups, raised a $100mn debt facility last week from Sivo to scale up its loan book. The Mexican non-bank lender is hoping to cash in on the new wave of venture debt by creating a debt business that’s the big brother of crowdfunding and the cousin of businesses like Konfio and Cumplo. In the wild world of web3, fintech Clave and DeFi platform Credix announced $150mn of tokenised debt that they will issue in 2023. The target market for the crypto fund is still vague – “individuals and businesses locked out of traditional options” – but will find eager borrowers if their interest rates and staking options promise the flexibility of other cryptocurrencies. (Latam List)
📞 Hotline bling. We don’t often hear from the world of telecom, but this week a Mexican startup is hoping to reinvigorate a space otherwise associated with apathetic customer service and oligopolistic supply chains. Oxio, the Mexican telecom-as-a-service provider, has partnered with Mexican network provider Telcel in a deal that grants Oxio full access to Telcel’s broadband network. Oxio is the new tech-enabled middleman that allows anyone to operate their own mobile network using their whitelabelled telecom system, and today counts customers like Rappi among their ranks. Oxio raised a $40mn Series B earlier this year to expand across Mexico, Brazil, and the US, and this deal is the biggest yet. Their ultimate goal makes sense: improve customer experience in telecom by having new brands launch to compete with sclerotic incumbents that leave us on hold for 45 minutes. (Latam List)
What’s not
🪑 Musical chairs. What do you do when things aren’t going your way? Put someone new in charge. Amidst stagnant growth in Mexico, Bloomberg Linea has reported that Kavak is amidst a management restructure in their home country. Kavak — which has not yet commented on the reports — is allegedly dismissing their 5 most senior leaders in Mexico. The used car reseller has been moving 3.5-4k cars per month against targets of 17k (an 80% miss). In Brazil, the CEO of publicly listed fintech StoneCo is swapping seats with board member Pedro Zinner. StoneCo’s share price has stalled out around $11 for most of 2022, a -65% drop from their 2018 IPO and a -89% plummet from their peak in early 2021. Oh, and Elon Musk’s Twitter layoffs have finally hit LatAm, almost as sharply as SF. (Bloomberg Linea)
🏠 The rent is too damn high? Not a month passes without a new gentrification article criticising digital nomads in CDMX, but the debate intensified this past week. A tenant in the trendy neighbourhood of La Condesa kicked off a social media storm by criticising their landlord for evicting tenants to become Airbnb hosts and hiking prices 750%. Even VC-content creators are lamenting the influx (below), and the data backs up the moaning: government data shows that residency permits granted to Americans to live in Mexico increased 85% from 2019 to 2022, setting a new record for relocations. Yet Mexico City, despite the furore, is accelerating into the controversy: the city has recently announced a partnership with AirBnB intended to entice more digital nomads to Mexico city. That’s great news for the hospitality platform, which has been publicly drawn and quartered (and then regulated) in high-demand places like Barcelona and Berlin. AirBnB will hope the partnership provides slight relief to their bookings volume, as they’ve just issued a disappointing downgraded outlook for Q4. (Bloomberg Linea)
Stat of the week
Q3 was an abysmal period for startup investment in LatAm. It was the lowest quarter since the pits of the pandemic in 2020, and no new unicorns were minted (compared to the near 50 in the region today). Late-stage investments have basically vanished as valuations have collapsed, and those remaining rounds likely have undisclosed terms that are dire for startups. Seed investment has been the only silver lining.
The pain has many asking: when will it end?
The data is preliminary and incomplete, so we’re looking at leading indicators. When it comes to investment levels, we can use a general rule of thumb: as Brazil goes, so goes the region.
So what? October’s boost is a positive indicator that may signal the softening of a sharp correction, but there are several serious caveats. October saw a couple megarounds (see: Cerc’s $100mn raise from Mubadala), which makes prediction especially dicey since these figures distort the picture of the capital base. Plus, seasonality is tough to gauge: Q4 has been smaller than Q3 typically, but it’s very possible that September’s atypically demoralising macroeconomic picture pushed deals into October. Then, the leading signals of layoffs and rising interest rates are still pointing towards a negative outlook. Yet, there’s hope for the optimists: Brazil does tend to be a bellwether as LatAm’s largest and most advanced tech ecosystem.
Smart links
Dock cuts 12% of staff, 6 months after becoming a unicorn (Startups Brasil)
CloudWalk becomes first crypto company to become a licensed payments institution in Brazil (CoinDesk)
Companies to watch: Planatus Ventures announces new accelerator cohort (Bloomberg Linea)
Mass layoffs at Twitter hit LatAm employees (Bloomberg Linea)
MercadoLibre posts a record quarter for revenue and profit (Bloomberg Linea)
Uruguay launches public-private “Innovation Hub” (Bloomberg Linea)
Uber LatAm revenue swells 33% in Q3 (Bloomberg Linea)
How Nubank plans to go global (Bloomberg Linea)
Deals (November 1-8, 2022)
M&A
🇲🇽 🇲🇽 FEMSA, the Mexican retail conglomerate, agreed to purchase Netpay, a Mexican payment aggregator, for an undisclosed amount
🇺🇸 🇲🇽 Tribal Credit, the SF-based fintech for emerging markets, acquired Paykii, a Mexican payments platform, for an undisclosed amount
🇧🇷 🇧🇷 Nomad, a Brazilian fintech for US-based bank accounts, announced the purchase of Husky, a cross-border payments company, for an undisclosed amount
Late stage
🇧🇷 Beep Saúde, a Brazilian healthtech, raised an undisclosed Series C led by the Chan Zuckerberg Initiative with participation from David Vélez, DNA Capital, and Endeavor Catalyst
🇰🇾 Aave, a Cayman web3 fintech, raised an undisclosed amount of late-stage funding from FTX Ventures
Early stage
🇲🇽 Quinio, a Mexican e-commerce aggregator, raised a $40mn investment of equity and debt led by Northgate Capital with participation from Cometa, Dila Capital, AlleyCorp, Western Technology Investment, Alchimia Investments, and strategic angels
🇧🇷 Zerezes, a Brazilian eyeglasses e-tailer, raised a $3.9mn round led by Shift Capital with participation from Order VC
🇧🇷 Looqbox, a Brazilian data platform, raised a $2.9mn seed round from DGF Investimentos, HiPartners, and Locaweb
🇨🇱 ObraLink, a Chilean constructiontech platform, raised a $2mn seed round led by Gruas M10 and CEMEX Ventures with participation from Carao Ventures and angels
🇨🇱 Wareclouds, a Chilean ecommerce fulfillment startup, raised a $1.2mn seed round led by ChileGlobal Investors with participation from angels
🇦🇷 Aerialoop, an Argentine drone logistics provider, raised an undisclosed seed round led by Kamay Ventures
Ad hoc
🇲🇽 Kapital, a Mexican SME lending fintech, raised a $100mn credit facility from Sivo
Did I miss any deals? Let me know!