#030: What happened to VC funding in October?
Taking a brief break from the FTX fallout to examine Nubank’s earnings, Beat’s retreat, and investment in Spanish-speaking LatAm
Hola technopolists,
Reading the news about FTX this week felt like watching an episode of Industry. You’d be justified for speculating about Jonah Hill starring as Sam Bankman-Fried in a film adaptation of a future Michael Lewis bestseller. You’d even be excused for daydreaming about how you’d redecorate SBF’s mega-mansion, now that it’s for sale.
But eventually we’d ask you to close Twitter and come back to reality, where the crypto fallout is real, the ride-hailing world just got smaller, and VC funding is still down.
The silver lining? Post-IPO tech companies can actually turn a profit. Seed funding persists. And the World Cup starts this Sunday.
What’s hot
🏦 Nubank flips a profit. Nubank gave investors billions of reasons to cheer with its Q3 results this week. Revenue surged +171% year-on-year to $1.3bn, after adding 5.1mn new customers (+46%) for a grand total of 70mn users. The biggest news? Nubank turned a profit for the first time, realising $7.8mn in net profit against consensus estimates of a -$25mn loss. There’s one black mark on the earnings: bad debt. The share of 90-day non-performing loans increased to 4.7% of their portfolio ($455mn), though this is in line with a broader worsening in credit markets. In response, the colossal neobank slowed its pace of lending, growing its total debt book only 5% to $9.7bn — three times lower than the prior quarter’s growth rate (15%). While Nubank is still trading at less than half of its IPO price, the results sent shares up 16% in after-hours trading. (Brazil Journal)
🏠 MercadoLibre has new (strange?) bedfellows. MercadoLibre is making its first foray into proptech in its new partnership with SimpleState, a property platform that allows the average person to invest in residential and commercial real estate. The details of the partnership are vague, but what we do know is that MercadoLibre uses its website to advertise investment opportunities through SimpleState. Since the launch of its high-growth fintech subsidiary (MercadoPago), MercadoLibre has moved increasingly further from its core ecommerce business into different financial verticals — first with payments, then with crypto (MercadoCoin), and most recently, in a partnership with Creditas to offer car loans. (Bloomberg Linea)
⚖️ Mexican fintechs voluntarily choose regulation. Konfio, the Mexican lending unicorn, has applied for a banking license in the next chapter of the non-bank lending saga. It comes as recent analysis shows that while ‘shadow lending’ in the country grew to 20% of total lending after the pandemic, recent collapses at Unifin, AlphaCredit, and CreditoReal have sapped investor confidence in the sector. That, combined with rising central bank interest rates, has meant that shadow lenders face unattractively high interest from their financiers, making a banking license the best (albeit painful) alternative to find new funding sources. (El Economista)
What’s not
🤯 FTX’s fallout hits LatAm. FTX’s cataclysmic decline reverberated around the world with astonishing speed, and it’s no surprise that LatAm — and especially Brazil, one of the world’s Top 10 crypto markets — is feeling the aftershocks. Last Friday as the company teetered into bankruptcy, FTX’s handful of LatAm employees all resigned. Antonio Neto, former head of FTX Brazil and LatAm, posted publicly on a Telegram group about the team’s utter shock and disappointment. The financial future of many ex-FTX employees (in LatAm and around the world) is in jeopardy, as many were compensated in equity or $FTT, the exchange’s utility tokens whose price crash triggered the collapse; to boot, many employees (including Neto himself) had most of their personal wealth tied up in assets traded on FTX. During the collapse, Brazilian investors claim their money on the platform completely disappeared. Customers ‘ran’ on FTX and other exchanges to withdraw their assets, yet when these exchanges froze assets, a stablecoin tied to the Brazilian real ($BRZ) lost its peg twice. The chaos has given renewed urgency for Brazil’s legislature to pass the crypto regulation bill that has been awaiting approval for months; insiders now expect a vote in the next two weeks. Yet, surprisingly, Brazil’s central bank decided that last week was the right time to announce its first investment into crypto. (Brazil Crypto Report)
🚘 Beat faces the music. Beat, the ride-hailing app and mobility provider known for its branded e-vehicles, has closed operations in LatAm and terminated its regional employees. FREE NOW, Beat’s German parent, described it as a “clear decision from shareholders to focus on core European geographies”. The announcement came as a big surprise. Only a few short months ago, country managers in Argentina and Peru boasted of billions of pesos in driver payouts and 2023 expansion plans. Riders in several markets have now been redirected to former rival Cabify. Beat represents a ride-hailing company trying to blaze a new trail as an ethical, cost-efficient alternative to Uber and Didi; the company exclusively uses e-vehicles like Tesla, kept prices competitive, and classed some drivers as employees rather than contractors. (Reuters)
Stat of the week
Last week’s post looked at October’s VC investment levels in Brazil, where the +100% funding boost over September was a positive signal that the bottom of the market may be behind us.
Yet while Brazil looked good, the stat gave false hope for the rest of LatAm.
So what? We probably haven’t found the floor yet. The end of the year is typically quiet as the holidays approach, and that’s bound to be compounded by the World Cup kicking off this weekend. Even a $200mn megaround in Colombia (Lulo Bank) wasn’t enough to propel Q3 investment past the $1bn mark. Still, seed funding is strong, with 111 deals completed and an average investment in the $8-9mn range. Investors are already banking on 2022-23 being some of the best vintages in the past decade — and no one wants to miss out on those returns.
Smart links
Startups find a new way to grow: loaning out their own VC money (Rest of World)
Musk lays off Twitter Mexico staff. The government rejoices (Rest of World)
Ping wants to simplify global payments while helping Latin Americans embrace crypto (TechCrunch)
Two years since launch, Pix is the most popular payments method in Brazil (Bloomberg Linea)
Draft proposal suggests Mexican fintechs may be required to report monthly financials (El Universal)
BRK raises the first ‘blue bond’ in Brazil (Brazil Journal)
The race to be Latin America’s next top development banker (The Economist)
Deals (November 8-15 , 2022)
M&A
🇨🇱 Betterfly, a Chilean unicorn insurtech and benefits platform, acquired 🇧🇷 SeuVale, a Brazilian benefits platform, for an undisclosed amount
🇧🇷 B3, the Brazilian stock exchange, announced the $120mn acquisition of 🇧🇷 Neurotech, an AI-powered data platform
Late stage
🇲🇽 Mendel, a B2B expense management platform, raised a $60mn round co-led by Industry Ventures, Infinity Ventures, and Victory Park Capital with participation from ALLVP
🇧🇷 Agrolend, a Brazilian agricultural fintech lender, raised a $28mn Series B led by Lightrock with participation from Yara International Growth Ventures, Mago Capital, Valor Capital Group, Continental Grain Company, Provence Capital, SP Ventures, and Barn Investimentos
Early stage
🇨🇴 Muncher, a Colombian dark kitchen startup, raised a $27mn Series B led by Glisco Partners with participation from FEMSA Ventures, TMT Investments, and several family offices
🇸🇻 n1co, a Salvadoran neobank, raised an $18mn pre-seed led from undisclosed investorsre
🇲🇽 Yave, a Mexican proptech, raised a $7.5mn seed II round co-led by Better Tomorrow Ventures and Metaprop with participation from Goodwater, Activant, Moore Capital, Fintech Fund, Cross River, Vinte, Magma Partners, DILA Capital, and Wollef
🇧🇷 Liti, a Brazilian healthtech, raised a $3.9mn seed from Monashees, Granary, Grão, Norte, Eclipseon, Newtopia, Latitud, The Fund, and angels (including Simon Borrero and Sebastian Mejia)
🇨🇱 Levannta, a Chilean fintech lender, raised a $2mn round of debt and equity from
undisclosed investors
🇧🇷 Erural, a Brazilian livestock marketplace, raised a $1.9mn round from SP Ventures
🇲🇽 Perfekto, a Mexican e-tailer for fresh produce, raised a $1.1mn pre-seed from undisclosed investors
🇧🇷 123Projetei, a Brazilian architecture and construction platform, raised a $750k pre-seed from angel investment platform Investidores.vc
Ad hoc
🇺🇸 Quona Capital, an American VC fund, closed a $332mn fund to invest in financial inclusion in emerging markets
🇧🇷 Ativy, a Brazilian ERP platform, raised $24mn in venture debt from Paramis and Milenio Capital
Did I miss any deals? Let me know!