#019: How will Petro’s tax plan impact Colombian startups?
Bradesco expands in Mexico, Rappi and iFood escalate the delivery wars, and a mini-mega-round from a female founder
Niltze technopolists,
Competition in banking and food delivery heated up this week, led by big Brazilians Bradesco and iFood. Plus, Petro’s Colombian tax plan has investors even jumpier, so we take a peek at tax burdens around the region for a deeper look.
What’s hot
🏦 Banking brouhaha. Bradesco, Brazil’s third largest banking institution, has announced it’s acquiring Mexican digital lender Ictineo. The acquisition is part of the Brazilian lender’s not-so-subtle master plan to fight Nubank, Klar, and Fondeadora to become the biggest digital bank in Mexico. Bradesco has already operated in Mexico for 12 years with its Bradescard, though the acquisition (amount: undisclosed) will provide it with essential extra licenses, allowing it to launch key retail products like bank accounts, payroll loans, and investment accounts. The announcement comes the same week that Bradesco’s CEO took a pot-shot at crypto, stating that the crypto market is “very small” — too small for Bradesco to explore in the near future. Is he right? (Reuters)
🚚 Dirty dancing delivery. iFood, Brazil’s largest food delivery platform, is facing renewed accusations of anti-competitive practices. A coalition of 40 industry stakeholders, led by Rappi Brazil, has delivered a petition to the Brazilian regulator (CADE), decrying iFood’s practice of signing exclusivity contracts with restaurants and suppliers, and asking CADE to intervene. An industry watchdog (which has also signed the petition) estimates that iFood has captured 80% of Brazil’s food delivery market share. Meanwhile, iFood is unperturbed; its CEO was in the media publicly touting aggressive plans for expansion and M&A, while their marketeers are hyping up the launch of Panini-like stickers for November’s World Cup. (Neofeed)
🔏 All the queen’s horses. Latú Seguros, the São Paulo-based software insurance startup, raised a titanic (for LatAm) $6.7mn pre-seed round that’s receiving attention for a few reasons. On the founder side: its 29-year-old Colombian founder Paola Neira has raised one of the largest pre-seed rounds ever — even more impressive as she’s one of the few women founders to do so in a region with a hefty gender-fundraise gap. On the investor side: Latú’s cap table is a who’s-who of LatAm venture heavyweights, with participation from multiple Rappi founders, a former Y Combinator investor, AirBnB’s alumni fund and co-led by Monashees. This is now the second time a promising young Colombian woman founder has raised a huge pre-seed round from venture royalty, with Neira joining Angela Acosta of beauty marketplace Morado. (Bloomberg Linea)
What’s not
💸 Capital flight. As Argentina’s hyperinflation continues spiralling out of control, Argentines are taking their cash elsewhere at alarming pace. Bank withdrawals have crossed $1bn in the last two months — 6% of total domestic bank deposits. Despite the “crypto winter”, inflationary pressure has driven an increasing number of Argentines to cryptocurrencies to escape the peso; polls estimate that 1 in 3 Argentinian adults have now bought or sold crypto. Annual inflation crested 78% last month, and analysts predict it could continue to climb to 90% or more by year-end — leaving no end to the spiral in sight. (Bloomberg Linea)
🇨🇴 Colombian tax plans. Colombian President Gustavo Petro’s newly unveiled tax plan — expected to pass into law — has the private sector shooketh. Colombia’s securities market self-regulator has warned that the new reforms could increase the “tax burden for entrepreneurship” by 60% or more, disincentivising new companies to incorporate. Today, roughly half of Colombian startups are incorporated abroad (typically in the Cayman Islands or Delaware), and VCs forecast that share will increase significantly in the coming years. Colombia’s VC ecosystem is still growing, with many startups looking to Brazil for investment and growth, and stakeholders on both sides of the negotiating table believe new reforms are unlikely to stimulate current growth trends. (Bloomberg Linea)
Stat of the week
Colombia saw a historic election last month with the nomination of its first leftist president in history, Gustavo Petro.
One of his major initiatives is an ambitious tax overhaul, which includes a landmark “Piketty-esque” wealth tax on Colombia’s richest 2% among other tax increases. If passed (which analysts think is likely), the changes could increase tax revenues by $11bn – 4% of Colombia’s GDP.
In light of Petro’s plans, we’re looking at the tax burden around the region, alongside some key non-LatAm reference points. Here’s how it stands today, before Petro’s bill:
So what? If Petro’s reforms pass, then Colombia would be tied with Uruguay for the highest tax burden in LatAm at ~18% of GDP. As mentioned, this has all kinds of investors speaking out about the negative impact on investment in Colombia. But that’s a short-term argument, and Petro is playing a long game: the increased revenues would fund anti-poverty and pro-education measures, which are critical enablers for innovation that are sorely needed in Colombia; in fact, it has the highest poverty rate and some of the lowest educational outcomes amongst LatAm’s leading economies. Plus, longitudinal research into entrepreneurial ecosystems shows that – contrary to popular belief – a society’s social norms and egalitarianism are the most important factors spurring entrepreneurship, not things like government tax breaks and VC investment levels. Still, only 4 countries in the OECD have implemented a wealth tax, and Petro’s would be the first of its kind in LatAm, so the reform is still very much an experiment with an unknown impact.
Smart links
The SoftBank-backed startup trying to take over grocery shopping in Brazil
For all the hype around Bitcoin, Salvadorans just want digital banking
Covalto becomes the first Mexican fintech to list on Nasdaq
Brazilian media giant Globo increases global collaboration with startups
LatAm’s 32 unicorns, visualised
Scam loan apps extorting Mexicans thrive in Google Play Store
Bitso launches a crypto debit card
More Latin American Startups Make Y Combinator’s Best Companies List
Ebanx’s ‘Latin America Summit’ Leaves Brazil, Arrives in Mexico
RYZ Labs launches to help startups leverage Latin American tech talent
Report: LAVCA Mid-Year 2022 Industry Data & Analysis
Report: LAVCA 2022 Startup Directory
Colombia’s leftwing government unveils tax-the-rich plan to tackle poverty
Fundraising
Announced from August 22-29, 2022
Early stage
🇧🇷 Moises, a Brazilian music platform, raised a $8.6mn seed co-led by Monashees and Kickstart with participation from Norwest Venture Partners, Valutia, Toba Capital, Alumni Ventures, and Goodwater Capital
🇦🇷 Fudo, an Argentinian restaurant management solution, raised a $7.5mn seed co-led by a16z, Atlantico, and MAYA Capital*
🇧🇷 Latú Seguros, a Brazilian software insurance provider, raised a $6.7mn pre-seed co-led by Monashees and CRV with participation from ONEVC, Latitud, including angels from Rappi, Y Combinator, AirBnB.
🇧🇷 CondoLivre, a Brazilian real estate fintech, raised a $5.4mn round from undisclosed investors
🇧🇷 Facio, a Brazilian payroll lender, raised a $2.4mn round from undisclosed investors; existing investors include Monashees, Y Combinator, and ONEVC
🇨🇴 doc-doc, a Colombian healthtech, raised a $1mn seed round from Cardo Health
🇨🇱 Loads, a Chilean digital agricultural marketplace, raised a $500k seed round from undisclosed investors
🇧🇷 Herself, a Brazilian femtech, raised an undisclosed amount in a seed round led by Sororité
Ad-hoc
🇧🇷 MovilePay, the fintech subsidiary of Brazilian internet company Movile, raised a $20mn debt facility to offer credit to iFood partner restaurants
🇲🇽 Auronix, a Mexican SaaS messaging platform, raised a $14.5mn debt facility from Alloy Capital
🇧🇷 Belvo, a Brazilian open banking platform, raised an undisclosed amount from Visa Ventures, Citi Ventures, and MAYA Capital
🇧🇷 Datlo, a Brazilian sales and marketing platform, raised an undisclosed amount from DAAL; existing investors include Y Combinator
*Originally announced on August 19th, but missed last week
Did I miss any deals? Let me know!