#020: How is rising inequality impacting LatAm entrepreneurship?
Brazilian banking, fantasy sports, and fempowered tech talent
Olá technopolists,
Brazilian fintech is super-hot this week, alongside a blockbuster deal and some promising news about gender representation. Meanwhile, Softbank’s misery continues with staff cuts and portfolio woes, while the music is stopping abruptly in Chile.
Elsewhere, we take a look at how inequality has evolved in LatAm, and what it means for entrepreneurship.
What’s hot
🤑 Brazuca banking. This week, Brazil earned stripes as a fintech leader. The ongoing success of Pix, Brazil’s central-bank-led digital payments app, which has attracted so many accolades that the US Fed is now considering the launch of ‘FedNow’, a Pix copycat. Then, Pagaleve, the Pix-based buy now pay later (BNPL) provider, raised a solid $25mn Series A led by Salesforce Ventures. The investment is one of the largest Series As in recent memory, and it also marks the American software giant’s first investment in LatAm — a rarity while most funds are in retreat (see SoftBank below). Meanwhile, Brazil’s central bank moved forward with developing its digital currency infrastructure, picking Itaú, the country’s largest bank, to build it. If the programme progresses on time, the digital real will be one of the world’s first central bank digital currencies. (Bloomberg Linea)
🏈 Crafty Draftea. Draftea, LatAm’s newest hype-worthy fantasy sports platform, has announced a fresh partnership with the NFL to bring daily fantasy football to Spanish-speaking LatAm. The partnership coincides with a $20mn Series A fundraise, which has an A-list cast of investors from the pitch to the boardroom: the round was led by Stepstone Group and had participation from Sequoia, Kaszek, Bullpen and Courtside Ventures in addition to Cristiano Ronaldo, Kevin Durant, mega-agent Jorge Mendes, and NFL player Travis Kelce. Daily fantasy sports (a close cousin of sports betting with much better PR) is a segment that has catapulted companies like DraftKings into a recession-proof stratosphere, and Draftea will be hoping to emulate much of their success. (TechCrunch)
👩🏽💻 Deepening the pool. LatAm is the world’s leading region for female applicants for tech roles, according to new data from a SF-based recruitment agency BairesDev. Argentina and Uruguay lead the way not just within LatAm, but around the whole world; women in these countries comprise ~45% of applicants, compared with ~33% in the US and UK. The future looks bright, too; the 5-year trend shows a 400% increase in women’s representation among applicants, and it’s even higher among younger age brackets. The data offers some hope, though all countries are still below gender parity, and remember only 1 in 5 actual workers in tech are currently women. Still, rising representation correlates with lower economic inequality (see more below). (Bloomberg Linea)
What’s not
🏦 Masa’s misery. SoftBank’s saga of decline continued last week, both in central office and at one of its major LatAm portcos. The Vision Fund, which has been a critical catalyst behind LatAm’s investment glow-up, announced cuts to at least 20% of its 500 employees. 2TM, the Brazilian holding company that has SoftBank as an anchor investor, has in turn announced 15% layoffs; having already laid off 12% of its staff in the spring. It comes after the Japanese juggernaut announced record $23bn losses , and in the past year the LatAm Vision Fund has seen the turnover of its entire executive team and the spinout of Upload Ventures into a standalone growth fund. (Bloomberg Linea)
📉 Chilly Chile. After a breakout 2021, Chile’s economy is making an Icarian descent from red-hot to flash-freeze that has investors in retreat. Annualised inflation hit 13% in the country – the highest outside of perenially crisis-stricken Venezuela and Argentina – while the peso has slid -18% against the dollar since the beginning of the year. Investors are pulling their cash out in droves, inducing the IMF to approve an $18.5bn credit line to help Chile weather the economic storm. Despite runaway inflation, interest rates are at a 24-year high and are expected to continue rising – another rough sign for investment. The turbulence has created new headwinds for Chilean entrepreneurs, while investors have been exercising additional caution as they await voting on Chile’s controversial new constitution. (Bloomberg Linea)
Stat of the week
Political tumult reached a crescendo last week, and economic inequality has been a common political flashpoint in each case. But what impact does inequality have on entrepreneurship?
It’s too early to measure the impact of last year’s VC funding explosion since it will take years before the capital cycles through the economy. But we can take a look at whether inequality has correlated with more entrepreneurial countries.
Here’s a look at LatAm using the Gini index (the higher the Gini index, the worse the inequality)
So what? The relationship between economic inequality and entrepreneurship in emerging economies is fickle: meta-analysis research shows that some inequality is beneficial to spur innovation by incentivising class mobility, but veers into harmful territory when it constrains human capital development in areas like education, public services, and access to capital.
In LatAm, high inequality has correlated with high levels of VC investment; Mexico, Brazil, and Colombia boast strong startup scenes and high inequality. Market structures matter, too: Brazil, Mexico, and Colombia all represent large economies with highly concentrated competition. When there’s more at stake to be #1, the race to win intensifies – fat profits and concentrated wealth attract attention and competition.
Smart links
LatAm early stage investments maintain upward trend
MercadoLibre gets $193mn through sale of Brazilian real estate bonds
QuintoAndar will start allowing owners to negotiate directly with tenants
Brazilian YouTubers raked in over $1bn in 2021
LatAm investor interest prompts local banks to offer American asset exposure
Brazilian software firm Totvs acquires HRtech Feedz for $13mn
Brazilian big data firm Semantix acquires Zetta Health Analytics
Uruguay woos Netflix, Amazon and HBO with incentives
Nubank launches gamified rewards with Nunos
Guatemalans are simultaneously ahead of and behind other Latin Americans
Venezuela’s gamers see esports as a way to escape the country’s crisis
Report (CB Insights): Global tech valuations are down 14-16%
What are LatAm CEO’s biggest concerns (aside from inflation)?
Latinometrics: Banks, Brazil's GDP, and Spin by Oxxo
Argentina’s vice-president survives assassination attempt
A superchef’s guide to the secrets of Mexico City
Opinion (FT): Chile’s draft constitution is seriously flawed
Fundraising
Announced from August 29 to September 6, 2022
Series B
🇧🇷 Caju, a Brazilian benefits platform, raised a $25mn Series B led by K1 Investments with participation from Valor Capital, Caravela Capital, Clocktower Ventures, ONEVC, and FJ Labs
Series A
🇧🇷 Pagaleve, a Brazilian BNPL platform, raised a $25mn Series A through a combination of equity and debt led by Salesforce Ventures with participation from Entree Capital, Founder Collective, OIF Ventures, Endeavor Scale-Up, and Janeiro Energy
🇲🇽 Draftea, a Mexican fantasy sports platform, raised a $20mn Series A led by Stepstone Group with participation from Sequoia, Kaszek, Bullpen, Courtside Ventures, Cristiano Ronaldo, Kevin Durant, Jorge Mendes, and angels
🇲🇽 R2, a Mexican fintech lender, raised a $15mn Series A led by Google’s Gradient Ventures with participation from General Catalyst, 166 2nd (Adam and Rebekah Neumann’s family office), and Magma Partners
🇲🇽 Plerk, a Mexican benefits/travel platform, raised a $12mn Series A led by Upload Ventures with participation from 500 Global, MGV Capital, Magma Partners, and angels
Seed & pre-seed
🇨🇱 SOLARBIO, a Chilean cleantech, raised a $17mn seed round from undisclosed investors
🇲🇽 MEDU, a Mexican medical supplies provider, raised a $4mn seed round from Halcyon Incubators and angels
🇦🇷 Qanlex, an Argentinian legaltech, raised a $3mn seed round led by Carao Ventures with participation from The LegalTech fund, Preface Ventures, FJ Labs and J Ventures
🇧🇷 Magis5, a Brazilian marketplace integration platform, raised a $2mn seed round led by Parceiro Ventures with participation from Bossa Nova Investimentos, Urca Angels, Hangar8 Capital, and angels
🇦🇷 Menta, an Argentinian payments platform, raised a $1.7mn pre-seed round from undisclosed investors
🇨🇱 Keirón, a Chilean healthtech, raised a $1.5mn seed round from LarrainVial Asset Management, Hero Capital, and angels
🇧🇷 Bankme, a Brazilian fintech, raised a $1.1mn seed round led by DOMO Invest with participation from Bamboo Capital Markets, Apex Partners, and angels
Ad hoc
🇨🇴 Plurall, a Colombian microfinance fintech, raised a $20mn debt facility from Fasanara Capital
🇨🇴 Efinti, a Colombian fintech, raised $1mn of investment led by Inversiones Andamas with participation from Acelera Latam and angels
Did I miss any deals? Let me know!