Who’s afraid of Revolut?
#053: New VC data for April, and reflecting on Revolut’s entry into Brazil.
Does size matter? In tech, of course it does — and the news this week backs that up.
We obsessed over comparisons of magnitude to determine how to evaluate the ecosystem.
Whether it’s regional VC investment data, Mercado Libre’s Q1 earnings, Revolut’s Brazilian launch, Nubank’s Mexican credit cards, or Oxxo Spin — everything is getting allocated into the category of ‘grower’ or ‘show-er’.
💰 Latin American VC investment bounced back modestly in April, jumping 78% over the prior month to $436mn. While April’s figures still represent a -48% decline over the prior year, Clara’s $60mn Series B extension and two $100mn debt facilities (Fairplay and Habi) demonstrated appetite for high-value deals, especially from foreign-based ‘dollar’ investors. Spanish-speaking geographies (notably Mexico and Colombia) stepped to the fore, comprising 75% of deal value as Brazilian activity slid -72% YoY. Deal counts remained largely stable over March. (Bloomberg)
🤑 Mercado Libre’s strong Q1 results beat analyst expectations, turning out another mammoth quarter for the giant. Revenue increased 58% on an FX-neutral basis to $3bn, while its profit margin nearly doubled compared to the prior year. Pago continues to be a growth machine, with a two-pronged tailwind of fintech transaction volume (up 96% YoY) and credit card growth. Geographically, Mexico showed the highest growth (62%), while Brazil contributed the greatest to group revenue (52%). The results come as additional wind in the sails of its $3bn+ investment programme and 13,000-person hiring spree. (Bloomberg)
💸 Revolut formally launched in Brazil, using Web Summit Rio to announce its much-anticipated entry into Latin America. The UK-based neobank — whose Brazilian launch was delayed more than 6 months — began onboarding users from its waitlist with a stripped down version of its product suite: Customers are able to buy 27 different fiat currencies, trade 90 cryptocurrencies, make transfers to Revolut customers, and make payments via debit card, PIX, Google Pay, and Apple Pay with their accounts. The company has applied for a direct credit society (CSD) license to begin lending. (Startups Brasil)
🏦 Nubank Mexico is off to a challenging start with its credit cards, with recent analysis from Bradesco BBI showing that a slew of its metrics lag industry-wide benchmarks. The biggest concern is its delinquency rate, which in the past 3 months shows worse credit quality than both SOFIPO and banking benchmarks (note: Nu Mexico is a SOFIPO, a type of licensed non-bank entity). Growth is a challenge, too: total Nu Mexico loans decreased -1.6% in February; by comparison, SOFIPOs contracted slightly and bank consumer credit grew 1.1% in the same period. (Bloomberg)
💳 User growth at Oxxo Spin appears to be slowing down, according to the latest earnings filing from parent company FEMSA. The fintech famously grew at breakneck pace in 2022 with 3 consecutive quarters of +35% average quarterly growth, but in Q1 2023 active user growth slowed to 8% as it only added 330k new active users. To its credit, Spin’s total number of users crested 6.4mn in Q1 — nearly doubling that of Nubank Mexico — despite the apparent slowdown. (Latinometrics)
Stat of the Week
Revolut’s entry into Brazil is a high-profile (and rare) clash of European and Latin American fintech.
Many readers of this newsletter will be very informed about Latin America’s large-scale fintech successes – but outside of our community, it’s safe to say that the region’s rep is often overshadowed by negative stereotypes (see: low financial inclusion, high fraud). LatAm is often seen as a younger, scruffier step-cousin playing catch-up to the big boys.
Yet while Latin America is rarely regarded as a global leader in fintech, there’s one glaring way in which it (specifically, Brazil) is undeniably head and shoulders above the competition. No, I’m not just talking about PIX again.
Size matters. Combined, the top two Brazilian neobanks (Nubank and Neon) have 96mn customers — nearly as many as all other neobanks in the top 10 combined (101mn). In one sense, heavier competition makes Revolut’s entry a daunting challenge.
Revolut, however, is hoping to ride the N&N gang’s coattails. They’re banking on greater digital penetration and tech savvy amongst consumers — largely thanks to Nubank & Neon’s trailblazing growth — to make customer onboarding even simpler.
🏦 A study from Deloitte and Brazil’s Federation of Banks estimates that banks will invest $9bn in tech this year — a 30% increase over last year — despite the market cooldown →
💸 PIX has done so well that Brazilian banks are starting to turn off normal bank transfers →
🌐 The first Web Summit in Rio took place last week, blowing the doors off attendance expectations by 4x and making a convincing case to return to Brazil →
🏧 The incredible story of PIX Payments (via Marcel van Oost) →
🏠 Behind the serial founder who sold his first venture to MadeiraMadeira and now runs a US-based proptech with +$100mn in transaction volume →
🔗 Argentina’s central bank cracks down on crypto with a new regulatory measure targeting payment service providers →
👕 Shein isn’t only making enemies in Brazil; American policymakers are turning against the fast fashion juggernaut →
🛍️ Ecommerce unicorn Merama filed a $13mn fraud lawsuit against one of its Chilean portfolio companies for cooking the books →
Deals (May 2-8, 2023)
🇫🇷 Edenred, a global payments provider, acquired 🇦🇷 GOIntegro, a SaaS employee engagement platform, for an undisclosed sum. Edenred purchased the equity from Kaszek and Riverwood Capital.
🇨🇱 Galgo (fmr. Migrante), a motorcycle financing fintech, acquired 🇨🇴 Crediorbe, a similar platform, for an undisclosed amount.
🇺🇸 Liquido, a payments provider for LatAm businesses, emerged from stealth and raised a $26mn round from Index Ventures.
🇵🇪 Leasy, a vehicle financier for gig workers, raised a $25mn round led by Lendable.
🇺🇸🇧🇷 DataMilk, an ecommerce optimisation platform, raised an $8mn Series A led by RTP Global with participation from Angel Invest, Big Bets , TLF Ventures, and others.
🇺🇸 BeeReaders, a Spanish literacy platform, raised a $3.5mn seed co-led by Reinventure Capital and Acumen Latam Impact Ventures with participation from EWA Capital, University Venture Fund, and Wisconsin Investment Partners.
🇧🇷 Noodle, a fintech designed for artists and creators, raised a $3.4mn round from SRM Ventures, Honey Island Capital, and other undisclosed investors.
🇧🇷 CargOn, a logistics management platform, raised a $2.8mn round from Viasoft and crowdfunding.
🇨🇴 Seeri, an SME operations platform, raised a $2.7mn pre-Series A led by H20 Capital Innovation with participation from Redwood Ventures.
🇨🇴 Pluria, a flexible office and co-working company, raised a $2mn round led by Eleven Ventures with participation from Phoenix Venture Fund, Croton Capital, and WIT Angels Club.
🇲🇽 Senzai, an AI commercial optimisation startup, raised a $2mn pre-seed led by ALLVP.
🇧🇷 Bump, a decentralised peer-to-peer internet platform, raised a $2mn pre-seed led by Pillar VC with participation from The Melon.
🇧🇷 Mimo Live Sales, a live shopping startup, raised an undisclosed amount from LW Ventures (Locaweb) and Cencosud Ventures.
🇲🇽 R2, a fintech for B2B lending infrastructure, closed a $100mn loan from Community Investment Management.
🇧🇷 Trampay, a fintech lender for informal and gig workers, closed a Credit Rights Investment Fund (FIDC) worth up to $1mn from Cedro Capital.
Simon Rodrigues is a consultant, writer, and speaker specialising in strategy and storytelling for early-stage startups. Find more information about his services here.