Booming fundamentals – and an IPO on the horizon
#062: Exploding fintech and e-commerce app usage vindicate #LongLatAm-ers, while a major LatAm e-commerce player inches toward IPO.
Hola technopolists,
All the tech conversations I’ve had in the last week revolve around a similar theme: the difference between market cycles and fundamentals.
The market cycle is still at its nadir, with new M&A data shows a steep decline in exits. At the same time, fundamentals are optimistic: consumer app usage and credit growth both point toward a brighter future, even if the tide is still way out.
What’s Hot
🏦 Shein’s in IPO talks. The e-commerce platform – one of LatAm’s largest digital retailers – is in live discussions with the NYSE, Nasdaq, and at least three different investment banks for a public listing, according to reports from Reuters. The company, which has been eyeing a US IPO for three years, is currently drafting its SEC filing though the timing of the listing is still uncertain. If the IPO goes through, Shein — most recently valued at $60bn — could become the most valuable China-based company to IPO in the US since DiDi’s $68bn listing in 2021. (Reuters)
📱 App usage booms. According to a new report from Adjust, LatAm’s use of fintech and e-commerce apps is more than doubling global averages. Fintech app usage in LatAm grew 54% in 2022 compared to a 19% global average, making LatAm the fastest-growing region in the world. In the same period, e-commerce app downloads in the region grew 6% compared to 3% in EMEA and 1% in North America. The trend only seems to be accelerating, with LatAm e-commerce usage exploding 13% in 2023 — more than EMEA (6%) and North America (7%). (Contxto)
📦 Brazil scraps import tax. As part of a landmark tax reform package passed last week, Brazil’s legislature made a last-minute change to remove a planned tax on low-value imports under $50. The move, which provides a boost to foreign retailers like Shein and AliExpress, is a controversial volte face: the government had previously signalled plans to implement the tax in order to protect local retailers, in line with similar protectionist moves in India and the US. This one may not be so “Hot” for them, though it certainly heats up e-commerce competition in Brazil. (Brazil Journal)
What’s Not
📉 Exits are down (bad). According to new data from Pitchbook, Latin American startup exits dropped 57% in the first half of the year, declining from 54 deals in H1-22 to 23 H1-23. Late-stage exits suffered the heaviest setback, with capital availability heavily reduced in both private and public markets on the back of inflationary concerns, rising interest rates, depressed valuations, and slowed growth. LatAm’s startup funding and M&A ecosystem has been hit the hardest on the global scale in 2023. (Bloomberg)
🍔 Didi Food exits Chile and DR. The China-born mobility platform announced that it will cease food delivery operations in both countries on August 7th, roughly one year after entering the countries. After the closures, Mexico and Costa Rica will be the only two remaining countries in DiDi Food’s Latin America footprint; however, Didi will continue standard mobility services across all geographies. The announcement is part of a wave of retreats by food delivery platforms around the region, with Jokr and iFood leaving Chile in the last year. (Forbes)
Stat of the Week
Fintech app usage is a good leading indicator for tech’s impact on consumers, but we can’t forget to look at the actual cash in people’s pockets. Here’s a look at credit growth in LatAm’s biggest Spanish-speaking country:
So what? Despite high and rising interest rates, Mexican household borrowing is accelerating in 2023 – a sign that fundamentals, like credit access and inherent demand, are outweighing macroeconomic headwinds. It seems like Mexico is catching up to Brazil, where credit balances are higher but growth is beginning to slow down.
The Rundown
🗣️ Hernan Kazah of Kaszek: SPACs are still on our radar, even though we had to dissolve ours. (Bloomberg)
🤖 Why deeptech in Latin America and the Caribbean is set to skyrocket. (TechCrunch)
🚘 Why Kavak, LatAm’s biggest unicorn, is entering an age of reckoning. (Rest of World)
🛍️ Mexico’s growing e-commerce infrastructure is built on top of its smallest shops. (Rest of World)
💸 Remittances in Mexico hit a record high, but a strong peso weakens the impact. (Reuters)
🌐 How PIX is poised to disrupt recurring payments with its new features launches in 2024. (The Brazilian Report)
🤑 Among Brazil’s big banks, Nubank pays its senior execs the most. (Brazil Journal)
Deals (July 4-10, 2023)
M&A
🇧🇷 TOTVS, a software conglomerate, acquired its own franchise in Rio Grande do Sul for $16mn.
🇲🇽 Gestopago, a B2B payments fintech, was acquired by 🇨🇴 Puntored, an embedded finance platform. Financial details were not disclosed. Puntored will use the acquisition to enter and expand in Mexico.
🇧🇷 Naxi, an internet provider, was acquired by 🇧🇷 Unifique, a telecommunications company. Financial details were not disclosed.
🇧🇷 Altimus, a second-hand automotive software platform, was acquired by 🇧🇷 OLX, an online rental and second-hand marketplace. Financial details were not disclosed.
Fundraises
🇧🇷 Turbi, a micro-mobility platform that allows hourly vehicle rentals, raised a $16.4mn round from Banco Daycoval, TMF Group, Solis Investimentos, Jive Investments, and Oliveira Trust.
🇨🇴 Somos Internet, an internet provider, raised a $13.4mn round from Nazca, K50 Ventures, Arrive Ventures (Jay-Z), Kaszek, Matias Muchnick (NotCo), Freddy Vega (Platzi), and Pierpaolo Barbieri (Ualá).
🇨🇱 Shinkansen, a B2B fintech platform, raised a $3mn seed led by ALLVP with participation from Salkantay Ventures and Chile Ventures.
🇧🇷 Payface, a facial recognition-powered payments platform, raised a $3mn Series A extension led by BTG Pactual with participation from Oikos, HiPartners, and Fintech Revolution.
🇧🇷 Tera, an edtech platform, raised a $2mn round from X8 Investimentos.
🇧🇷 Bipa, a platform for buying and selling bitcoin, raised a $1.6mn seed from New Form Capital, Hivemind Ventures, and other undisclosed investors.
🇧🇷 NG.Cash, a digital wallet and fintech platform for Gen Z, raised a $1.6mn round from undisclosed investors.
🇧🇷 Teachy, an AI-powered edtech platform for elementary school teachers, raised a $1.6mn seed led by NXTP with participation from Roble Ventures.
🇨🇴 Celes, a SaaS platform for retailers, raised a $1mn pre-seed led by Primeline Logistics with participation from Matterscale Ventures and Rockstart.
🇵🇪 Nutri Co, a plant-based grocery retail platform, raised a $1mn seed from Terraflos, MrPink VC, and White Lions VC.
Debt
🇧🇷 Frete.com, a road freight transportation platform, partnered with 🇧🇷 BTG Pactual, Brazil’s largest investment bank, to launch a $60mn credit receivables fund. The funds will be used to provide working capital loans to small freight providers.
🇧🇷 Torqi, a fintech lender for agribusiness trucking and logistics, raised a $12.4mn credit receivables fund (FIDC) from Galapagos Capital.
VC Funds
🇧🇷 Iporanga Ventures announced the launch of its third fund targeting a $100mn close. The fund plans to focus investments on embedded finance companies.
🇧🇷 Fundo Criatec, a VC fund created by Brazil’s development bank (BNDES), announced the launch of Criatec 4, an ESG-focused fund targeting a $72mn close.
🇨🇱 Minga Ventures, a new early-stage fund launched by startup founders, announced its inaugural fund targeting a $3-5mn close.
Simon Rodrigues is a consultant, writer, and speaker specialising in strategy and storytelling for early-stage startups.