Why Mexican firms aren’t getting financing
#056: Plus, EBANX’s expansion and SoftBank’s rating downgrade.
Hola technopolists,
When was the last time we could announce 3 mega-rounds in the same week?
This week, we have big fundraises from startups in Brazil, Mexico, and Puerto Rico. Sure, they’re all juiced by some hefty debt facilities, but with late-stage rounds still depressed while SPACs are de-listing (more below), we’ll celebrate what we can.
What’s Hot
💰 Big debt financing is back, with 2 early-stage fintechs announcing large credit facilities this week. Kiwi, a Puerto Rico-based fintech helping Latinos in the US build credit histories, raised a $75mn credit facility from i80, while Kapital, a Mexico-based SaaS fintech platform for SMEs, bagged $45mn in debt financing from Accial. Both rounds were accompanied by decent equity raises ($4.5mn for Kiwi, $20mn for Kapital), that exemplify 3 contemporary trends: resilience in early-stage fundraising, strong use of debt financing, and buoyant outlooks in fintech. (Latam Fintech Hub)
🤝 Open finance is gathering consensus. The coalition of national fintech associations — made up of Chile, Colombia, Mexico, and Peru — will make a joint proposal that enables low-cost interoperability between digital banks and fintechs across borders. The move attempts to further unify the largest markets in Spanish-speaking LatAm (excluding Argentina) as a common market to rival Brazil in scale. A timeline has not yet been announced. (Tekios)
💸 Brazilian paytech EBANX plans to operate in 8 new African countries by the end of the year, bringing its African footprint to 11 countries. Last year, the company made an announcement rarely heard from a LatAm startup: plans to expand into nearly a dozen African geographies. Now, EBANX’s CEO teased that it has seen 70% global transaction volume growth in the last 6 months, largely thanks to launches in its first 3 African countries (South Africa, Nigeria, and Kenya). If achieved, the expansion would bring the payment processor’s global footprint to 26 countries — trailing LatAm rivals dLocal, who currently boast 39 countries. (TechCrunch)
What’s Not
↩️ Several Brazil-focused SPACs have returned funds to investors after failing to find an acquisition target in recent months. Three notable vehicles — belonging to SoftBank, Itiquira, and Valor Capital — each raised $200mn+ during the 2021 SPAC craze but did not find a suitable investment by the end of their respective two-year windows. Analysts point to higher interest rates, depressed valuations, and a lack of available targets for the SPAC dearth. Several LatAm-related SPACs face similar jeopardy in the next few months; most notably, MEKA, the fund sponsored by Mercado Libre and Kaszek. (Brazil Journal)
👇🏽 S&P downgraded SoftBank’s long-term rating further into junk territory, cutting the fund from BB+ to BB in its latest review. The agency noted that its share sales of listed companies not only crystallised losses, but also weighted the fund’s portfolio toward riskier, unlisted assets with greater sensitivity to external market fluctuations. The Japanese fund, which has faced nearly $40bn in portfolio losses in the past year, stated that there “is a marked lack of rationality” in S&P’s explanation, urging the agency to reconsider its rating after Arm, its chip-making portfolio company, goes public later this year. (Reuters)
Stat of the Week
Kapital’s mega-round has drawn attention back to the gargantuan, untapped SME segment: 99% of Latin American firms are SMEs (making up 60% of formal employment), but only generate one-quarter of economic output. Financing is a major pain point — but why? Clara tapped Mexican governmental data to understand the borrower side of the equation.
So what? There are 3 tiers of pain for Mexican firms (grouped by colour in the chart):
High interest rates: the most painful burden (and the hardest to change). This is a combination of higher bank rates and fatter lender spreads—products of risk exposure and contextual factors.
High-friction processes: very painful for borrowers, but largely within lenders’ control to adapt. The most bang-for-buck opportunity space for fintech.
Missing data & resources: the least burdensome of all groups, but more likely to hit the long tail of the smallest micro-entrepreneurs.
The Rundown
📊 Diversity data: 2% of US investment professionals are Hispanic women while 3% are Black women →
🏦 Ualá’s acquisition of Mexican bank receives final regulatory approval →
👮🏽 The US has begun sending IRS agents to Latin America to investigate crypto-related crimes →
👨🏽💻 500 LatAm announced the 12 LatAm startups in its new Somos Lucha cohort →
🏦 PagBank beat analyst expectations in Q1, but its stock price still fell →
🧳 Feature: When digital nomads come to town in LatAm →
📺 Netflix announced higher fees for account sharing in Brazil →
🎙️ Spotify is partnering with Mexico’s UNAM to launch a podcasting course →
⛓️ Mexico-based crypto exchange Bitso now has over 7 million users →
💉 Latin American crypto users sent $3.6mn to China-based fentanyl suppliers according to Chainalysis estimates →
🚔 Braiscompany‘s former security head spoke out about the CEO’s dodgy behaviour up to the alleged $400mn pyramid scheme fraud →
🌐 US reluctance on trade deals is sending Latin America towards China →
Deals (May 23-30, 2023)
M&A
🇧🇷 Move3, a holding company for logistics businesses, acquired 🇵🇹 Levoo, a last-mile delivery company, for an undisclosed amount.
🇭🇰 Bitfinex, a crypto exchange, acquired 🇨🇱 OrionX, another crypto exchange, for an undisclosed amount. The move is part of Bitfinex’s push deeper into LatAm.
Fundraises
🇵🇷 Kiwi, a platform helping consumers build a credit history, raised $80mn in new funding: a $75mn credit facility from i80; and a $4.5mn pre-Series A led by Advent-Morro Equity Partners, Altio Capital, and Independent Capital.
🇲🇽 Kapital, a fintech SaaS platform for SMEs, raised $65mn in new funding: $20mn in a Series A co-led by Tribe Capital and Niya Partners with participation from Broom Ventures, Pioneer Fund, Arash Ferdowsi (Dropbox), and others; and a $45mn debt facility from Accial.
🇧🇷 Digibee, a software services integration platform, raised a $60mn Series B led by Goldman Sachs Asset Management with participation from Leadwind (K Fund) and Vivo Ventures.
🇧🇷 Onfly, a travel and expense management platform, raised a $16.5mn Series A led by Cloud9 Capital.
🇲🇽 Huli, a healthtech with operations in Mexico, raised a $5.5mn pre-Series A from Intoku Health and Carao Ventures.
🇺🇸 Onyx Private, a members-only consumer neobank, raised $4.1mn from Village Global, Y Combinator, GFC, One Way Ventures, 186 Ventures, and Olive Tree Capital.
🇨🇴 Trébol, an identity and underwriting verification platform, raised a $3mn seed co-led by Better Tomorrow Ventures and Canaan Partners with participation from SOMA Capital, Y Combinator, Unpopular ventures, and angels.
🇦🇷 Num Finance, an issuer of stablecoins around Latin America, raised a $1.5mn seed led by Reserve with participation from H20 Scouter Fund, Ripio Ventures, and angels.
🇧🇷 Sensix, an agricultural monitoring platform, raised $1mn from DOMO Invest, SLC Agricola, and 454 other investors via crowdfunding platform Captable.
VC Funds
🇺🇸 QED raised $925mn across two new funds: a $650mn early-stage fund and a $275mn growth-stage fund.
🇺🇾 Lab+ Ventures announced a new $10mn life sciences-focused fund, with backing from Institut Pasteur de Montevideo and Ficus Advisory.
🇸🇻 Innogen Capital announced a new $10mn fund, ICV Delta Fund I, to invest in startups in El Salvador, Guatemala, and Honduras.
Simon Rodrigues is a consultant, writer, and speaker specialising in strategy and storytelling for early-stage startups.