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Investors in LatAm get bitten by the hotel investment bug as Ayenda raises $8.7 million

Published February 21, 2020

Some of Latin America’s leading venture capital investors are now backing hotel chains.

In fact, Ayenda, the largest hotel chain in Colombia, has raised $8.7 million in a new round of funding, according to the company.

Led by Kaszek Ventures, the round will support the continued expansion of Ayenda’s chain of hotels in Colombia and beyond. The hotel operator already has 150 hotels operating under its flag in Colombia and has recently expanded to Peru, according to a statement.

Financing came from Kaszek Ventures and strategic investors like Irelandia Aviation, Kairos, Altabix and BWG Ventures.

The company, which was founded in 2018, now has more than 4,500 rooms under its brand in Colombia and has become the biggest hotel chain in the country.

Investments in brick and mortar chains by venture firms are far more common in emerging markets than they are in North America. The investment in Ayenda mirrors big bets that SoftBank Group has made in the Indian hotel chain Oyo and an investment made by Tencent, Sequoia China, Baidu Capital and Goldman Sachs, in LvYue Group late last year, amounting to “several hundred million dollars”, according to a company statement.

“We’re seeking to invest in companies that are redefining the big industries and we found Ayenda, a team that is changing the hotel’s industry in an unprecedented way for the region”, said Nicolas Berman, Kaszek Ventures partner.

Ayenda works with independent hotels through a franchise system to help them increase their occupancy and services. The hotels have to apply to be part of the chain and go through an up to 30-day inspection process before they’re approved to open for business.

“With a broad supply of hotels with the best cost-benefit relationship, guests can travel more frequently, accelerating the economy,” says Declan Ryan, managing partner at Irelandia Aviation.

The company hopes to have more than 1 million guests in 2020 in their hotels. Rooms list at $20 per-night, including amenities and an around the clock customer support team.

Oyo’s story may be a cautionary tale for companies looking at expanding via venture investment for hotel chains. The once high-flying company has been the subject of some scathing criticism. As we wrote:

The New York Times published an in-depth report on Oyo, a tech-enabled budget hotel chain and rising star in the Indian tech community. The NYT wrote that Oyo offers unlicensed rooms and has bribed police officials to deter trouble, among other toxic practices.

Whether Oyo, backed by billions from the SoftBank Vision Fund, will become India’s WeWork is the real cause for concern. India’s startup ecosystem is likely to face a number of barriers as it grows to compete with the likes of Silicon Valley.

Peru’s startup scene is ready for more

Published February 12, 2020

Greg Mitchell
Contributor

Greg Mitchell is regional director of Angel Ventures, a startup investor and advisor and is the creator of the blog Ruta Startup.

Funding of Latin American startups has doubled each year over the past two years.

And while most of this capital has been directed toward Brazil and Mexico, this surge is starting to have an effect on startups in the region’s smaller markets. The increased availability of capital for later rounds is creating more opportunities for startups to scale both regionally and globally. And while it may not be one of the largest countries in Latin America, Peru continues to have one of the best-performing economies and fastest-growing startup scenes.

In 2019, a new record was set for the amount of capital invested into Peruvian startups, at least $11 million, a 24% increase compared to 2018. Most of the money went to fintech (47%) and edtech (37%) startups. Over the past four years, more than $22.7 million in public funds went toward startup-related projects as well.

The government-backed program Innóvate Perú awarded approximately $13.8 million of its total investments almost exclusively to startups. Total venture capital investment will likely exceed US$25 million in 2020, doubling what was achieved in 2019, and will continue to grow from there.

In 2019, Peru’s development bank, COFIDE, announced a new fund of funds to invest in venture capital firms, mirroring similar entities such as Chile’s CORFO, Colombia’s Bancoldex and Mexico’s NAFIN. While there are plenty of opportunities to secure seed-stage capital in Peru, many startups still have to look abroad for growth capital. Keynua, Xertica, Turismoi and Runa are just a few of the Peruvian startups that sought international investors to lead their rounds over $1 million. Following in the path of similar funds, the fund of funds will invest $20 million in half a dozen venture capital firms, which would in turn invest in approximately 120 startups.

As government support for entrepreneurs continues to pour in, the Peruvian startup ecosystem is entering a new phase. More and more startups are launching, graduating from accelerator programs and seeking ways to reach their next milestone. Local early-stage investors are stepping in to fill the financing gap and have teamed up to form the Peruvian Seed and Venture Capital Association, PECAP, to share investment opportunities and lay a strong foundation for venture capital in Peru. Here’s a look at just a few of the opportunities for more venture capital to step in.

Fueling Peru’s growing fintech sector

A massive fintech boom is playing out across Latin America, with the size of the industry expected to exceed $150 billion by 2021. Peru is home to an estimated 120 fintech startups actively tackling the issues of financial inclusion and better servicing the region’s small and medium-sized businesses. Peru’s economy is still largely informal, with approximately 14 million people underbanked. In 2017, María Laura Cuya started Peru’s Fintech Association to work alongside regulators, academics and other organizations to improve financial literacy and access to financial products, with a focus on Peruvian SMEs.

A few of Peru’s fintech sectors stand out, including factoring and foreign exchange, where a number of startups are quickly gaining traction and already branching out to neighboring markets. Innova Funding, Innova Factoring, Facturedo, Kambista and Rextie are just a few examples. Peru’s membership in the Pacific Alliance also makes it an attractive initial market prior to launching in other Pacific Alliance countries.

In 2019, Peruvian fintechs Keynua and Apurata were selected for the Y Combinator accelerator program, putting them on the international radar. Traditional banks in Peru are also shifting their mindsets and warming up to fintech partnerships. The publicly traded Peruvian bank, Credicorp, for example, recently set up a corporate venture fund called Krealo. The bank made its first investments in Culqi, a local payments gateway, and Independencia, a lending platform.

Impact investing opportunities

Latin America is a top destination for impact investment capital, outpacing many other regions in the world, with a 15% compound annual growth rate over the last five years, according to the Global Impact Investing Network. Edtech represents a rising entry point across the region for impact investors thanks to its potential for both financial and non-financial returns.

According to an OECD report, approximately 30 million young people in Latin America are not participating in any form of education, training or employment, and 76% of this total are women. Laboratoria, co-founded by edtech thought leader Mariana Costa Checa, helps women develop technical skills and has expanded across the region from its headquarters in Lima to train more than 1,000 women so far. The startup has received praise from global companies, including Walmart and Facebook. In 2019, the skills development platform Crehana raised the largest-ever round for a Peruvian startup ($4.5 million) from both regional and global funds.

Peru attracted more impact investment capital than Mexico, a longtime leader in the region, for the first time in 2018. Much of this investment is focused on improving Peru’s education system. Local startups are addressing everything from early childhood education to workforce training, and as more success stories emerge, more resources will be needed to fully tap into Latin America’s large markets for these solutions.

Supporting long-term startup growth

The government-backed program Innóvate Perú has financed more than 3,400 entrepreneurial projects to date, and more than 25 private institutions are now accelerating, incubating and investing in Peruvian startups. New startup creation is at its highest rate ever; however, these companies are outgrowing their angel and seed-stage supporters and are now seeking ways to take their ventures to the next level.

Over the past few years, Latin America has proven that it is a place where startups can scale and succeed. Now, with more startups coming out of the region’s smaller, underserved markets, like Peru, there is an opportunity to deploy capital effectively and bring impactful solutions to millions of people across the region.

*Angel Ventures was an investor in Culqi before it was sold to BCP. Neither Angel Ventures nor Greg Mitchell currently hold any shares.

Latin America Roundup: XP’s chart-topping IPO, Wildlife becomes a unicorn, SoftBank backs Konfio

Published December 26, 2019

Sophia Wood
Contributor

Sophia Wood is a principal at Magma Partners, a Latin America-focused seed-stage VC firm with offices in Latin America, Asia and the U.S. Sophia is also the co-founder of LatAm List, an English-language Latin American tech news source.

Gaming startup Wildlife becomes a unicorn

Brazil has seen a new unicorn emerge almost every month this year, and December was no exception. Gaming startup Wildlife raised a $60 million Series A round led by U.S.-investor Benchmark Capital at a $1.3 billion valuation to become the country’s eleventh unicorn. This round was big even for Silicon Valley standards, and it is uncommon for startups even in markets like the U.S. or Europe to hit a $1 billion-plus valuation in such an early round.

Wildlife has created more than 60 games since 2011, including Zooba and Tennis Clash, which have both reached global acclaim. Founded by brothers Victor and Arthur Lazarte, Wildlife operates on a freemium model that only charges users for in-app purchases. They plan to use the funding to double their employee base and grow to $2 billion in 2020, continuing the 80% yearly growth they have seen since 2011.

Mexico’s lender Konfio receives $100 million from SoftBank

Konfio provides small business loans in Mexico through an online platform to help SMEs gain liquidity and grow their operations. These small businesses are often overlooked by banks in Mexico and Latin America, which do not know how to price risk for businesses that process less than $10 million per year.

Konfio recently raised $100 million from SoftBank’s Innovation Fund, the third investment that SoftBank has made into Mexico since launching the fund. The capital will go toward financing working capital loans, as well as creating new products for Konfio’s customers. Today, Konfio’s loans average around $12,000, while banks still struggle to loan less than $40,000. The tech-driven platform allows Konfio to disburse loans within 24 hours without requiring collateral.

Small business lending is a tremendous opportunity in Latin America, where banks are among the most profitable and the least competitive in the world. Brazil’s Creditas and Colombia’s OmniBnk are among the other startups providing innovative products that calculate risk more effectively than banks in Latin America’s complex lending environment.

The Albo team has raised $26.4 million to scale its leading neobank.

Albo, Mexico’s leading neobank, raises $19 million

In an extension of a Series A round, Mexico’s albo raised a further $19 million from Valar Ventures to bring their newest round to $26.4 million in total. Albo previously raised $7.4 million from Mountain Nazca, Omidyar Network and Greyhound Capital in January 2019. Albo’s mission is to provide banking services to unbanked and underbanked clients in Mexico. More than half of albo’s customers claim that albo was their first-ever bank account.

Founded by Angel Sahagun in 2016, albo quickly became Mexico’s largest neobank, serving more than 200,000 customers and sending out thousands of new cards every day. The investment from Valar Ventures, founded by Peter Thiel (also an investor in N26 and TransferWise), is a vote of confidence for this Mexican fintech. Albo has also previously received investment from Arkfund, Magma Partners and Mexican angels.

Albo plans to use the capital to develop new products, including savings and credit services, in the coming year. Mexico will likely be a battleground for Latin American neobanks in 2020, as Klar, Nubank and potentially Argentina’s Uala will begin to grow in the region’s second-largest market. While there is room for several competitive neobanks to thrive in Mexico, this industry will be one to watch in 2020.

News and Notes: Mercado Credito, Mimic, Rebel and Rappi

Goldman Sachs loaned $125 million to MercadoLibre to continue developing their credit product, MercadoCredito. MercadoLibre will use the capital to triple its $100 million debt facility for small business loans in Mexico. To date, MercadoCredito has loaned more than $610 million to 270,000 businesses around the region in Mexico, Brazil and Argentina.

Brazilian cloud-kitchen startup Mimic raised $9 million in a seed round led by Monashees to develop a more efficient food delivery model in Brazil. Mimic will exclusively manage the logistics of “dark kitchens,” which exist only for delivery and have no sit-down facilities, saving time and money for clients. Mimic will use the investment to grow its team.

An early-stage online lending startup in Brazil, Rebel, recently raised $10 million from Monashees and Fintech Collective to provide unsecured loans to middle-class Brazilians at affordable rates. Rebel has lowered rates to around 2.9% per month, compared to 40-400% at Brazil’s largest banks. The startup uses a proprietary algorithm to calculate risk for clients and provide loans rapidly through its online platform.

Colombia’s Rappi recently announced an expansion into Ecuador, where it has rapidly reached 100,000 users between Quito and Guayaquil, the country’s two largest cities. Rappi is now active in nine countries and more than 50 cities in Latin America.

2019: A Year in Review

Given the arrival of the SoftBank Innovation Fund, Latin American startup investment in 2019 will likely more than double the $2 billion invested in 2018. Here are a few of the highlights we saw this year:

Record-breaking rounds and Brazilian unicorns: In 2019, Rappi raised $1 billion from SoftBank, beating iFood’s previous record-breaking $500 million from Naspers in 2018. Brazil got at least six new unicorns — Nubank, QuintoAndar, Gympass, Wildlife, Loggi and EBANX — most of whom raised funding from international investors.
Asian investment in Latin American fintechs: Nubank received $400 million-plus in 2019 from investors that included TCV, Tencent, Sequoia, Dragoneer and Ribbit Capital. Argentina’s Uala received $150 million from SoftBank and Tencent in November 2019. SoftBank has been investing in Brazilian and Mexican fintechs including Creditas, Konfio and Clip, throughout the year.
U.S. investors take an interest in LatAm: Many U.S. investors made their first Latin American investments in 2019, including Valar Ventures (albo), Bezos Expeditions (NotCo), SixThirty Cyber (Kriptos) and Homebrew (Habi). This year has also seen large funds like a16z, Sequoia, Accel and others making earlier-stage investments in Latin America, rather than Series B and beyond. This change demonstrates that U.S. funds are becoming more familiar and involved with the Latin American ecosystem, helping early-stage companies grow rather than focusing on international scale-ups as they have in the past.
The Cornershop acquisition: Chilean-Mexican delivery startup, Cornershop, was acquired by Walmart in late 2018 for $225 million, but the deal was blocked by the Mexican government. Four months after the block, Cornershop announced that Uber would take a 51% share of the company for $450 million, representing a 4x growth in valuation since the previous acquisition deal. The Mexican and Chilean governments still have to approve the Uber deal, so all eyes will be on Cornershop through the start of 2020.
The start of the battle for Latin America’s super-app: In China, two companies dominate the mobile market, handling payments, communications, ridesharing, delivery and more within a single app. Events in 2019, such as Rappi’s $1 billion round and the merger between Mexico’s Grin and Brazil’s Yellow, suggest that Latin America may be heading in the same direction toward a few apps that integrate dozens of features. Colombia’s Rappi and Brazil’s Movile are strong competitors for the role, but the rise of a regional super-app still remains far in the future for Latin America.

Latin America’s startup and investment ecosystem has likely more than doubled this year as compared to 2019. As international investors like SoftBank, Andreessen Horowitz, Sequoia, Accel, Tencent and others are taking more bets on the region, more startups than ever have scaled and reached unicorn status. These startups will continue to scale in 2020, taking on a regional presence to provide services to Latin America’s 650 million population.

ProducePay nabs $190 million debt financing to lend to farmers

Published December 10, 2019

Los Angeles-based ProducePay has inked a $190 million debt facility from CoVenture and TCM Capital to expand its lending business and marketplace for farmers.

ProducePay offers farmers cash advances throughout the growing season to smooth the sometimes lumpy revenues and give farmers a bit more predictability, the company said. It buys produce ahead of delivery and sets itself up as a middle-man between distributors, growers and grocers.

Since its launch in 2015, the company has seen $1.5 billion worth of produce flow across its marketplace; $750 million of those transactions were in the last year.

ProducePay raises $77 million in debt and equity to revolutionize farm financing

ProducePay’s pitch to farmers is the company’s centralized marketplace, which the company says offers growers higher pricing and certain payment from distributors, along with better pricing for supplies and services like seed, equipment and logistics services.

The marketplace service, which only launched in October, has already seen $100 million in purchases.

“In just four years, ProducePay has had a transformative effect on the financial health and success of scores of farmers and value-additive distributors in Latin America and the U.S.,” said ProducePay founder and CEO Pablo Borquez Schwarzbeck, in a statement. “This new debt facility will accelerate ProducePay’s impact, empowering more farmers and distributors to run their businesses more profitably, making high quality and affordable fresh produce available throughout the U.S.”

A look at Latin America’s emerging fintech trends

Published December 5, 2019

Thiago Paiva
Contributor

Thiago is a fintech entrepreneur, investor, and columnist. He is currently a product leader at Oyster, a neobank for SMEs in Latin America.

Financial services for the gig economy

Latin America has seen explosive growth in ride-hailing and food delivery platforms such as Uber, Didi, Rappi and iFood, creating a totally new market opportunity — many gig economy workers can’t access basic financial services such as bank accounts, personal loans and insurance. Even those who have access often struggle with financial products that that don’t suit their needs because they were designed for full-time workers.

Spotting this opportunity, Uber Money launched at Money 2020, focusing on providing drivers with financial services. As 50% of the population in Latin America is unbanked where Uber has more than 1 million drivers, the region is definitely a ripe market. Cabify is going even farther by spinning off Lana, its company that provides financial services, so it can expand its market beyond Cabify drivers to include other gig economy professionals.

Although established players in this sector have a clear advantage, they aren’t the only ones looking to explore this opportunity; Brazilian YC alumni Zippi is offering personal loans to ride-hailing drivers based on their driving earnings. As the gig economy tends to keep growing in the region, I believe we will start to see more solutions for those professionals.

Rethinking insurance

As the banking world has been shaken by fintechs, insurance companies are growing aware that high regulatory barriers won’t protect their industry from disruption.

Insurance penetration in Latin America has been historically low compared to developed markets — 3.1%, compared to 8% — but the insurance market is growing well and tends to close this gap. Adding this to bad services and complex products that insurances provide, insurtech has an immense opportunity to grow.

Because purchasing insurance is historically a complicated and painful experience, the first insurtechs in the region focused on providing a better experience by digitizing the process and using online channels to acquire customers. Those insurtechs worked together with the insurance companies and operating as online broker, but now, we’re starting to see startups providing new insurance products, as well as traditional insurances in different models.

Some are partnering with insurance companies while others are competing directly with them; Think Seg and Miituo partnered with larger players to provide a pay-as-you-go model for car insurance, while Mango Life and Kakau are offering a better purchasing experience. On the other end, Crabi and Pier are rethinking the insurance model from the ground up.

As insurtechs emerge as a potential threat, incumbents are more willing to work with startups that can improve their services to enable them to compete on better grounds, which is exactly what companies such as Bdeo, Lisa, and HelloZum are doing.

Although penetrating the insurance industry is more complicated than other financial services due to high regulatory demands and steep initial operating costs, insurtechs fueled by VC investment will without any doubt try to do it. And, if we’ve learned anything from other fintech segments, it’s that entrepreneurs will find ways to overcome initial challenges.

Brazil’s new fintech startup Cora raised $10 million on the strength of its founding team

Published December 4, 2019

It didn’t take much for the founders of Cora, Brazil’s newest startup to tackle some aspect of the broken financial services industry in the country, to raise their first $10 million.

Igor Senra and Leo Mendes had worked together before — founding their first online payments company, MOIP, in 2005. That company sold to WireCard in 2016 and after three years the founders were able to strike out again.

They built their initial business servicing the small and medium-sized businesses that make up roughly two-thirds of the Brazilian economy and represent some trillion dollars’ worth of transactions. But at WireCard, they increasingly were told to approach larger customers that didn’t have the same kind of demand for their services, according to Mendes.

So they built Cora — a technology-enabled lender to the small and medium-sized businesses that they knew so well.

The round was led by Kaszek Ventures, one of Latin America’s largest and most successful investment funds, with participation from Ribbit Capital — one of the most influential early-stage fintech investment firms globally.

“We created Cora to pursue our life purpose, which is to solve the financial problems faced by small and medium businesses. These businesses produce 67% of the Brazilian GDP but are totally underserved by the traditional banks,” said Senra, the company’s chief executive, in a statement.

The company is currently operating in closed beta and plans to launch its first product, a free SME-only mobile account, in the first half of 2020, according to the statement. Cora will later release a portfolio of payments, credit-related products and financial management tools that are currently being developed.

“So far, large financial institutions have mainly built products that focus either on individuals or on large corporate clients and have totally ignored small and medium sized enterprises, who are the most relevant creators of value in our economies,” said Mendes in a statement. “We want to offer a high-quality, customer-centric suite of financial products that address the specific underserved needs of our clients’ businesses.”

Rapyd, which offers fintech-as-a-service via a single API, adds $20M more to its coffers at a $1.2B valuation

Published December 3, 2019

One of the biggest trends in the world of financial technology has been an ongoing push towards consolidation, where larger fish are snapping up smaller fish (including a proliferation of interesting startups) to get improved economies of scale in a business model where every transaction brings incremental returns. But today, a startup that has built the concept of consolidation into its basic DNA has raised another round of funding to continue doubling down on its business.

Rapyd — a London-based startup that has built an API that lets customers tap into a range of financial services spanning payments, checkout, funds collection, fund disbursements, compliance as a service, foreign exchange, card issuing and soon logistics across a wide range of geographies — has picked up an additional $20 million. Rapyd’s valuation with the funding is now at $1.2 billion (up from just under $1 billion in October).

The $20 million comes from new investment firm Durable Capital Partners.

Notably, it was only in October that Rapyd announced a $100 million raise. CEO and co-founder and Arik Shtilman said that Rapyd has now raised $180 million in total, with previous investors in the startup including Oak HC/FT Tiger Global, Coatue, General Catalyst, Target Global, Stripe and Entrée Capital. (Stripe, itself a fast-growing fintech upstart, remains only a financial investor in the company, Shtilman confirmed.)

Durable is the firm founded by Henry Ellenbogen, formerly a star investor at T. Rowe Price, in what Rapyd said was the firm’s first investment. (Note: Durable was also announced earlier as an investor in Convoy’s $400 million round, some clear signs that it’s open for business now.)

With Rapyd only recently raising a round, Shtilman said that the reason for the — err — rapid follow up was because the company is gearing up to make some acquisitions, as it too moves in on the consolidation trend by adding in more tools into its “Swiss Army Knife” of services.

“We’ve started to look at two acquisitions that were bigger than what we originally planned, with prices more in the range of $100 million,” he said. Up to now, Rapyd has largely built its technology from the ground up, but this will be about “getting at new business very quickly,” he added. Both deals are in progress now and are likely to close in February / March. One is of a card issuing platform (a la Marqeta), and the other is of a company based in Asia Pacific that is a significant player in payments in the region.

The focus on Asia Pacific both for testing out new services and acquisitions is in part because this, along with Latin America, have shaped up to be important geographies for the company. In the last three months, Rapyd has signed on 20 additional large-scale companies, Shtilman said, with several of them based out of, or serving, customers out of the two regions.

In fact, Rapyd doesn’t talk much about actual customers, but they include e-commerce merchants, gig-economy platforms — including Uber — financial institutions, and technology providers. The basic pitch is that financial services are complex, and providing one like payments often means having to offer others. Building these from scratch if this is not your core competency can be time-consuming and costly, and so that is where a company like Rapyd steps in with its API.

This is what attracted its newest investor, too. “Durable Capital Partners LP has a vision to identify and invest in promising early stage growth companies and invest in teams that have bold ideas but can also execute at a world-class level and build much larger companies,” said Ellenbogen in a statement. “I believe the Fintech-as-a-Service category has tremendous potential as companies seek to embed financial services as an integral part of the next generation technology stack. I believe Rapyd is very well positioned to drive this trend and I believe Arik’s track record in scaling cloud-based businesses will deliver success in this sector.”

When we last talked with Rapyd in October, we asked Shtilman about whether the company would ever move into logistics as part of its range of tools. After all, when you think about the complexities of procuring, storing and moving goods, it’s clear that logistics is one of the cornerstones you need to get right in an online business.

He said that this was on the company’s roadmap, and now Rapyd is in a pilot in Indonesia — an interesting test bed, considering that the country’s is spread across thousands of islands — where it has integrated a logistics service and given access to a single merchant as stage one of its closed beta. It’s also in discussions with other companies about how it can incorporate their services into the Rapyd platform to provide further “logistics as a service” to customers. He also confirmed the Durable has been a help here, by making an introduction to Convoy as part of that wider strategy.

VTEX, an e-commerce platform used by Walmart, raises $140M led by SoftBank’s LatAm fund

Published November 22, 2019

E-commerce now accounts for 14% of all retail sales, and its growth has led to a rise in the fortunes of startups that build tools to enable businesses to sell online. In the latest development, a company called VTEX — which originally got its start in Latin America helping companies like Walmart expand their business to new markets with an end-to-end e-commerce service covering things like order and inventory management, front-end customer experience and customer service — has raised $140 million in funding, money it will be using to continue taking its business deeper into more international markets.

The investment is being led by SoftBank, specifically via its Latin American fund, with participation also from Gávea Investimentos and Constellation Asset Management. Previous investors include Riverwood and Naspers; Riverwood continues to be a backer, the company said.

Mariano Gomide, the CEO who co-founded VTEX with Geraldo Thomaz, said the valuation is not being disclosed, but he confirmed that the founders and founding team continue to hold more than 50% of the company. In addition to Walmart, VTEX customers include Levi’s, Sony, L’Oréal and Motorola . Annually, it processes some $2.4 billion in gross merchandise value across some 2,500 stores, growing 43% per year in the last five years.

VTEX is in that category of tech businesses that has been around for some time — it was founded in 1999 — but has largely been able to operate and grow off its own balance sheet. Before now, it had raised less than $13 million, according to PitchBook data.

This is one of the big rounds to come out of the relatively new SoftBank Innovation Fund, an effort dedicated to investing in tech companies focused on Latin America. The fund was announced earlier this year at $2 billion and has since expanded to $5 billion. Other Latin American companies that SoftBank has backed include online delivery business Rappi, lending platform Creditas and property tech startup QuintoAndar.

The common theme among many SoftBank investments is a focus on e-commerce in its many forms (whether that’s transactions for loans or to get a pizza delivered), and VTEX is positioned as a platform player that enables a lot of that to happen in the wider marketplace, providing not just the tools to build a front end, but to manage the inventory, ordering and customer relations at the back end.

“VTEX has three attributes that we believe will fuel the company’s success: a strong team culture, a best-in-class product and entrepreneurs with profitability mindset,” said Paulo Passoni, managing investment partner at SoftBank’s Latin America fund, in a statement. “Brands and retailers want reliability and the ability to test their own innovations. VTEX offers both, filling a gap in the market. With VTEX, companies get access to a proven, cloud-native platform with the flexibility to test add-ons in the same data layer.”

Although VTEX has been expanding into markets like the U.S. (where it acquired UniteU earlier this year), the company still makes some 80% of its revenues annually in Latin America, Gomide said in an interview.

There, it has been a key partner to retailers and brands interested in expanding into the region, providing integrations to localise storefronts, a platform to help brands manage customer and marketplace relations, and analytics, competing against the likes of SAP, Oracle, Adobe and Salesforce (but not, he said in answer to my question, Commercetools, which builds Shopify -style API tools for mid and large-sized enterprises and itself raised $145 million last month).

E-commerce, as we’ve pointed out, is a business of economies of scale. Case in point: While VTEX processes some $2.5 billion in transactions annually, it makes a relatively small return on that — $69 million, to be exact. This, plus the benefit of analytics on a wider set of big data (another economy of scale play), are two of the big reasons VTEX is now doubling down on growth in newer markets like Europe and North America. The company now has 122 integrations with localised payment methods.

“At the end of the day, e-commerce software is a combination of knowledge. If you don’t have access to thousands of global cases you can’t imbue the software with knowledge,” Gomide said. “Companies that have been focused on one specific region are now realising that trade is a global thing. China has proven that, so a lot of companies are now coming to us because their existing providers of e-commerce tools can’t ‘do international.’ ” There are very few companies that can serve that global approach and that is why we are betting on being a global commerce platform, not just one focused on Latin America.”

Latin America Roundup: Uber acquires Cornershop, SoftBank invests in Buser and Olist

Published October 30, 2019

Sophia Wood
Contributor

Uber acquires Cornershop, takes off where Walmart left off

The acquisition of the Chilean-Mexican grocery delivery startup Cornershop has been an emotional roller coaster for Latin American entrepreneurs and investors throughout 2019. First Walmart announced a $225 million deal that would be one of the bigger exits of the region, then the acquisition was blocked by Mexican antitrust institution COFECE. This announcement dealt a blow to the ecosystem as entrepreneurs and VCs had eagerly awaited this boost in liquidity in the local market.

Last-mile delivery and logistics became a very competitive space in Latin America in 2018.

Then in mid-October 2019, Uber announced it would take a 51% stake in Cornershop for a reported $450 million, quadrupling the startup’s value in the four months since the COFECE decision. This deal will consist of cash, investment in Cornershop’s growth and stock in Uber, which IPO’d earlier this year.

However, this deal must also be approved by the Chilean and Mexican antitrust boards, which are expected to release their decisions within the next two weeks. In the meantime, Cornershop will continue its expansion into the Colombian market after it added Peru and Canada in 2019.

Last-mile delivery and logistics became a very competitive space in Latin America in 2018, and many of the players are sitting on enormous pools of capital. Colombia’s Rappi raised $1 billion from SoftBank in early 2019, breaking records for startup investment for the region. Brazil’s iFood raised $500 million from Naspers at the end of 2018. However, delivery continues to be a cash-intensive business, with many of these companies burning through capital quickly to gain market share. Cornershop was an exception and had raised less than $50 million before the acquisition.

Brazil’s Buser, Olist, raise funding from SoftBank

Despite the WeWork crash, SoftBank has continued investing consistently in Brazilian startups. In early October 2019, the Japanese investor led an undisclosed Series B round for Brazilian collaborative bus chartering startup Buser. Buser’s team will invest more than $73 million in growth over the next 12 months to create new alliances for their network of operating partners.

Buser helps coordinate groups of people to charter buses at convenient times and lower prices, disrupting the bureaucratic, anti-competitive and inefficient bus system. The company has grown 1,500% over the past nine months and serves more than 3,000 people per day. While Buser has been popular with locals, traditional bus drivers are calling for regulation to slow the company’s meteoric growth. Buser plans to add more than 100 direct jobs in 200 cities over the next 12 months, and SoftBank’s most recent investment will help power this growth.

Brazil’s e-commerce marketplace integrator Olist also received investment from SoftBank for its Series C, coming in around $46 million. Redpoint eVentures and Valor Capital also participated in the round.

This investment signals the increased interest by traditional retailers in startups that are slowly chipping away at their market share across the region.

Olist connects small businesses to larger product marketplaces to help entrepreneurs sell their products to a larger customer base. They will reportedly use this investment to investigate the development of financial products and look for collaboration with SoftBank’s other companies, like Rappi and Loggi. Based in Curitiba, Olist was founded in 2015 to help small merchants gain market share across the country through a SaaS licensing model to small brick and mortar businesses.

Today, Olist has more than 7,000 customers and uses a drop-shipping model to send products directly from stores to clients around the country, allowing them to grow with a capital-light model. They will use the investment to add up to 100 new employees.

Carrefour Brazil acquires 49% of Ewally

Grocery chain Carrefour acquired a large stake in Brazil-based Ewally after it completed Village Capital’s first regional acceleration program.

Ewally improves financial inclusion in Brazil through a mobile wallet app that allows unbanked clients to pay bills and make purchases online through the blockchain. Carrefour will reportedly use the acquisition to accelerate digital transformation and improve online payment mechanisms throughout Brazil.

Carrefour did not disclose the amount invested and the deal is still subject to approval by Brazilian financial regulation authorities. However, this investment signals the increased interest by traditional retailers in startups that are slowly chipping away at their market share across the region.

News and Notes: Early-stage rounds are getting bigger

Startups in Brazil, Colombia and Argentina raised several rounds this month, ranging from $1.5 million to $13 million. Brazil’s Xerpa, Colombia’s Sempli, Brazil’s Gorilla and Argentina’s Bitso and Worcket were among those that raised capital from local and international investors in October 2019.

Brazilian human resource management platform Xerpa raised $13 million from Vostok Emerging Finance to continue to help companies like MercadoLibre, iFood and QuintoAndar provide benefits for their employees. Previous investors include Nubank’s David Velez, Kaszek Ventures and QED Investors.

Sempli, an online lending platform for small businesses in Colombia, raised an $8 million Series A from new investors Oikocredit and Incofin CVSO, as well as previous investors BID LAB, XTPI Fund, Generación Exponencial, and Impulsum Ventures. To date, Sempli has raised more than $24 million in equity funding. The founders will use this round to grow their portfolio and improve their risk assessment technology to provide more small business loans in Colombia.

Brazil’s Quicko, an alternative mobility startup that uses big data, raised $10 million in October from Brazilian transport company CCR. Quicko’s technology integrates all mobility options — from bicycles to Uber and 99 — to help people get where they need to go as quickly and inexpensively as possible.

Also in Brazil, startup Gorilla Invest raised $8.4 million from Ribbit Capital, Monashees and Iporanga. Gorilla aggregates financial assets so that investors can review all their commitments in one place, and currently manages more than $1.2 billion for 40,000 clients.

Mexican cryptocurrency exchange Bitso raised an undisclosed round from Argentine startup Ripple to expand into the Southern Cone, especially Argentina and Brazil. Other investors in the round included Pantera Capital, Digital Currency Group, Jump Capital and Coinbase.

Looking ahead to November, with unsettled politics in several countries across the region, tech startups are growing despite governmental changes. Some of these changes will likely have a positive effect on the regional ecosystem as people push for more sustainable and equal economic growth.

What to watch next? Last year, Q4 was marked by a wave of large investments as funds and startups look to end the year strong. IFood raised its record-breaking $500 million round in December 2018. We may well see a similar uptick this year as mega-funds like SoftBank have been consistently investing multi-million dollar rounds since June. There is no sign international investment in Latin America will slow through the end of the year, so we can likely look forward to several more growth-stage rounds before the year is out.

Zubale, founded in Mexico City by two HBS grads, just raised $4.4 million to put locals to work over their phones

Published October 17, 2019

A year ago, at a demo day south of San Francisco, we watched a number of recently formed startups pitch investors on their companies. One that stood out to us at the time was Zubale, a Mexico City-based outfit whose founders were looking to connect big corporations with Latin Americans eager to address tasks on their behalf. A person could conduct on-the-ground market research for a brand, for example, then earn mobile phone credits or other redeemable digital rewards.

Fast-forward and Zubale, which had 10 employees at the time, now has 40 full-time employees, and has completed 170,000 tasks on behalf of the consumer brands on which it is squarely focused — and for two reasons.

First, according to Zubale co-founder Allison Campbell, the retail industry across Latin America is generating $2 trillion per year, but companies are also shelling out $40 billion on “super painful and high spend” that includes employees who complete in-store tasks like stocking shelves, checking prices and building displays.

Campbell says Zubale can save — even make — these companies money by crowdsourcing the same tasks to independent contractors who can choose from an inventory of similar jobs near them.

Campell and her co-founder, Sebastian Monroy, also know a few things about retail in emerging markets. Before heading to HBS, Campbell spent nearly eight years with Walmart, first as a merchandise manager, then as a director of international strategic initiatives, roles that placed her in Gurgaon, India, then Shanghai and Shenzhen, China. Monroy’s path was similar; he spent more than seven years working in a variety of sales roles for Proctor & Gamble in Mexico before heading to Harvard, where he met Campbell on their first day of business school. (“We realized we were wearing the same exact glasses and took a picture together,” she says with a laugh. They decided to team up on Zubale a year later.)

Indeed, though one could see Zubale using its platform to crowdsource any number of tasks, à la TaskRabbit, the opportunity is so massive in catering to retailers that the startup plans to stay in its lane for the foreseeable future.

If anything, says Campell, Zubale — which plans to eventually expand from Mexico into other countries, including Brazil, Chile and Peru — may end up offering the contractors more in the way of financial services products, given that there remains a dearth of these and that these individuals are constantly checking the app anyway.

It makes sense. While 85% of Mexico’s population of 125 million now has a smart phone — giving rise to more app-driven startups like Zubale — only 10% have a credit card, and only 35% have a checking account. It’s for that reason that many of the people who work for Zubale still choose to earn mobile phone credit and other digital rewards that they can redeem through making online purchases.

They “love us,” too, says Campbell, because they can “increase their income by 40%” by performing work for Zubale. In fact, she suggests Zubale hasn’t had to do much in the way of marketing, thanks to Facebook Groups where the company is discussed, as well as through other word of mouth, including workers’ friends who want more jobs and find it easier to find and complete jobs in 30-minute increments at the same store location rather than run from store to store or job to job. (On average, she adds, they complete 20 jobs for the company per week.)

Certainly, investors like the company. Campbell and Monroy say they had a lot of inbound interest when they began seeking seed funding more recently. They chose the venture firm NFX to lead the $4.4 million round, given its expertise in marketplaces and network effects-driven businesses. Other participants in the round include Industry Ventures, Joe Montana’s Liquid 2 Ventures and XFactor Fund, along with individual investors Jonathan Swanson (who is the chairman of Thumbtack), Sergio Romo (the CEO of Grow Mobility) and Bob White (the founder and a former managing director of Bain Capital).

Meanwhile, the company’s very first check came from the seed-stage firm Pear, which had hosted that demo day.