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Meet Justos, the new Brazilian insurtech that just got backing from the CEOs of 7 unicorns
Here in the U.S. the concept of using a driver’s data to decide the cost of auto insurance premiums is not a new one.
But in markets like Brazil, the idea is still considered relatively novel. A new startup called Justos claims it will be the first Brazilian insurer to use drivers’ data to reward those who drive safely by offering “fairer” prices.
And now Justos has raised about $2.8 million in a seed round led by Kaszek, one of the largest and most active VC firms in Latin America. Big Bets also participated in the round, along with the CEOs of seven unicorns, including Assaf Wand, CEO and co-founder of Hippo Insurance; David Vélez, founder and CEO of Nubank; Carlos Garcia, founder and CEO of Kavak; Sergio Furio, founder and CEO of Creditas; Patrick Sigrist, founder of iFood and Fritz Lanman, CEO of ClassPass. (There’s a seventh CEO who wishes to remain anonymous). Senior executives from Robinhood, Stripe, Wise, Carta and Capital One also put money in the round.
Serial entrepreneurs Dhaval Chadha, Jorge Soto Moreno and Antonio Molins co-founded Justos, having most recently worked at various Silicon Valley-based companies including ClassPass, Netflix and Airbnb.
“While we have been friends for a while, it was a coincidence that all three of us were thinking about building something new in Latin America,” Chadha said. “We spent two months studying possible paths, talking to people and investors in the United States, Brazil and Mexico, until we came up with the idea of creating an insurance company that can modernize the sector, starting with auto insurance.”
Ultimately, the trio decided that the auto insurance market would be an ideal sector considering that in Brazil, an estimated more than 70% of cars are not insured.
The process to get insurance in the country, by any accounts, is a slow one. It takes up to 72 hours to receive initial coverage and two weeks to receive the final insurance policy. Insurers also take their time in resolving claims related to car damages and loss due to accidents, the entrepreneurs say. They also charge that pricing is often not fair or transparent.
Justos aims to improve the whole auto insurance process in Brazil by measuring the way people drive to help price their insurance policies. Similar to Root here in the U.S., Justos intends to collect users’ data through their mobile phones so that it can “more accurately and assertively price different types of risk.” This way, the startup claims it can offer plans that are up to 30% cheaper than traditional plans, and grant discounts each month, according to the driving patterns of the previous month of each customer.
“We measure how safely people drive using the sensors on their cell phones,” Chadha said. “This allows us to offer cheaper insurance to users who drive well, thereby reducing biases that are inherent in the pricing models used by traditional insurance companies.”
Justos also plans to use artificial intelligence and computerized vision to analyze and process claims more quickly and machine learning for image analysis and to create bots that help accelerate claims processing.
“We are building a design-driven, mobile first and customer experience that aims to revolutionize insurance in Brazil, similar to what Nubank did with banking,” Chadha told TechCrunch. “We will be eliminating any hidden fees, a lot of the small text and insurance-specific jargon that is very confusing for customers.”
Justos will offer its product directly to its customers as well as through distribution channels like banks and brokers.
“By going direct to consumer, we are able to acquire users cheaper than our competitors and give back the savings to our users in the form of cheaper prices,” Chadha said.
Customers will be able to buy insurance through Justos’ app, website or even WhatsApp. For now, the company is only adding potential customers to a waitlist but plans to begin selling policies later this year..
During the pandemic, the auto insurance sector in Brazil declined by 1%, according to Chadha, who believes that indicates “there is latent demand raring to go once things open up again.”
Justos has a social good component as well. Justos intends to cap its profits and give any leftover revenue back to nonprofit organizations.
The company also has an ambitious goal: to help make insurance become universally accessible around the world and the roads safer in general.
“People will face everyday risks with a greater sense of safety and adventure. Road accidents will reduce drastically as a result of incentives for safer driving, and the streets will be safer,” Chadha said. “People, rather than profits, will become the focus of the insurance industry.”
Justos plans to use its new capital to set up operations, such as forming partnerships with reinsurers and an insurance company for fronting, since it is starting as an MGA (managing general agent).
It’s also working on building out its products such as apps, its back end and internal operations tools, as well as designing all its processes for underwriting, claims and finance. Justos’ data science team is also building out its own pricing model.
The startup will be focused on Brazil, with plans to eventually expand within Latin America, then Iberia and Asia.
Kaszek’s Andy Young said his firm was impressed by the team’s previous experience and passion for what they’re building.
“It’s a huge space, ripe for innovation and this is the type of team that can take it to the next level,” Young told TechCrunch. “The team has taken an approach to building an insurance platform that blends being consumer-centric and data-driven to produce something that is not only cheaper and rewards safety but as the brand implies in Portuguese, is fairer.”
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In the race for tech talent, the US should look to Mexico
The global tech sector is booming, and as technologies like cloud and AI accelerate their growth, the demand for tech talent outpaces supply globally. Specifically, the U.S. tech sector has seen unprecedented growth in recent years, with four tech firms reaching a $1 trillion market cap by the beginning of 2020 — all of which have seen double-digit growth since achieving a 13-digit valuation pre-pandemic.
One of the major factors in the growth and adoption of tech in the U.S. is the increasing focus on software as a service and broader digital transformations across industry sectors, which have accelerated due to the COVID-19 pandemic. As such, there is an insatiable appetite for quality tech talent in the U.S., with projections showing an 11% increase by 2029 from 2019 numbers, which amounts to over half a million new jobs.
Given that the U.S. produces only about 65,000 computer science graduates, there is a vast deficit in the tech talent market, which materialized as over 900,000 unfilled IT and related positions in 2019 alone. The problem is so vast that more than 80% of U.S. employers stated that recruiting for tech talent is a top business challenge, according to a survey by top HR consulting firm Robert Half.
Demand increasing for Mexican tech talent
Mexico’s tech talent can help to fill the gaps left in a hypercompetitive U.S. market for tech workers. Unlike the U.S., 20% of Mexican college graduates have relevant engineering degrees, amounting to over 110,000 per year, far surpassing the U.S. in technical talent. Investors and tech firms have noticed and are increasing operations in Mexico.
20% of Mexican college graduates have relevant engineering degrees, amounting to over 110,000 per year, far surpassing the U.S. in technical talent.
Some have referred to the cities of Monterrey and Guadalajara as the “Silicon Valley of Latin America,” and while their tech sectors are also seeing tremendous growth, the pace falls short of Mexico’s talent production, leading to a surplus of highly trained and capable individuals in the tech sector. The cost of higher education in Mexico is far less than in the U.S., so we’re likely to see that talent surplus grow in the coming years.
Under current conditions, the U.S. has an incredible opportunity to capitalize on the surplus of tech talent in Mexico. Because tech jobs are more scarce than in the U.S., the cost of talent in Mexico is considerably less than in the U.S. or in Canada. In general, talent in Mexico can be two to three times cheaper than in the U.S. while still delivering outstanding quality and specialized experience.
More so than other Latin American countries, Mexico has the experience and economy to support a robust tech talent export ecosystem. In fact, Mexico City’s concentrated market is larger than the sum total of every other Spanish-speaking country in Latin America. Specifically, Mexico’s IT outsourcing industry has been growing at an annual rate of 10%-15% and is now considered the third-largest exporter of IT services.
What’s more, the U.S./Mexico relationship is seeing a refresh after several tumultuous years. With Mexico ranked No. 1 among U.S. trade partners, the political and economic mechanisms for investments and partnerships are in place. Technology leaders such as Cisco and Intel have already set up shop in Mexico, demonstrating confidence in the country’s ability to support tech and economic growth.
The benefits of proximity
Mexico provides a number of benefits that make drawing from its talent surplus easier and more efficient. For one, Mexico’s time zones align with those in the U.S., enabling real-time collaboration at times that work best for both parties. Compare this to the time difference in India, which is over 12 hours ahead of California’s Silicon Valley.
Beyond the time difference, there are also many cultural similarities that make working with Mexico the clear choice for IT outsourcing. For example, the U.S. is home to more than 41 million native Spanish speakers, and plus over 12 million bilingual Spanish speakers, making the U.S. the second-largest Spanish-speaking country after Mexico. While difficult to quantify, the number of consumer and cultural exports from Mexico to the U.S. also helps to build familiarity and solidarity between the two countries, which can only improve an already healthy relationship.
New geopolitical considerations favor U.S.-Mexico ties
The steady progression of America’s tech sector is now seen as a strategic priority at the federal level. Meanwhile, public and private sector decision-makers are more interested than ever in conducting business under favorable trade treaty terms with friendly governments amid a new climate of geopolitical uncertainty.
As the U.S. tech sector continues its explosive growth, technology companies in the U.S. will need to seek alternative means to supplement its in-demand tech workforce. Rather than turning to countries undergoing increased regulatory scrutiny, or distant talent bases requiring significant business travel, business leaders are looking to geographically close, diplomatically friendly nations. U.S. companies are finding Mexico’s status as a key business partner and strategic ally to be a massive value driver.
By 2030, the middle-class population in Mexico is expected to reach 95 million, placing it in the top 10 countries with the highest share of global middle-class consumption. As the middle class rises, so will companies to meet their consumer needs, and, as such, Mexico’s own tech sector will grow and require significantly more tech talent, reducing or potentially eliminating Mexico’s talent surplus.
This is evidenced by the uptick in Mexico-based technology companies, such as Mexican used-car startup Kavak, which recently hit a $4 billion valuation. Amid an exciting backdrop of skyrocketing tech valuations and potential, the U.S. tech sector should look to Mexico as a key growth market and technology partner. The time is now for the U.S. to tap into the surplus of quality tech talent in Mexico.
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Google Fi turns 6 and gets a new unlimited plan
Google Fi, Google’s cell network, is turning six today and to celebrate, the team is launching a new pricing plan, dubbed “Simply Unlimited” starting at $60 per month for a single line (down to $30 per line for three lines or more). The new plan features unlimited calls and texts in the U.S., plus unlimited data and texting in the U.S., Canada and Mexico.
Image Credits: Google
You may recall that Fi’s original promise was a single, affordable pay-as-you-go plan where you would pay a fixed price per month for the basic call and texting service and then pay an extra $10 per GB of data you used per billing cycle, capped at $80 per month. In 2019, Google then turned this into what is essentially an unlimited plan, dubbed Fi Unlimited, starting at $70 per month for a single line, with discounts for additional lines.
The new “Simply Unlimited” plan is a pared-down version of the original Unlimited plan, which is now called the Unlimited Plus plan (yeah, that’s a lot of names). Now, that plan has still a lot of extra features that power users aren’t likely willing to give up for a slightly lower price. In addition to everything in the new Simply Unlimited plan, this plan still features free international calls to more than 50 countries and international data in more than 200 destinations, plus full-speed hotspot tethering and 100 GB of Google One cloud storage.
The Flexible plan is also still an option, with its base fee of $20 per month for texting and calling for a single line (down to $17 per month for three lines) and $10 per GB of data, no matter whether you use if abroad or at home — or for hotspot tethering. Google says that’s the plan to choose if you’re mostly on WiFi — as most of us are right now.
Basically, if you’re not planning to use your phone outside of North America, the new Simply Unlimited plan looks like a good deal that, depending on your use case, compares favorably with similarly priced plans from other carriers — especially if international data is important to you.
Image Credits: Google
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Mexican unicorn Kavak raises a $485M Series D at a $4B valuation
Kavak, the Mexican startup that’s disrupted the used car market in Mexico and Argentina, today announced its Series D of $485 million, which now values the company at $4 billion. This round more than triples their previous valuation of $1.15 billion, which established them as a unicorn just a couple of months ago in October of 2020. Kavak is now one of the top five highest-valued startups in Latin America.
The round was led by D1 Capital Partners, Founders Fund, Ribbit and BOND, and brings Kavak’s total capital raised to date to more than $900 million. Kavak recently soft-launched in Brazil, and this new round of funding will be used to build out the Brazilian market and beyond, said Carlos García Ottati, Kavak’s CEO and co-founder. The company plans to do a full launch in Brazil in the next 60 days, García said, and we can expect to see Kavak in markets outside Latin America in the next 24 months, he added.
“We were built to solve emerging market problems,” García said.
Kavak, which was founded in 2016, is an online marketplace that aims to bring transparency, security and access to financing to the used car market. The company also offers its own financing through its fintech arm, Kavak Capital, and counts more than 2,500 employees and 20 logistics and reconditioning hubs in Mexico and Argentina.
“In Latin America, 90% of the [used car] transactions are informal, which leads to a 40% fraud rate,” said García, who experienced these challenges firsthand when he moved to Mexico from Colombia a couple of years ago and bought a used car.
“My budget allowed me to buy a used car, but there was no infrastructure around it. It took me six months to buy the car, and then the car had legal and mechanical issues and I lost most of my money,” he said. Kavak buys cars from individuals, refurbishes them and offers warranties to buyers.
“Instead of buying a new car, they can buy a better car that still has all the warranties. It’s a really aspirational process,” said García. The company, which really amounts to four companies in one given its areas of focus, was built to be comprehensive by design in order to meet the various gaps in the market, García said.
“When you’re building a business here [Latin America], you need to build several businesses because so many things are broken,” he said. That’s why the financing option, for example, has been a key to their success, according to García.
Financing has traditionally been hard to come by in Brazil, and as García said, the used car market lacks infrastructure there, too. That being said, Brazil is Latin America’s fintech hub, and the space has made leaps and bounds over the last 7-10 years with companies such as Nubank, PagSeguro, Creditas, PicPay, and others leading the way. As a result, credit cards and loans are more widely available today in the region, offering competition for Kavak Capital. While Kavak has localized some of its product for the Brazilian market — namely building out a Portuguese language version of the app and website — García said the markets are very similar.
“In Brazil, you still have the same problems that you have in Mexico, but Brazil is a little more developed, especially in fintech, which is light years ahead of Mexico,” he said.
With the Brazilian product heading to the races, García said they already have plans for other regions, though he declined to name them.
“80% of people in emerging markets don’t have access to a car,” García said of the global market size. “We want to go into big markets where customers are facing similar problems and where Kavak can really change their lives,” he added.
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Tech in Mexico: A confluence of Latin America, the US and Asia
Mexico has been known as an up-and-coming tech hub and a gateway to the Latin American market. As an investor focused on developer-centered products, open-source startups and infrastructure technology companies with a particular interest in emerging market innovation, I have been wanting to do some firsthand learning there.
So, despite the ongoing pandemic, I took all the necessary precautions and spent roughly seven weeks in Mexico from January to March. I spent most of my time meeting founders to get a handle on what they are building, why they are pursuing those ideas, and how the entire ecosystem is evolving to support their ambitions.
Knowledge transfer is not the only trend flowing in the U.S.-Asia-LatAm nexus. Competition is afoot as well.
The U.S.-Asia-LatAm nexus
One fascinating, though not surprising, observation was how much LatAm entrepreneurs look to Asian tech giants for product inspiration and growth strategies. Companies like Tencent, DiDi and Grab are household names among founders. This makes sense because the market conditions in Mexico and other parts of LatAm resemble China, India and Southeast Asia more than the U.S.
What often happens is entrepreneurs first look to successful startups in the U.S. to emulate and localize. As they find product-market fit, they start to look to Asian tech companies for inspiration while morphing them to suit local needs.
One good example is Rappi, an app that started out as a grocery delivery service. Its future ambition is squarely to become the superapp of LatAm: It is expanding aggressively both geographically and productwise into delivery for restaurant orders, pharmacy and even COVID tests. It’s also introducing new payment, banking and financial-service products. Rappi Pay launched in Mexico just a few weeks ago, while I was still in the country.
Rappi now looks more like Meituan and Grab than any of its U.S. counterparts, and that’s not an accident. SoftBank, whose portfolio contains many of these Asian tech giants, invested heavily in Rappi’s previous two rounds and now has a $5 billion fund dedicated to the LatAm region. The knowledge and experience accumulated from Asian tech in the last 10 years is transferring to like-minded firms like Rappi, right under Silicon Valley’s proverbial nose.
U.S.-Asia-LatAm competition
Knowledge transfer is not the only trend flowing in the U.S.-Asia-LatAm nexus. Competition is afoot as well.
Because of similar market conditions, Asian tech giants are directly expanding into Mexico and other LatAm countries. The one I witnessed up close during my visit was DiDi.
DiDi’s foray into LatAm started in January 2018 with its acquisition of 99, a Brazilian ride-sharing company. In April 2018, DiDi entered Mexico with its bread-and-butter ride-sharing service. It wasn’t until April 2019 that DiDi launched its food delivery service, DiDi Food, in Monterrey and Guadalajara — two of the largest cities in Mexico. Its expansion hasn’t slowed down since, with a 10% extra earnings incentive to lure delivery drivers.
Image Credits: Kevin Xu
My Airbnb in Mexico City happened to be two blocks away from the large WeWork building where DiDi’s local office was located. Every day, I saw a long line of people responding to the earning incentives — waiting outside to get hired as DiDi delivery workers.
Meanwhile, the Uber office that’s literally one block away had hardly any foot traffic. As Uber and Rappi fight for more wealthy consumers, DiDi is working to attract lower-income users to grab market share, hoping that one day some of these people will reach the middle class and become profitable customers.
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Valoreo closes on $50M to roll up LatAm e-commerce brands
A new breed of startups is acquiring and growing small but promising third-party merchants, and building out their own economies of scale.
And while there are a number of such startups based in the U.S. and Europe, none had emerged in the Latin American market. Until now.
Valoreo, a Mexico City-based acquirer of e-commerce businesses, announced Tuesday that it has raised $50 million of equity and debt financing in a seed funding round.
The dollar amount is large for a seed round by any standards, but most certainly ranks among the highest ever raised by a Latin American startup — further evidence of increased investor interest in the region’s burgeoning venture scene.
Upper90, FJ Labs, Angel Ventures, Presight Capital and a slew of angel investors participated in the round. Those angels included David Geisen, head of Mercado Libre Mexico; BEA Systems’ co-founder Alfred Chuang; and Tushar Ahluwalia, founder of Razor Group, a European marketplace aggregator, among others.
Founded in late 2020, Valoreo aims to invest in, operate and scale e-commerce brands as part of its self-described mission “to bring better products at more affordable prices” to the Latin American consumer.
“We were substantially oversubscribed and were therefore able to select investors that not only provide capital, but also additional know-how in key areas,” said co-founder Alex Gruell.
Valoreo joins the growing number of startups focused on rolling up e-commerce brands.
The company’s model is similar to that of Thrasio — which just raised another $750 million –– and Perch in the U.S. But Valoreo says its approach has been tailored to “the specific needs of the Latin American market and is specifically focused on the Latin American end customer.”
Another new company in the space called Branded recently launched its own roll-up business on $150 million in funding. Others in the space include Berlin Brands Group, SellerX, Heyday and Heroes.
But as my colleague Ingrid Lunden points out, “the feverish pace of fundraising in the area of FBA roll-ups feels very much like a bubble in the market — not least because none of these still-young companies have yet to prove that the strategy to buy up and consolidate these sellers is a useful and profitable one.”
How it works
Valoreo (which the company says is an extension of the Spanish word “valor,” meaning to add value), acquires merchants that operate their own brands and primarily sell on online marketplaces such as Mercado Libre, Amazon and Linio. The company targets brands that offer “category-leading products” and which it believes have “significant growth potential.” It also develops brands in-house to offer a broader selection of products to the end customer.
Like Thrasio, Valoreo says it’s able to help entrepreneurs who may lack the resources and access to capital to take their businesses to the next level.
Co-founder and co-CEO Stefan Florea says the company takes less than five weeks typically from its initial contact with a seller to a final payout.
Then, the acquired and developed brands are integrated into the company’s consolidated holding. By tapping its team of “specialists” in areas such as digital marketing and supply chain management, it claims to be able to help these brands “reach new heights” while giving the entrepreneurs behind the companies “an attractive exit,” or partial exit in some cases.
“We have different structures, always taking into account the personal objectives of the seller,” Stefan Florea added.
Generally Valoreo acquires the majority of the business, with the purchase price typically being a combination of an upfront cash payment and a profit share component so sellers can still earn money.
Looking ahead, Valoreo plans to use its new capital mostly to acquire and develop “interesting” brands, as well as build out its current team of 10 while expanding its infrastructure and operations.
The company is currently focused on the Mexican and Brazilian markets, but is planning its expansion into other Latin American countries where it has strong local support systems, such as Colombia, according to co-founder Martin Florea.
“Our mission is to be a pan-Latin American player providing value to the entire region,” Martin Florea said. “Latin America in general and Mexico in particular are in a distinct situation which provides phenomenal opportunities for e-commerce merchants on the one hand but also presents particular challenges on the other hand.”
Those challenges, according to Martin Florea, include limited access to growth capital, a lack of specialized expertise in certain areas (such as supply chain management), limited opportunities to sell their business and pursue new ventures, as well as operational burdens and the lack of capacities to expand into new countries and marketplaces.
Valoreo emphasizes it is not out to compete with Mercado Libre, Amazon and other regional marketplaces but instead wants to partner with them.
“Without these platforms, this opportunity would not exist,” Martin Florea said.
Hernán Fernández, founder and managing partner of Angel Ventures, believes Valoreo “will add a lot of value” to the Latin American e-commerce landscape, which is experiencing both market growth and the fragmentation of the seller space.
Jüsto co-founder and CEO (and Valoreo investor) Ricardo Weder notes that the e-commerce market is at an inflection point in Latin America. According to eMarketer, the region was the fastest-growing e-commerce market in the world in 2020, with 37% year over year growth. However, it is a much more fragmented and crowded market compared to other regions, such as the United States.
This, Valoreo believes, provides an opportunity for consolidation.
“There are still many consumers that are not aware of the great variety of outstanding local brands that sell innovative products on marketplaces online,” Stefan Florea said. “In the U.S. or Europe e-commerce is the new way of shopping, offering an even greater range of products and brands than offline shopping. We firmly believe it will not take long until end-customers in Mexico and across Latin America discover all the benefits that e-commerce offers.”
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Brazilian lending company Creditas raises $255 million as Latin America’s fintech explosion continues
Creditas, the Brazilian lending business, has raised $255 million in new financing as financial services startups across Latin America continue to attract massive amounts of cash.
The company’s credit portfolio has crossed 1 billion reals ($196.66 million) and the new round will value the company at $1.75 billion thanks to $570 million raised in outside financing over five rounds.
Creditas is the latest company to benefit from a boom in financial services startup investing across the region. As the year dawned, venture investments into fintech startups in Latin America had grown from $50 million in 2014 to top $2.1 billion in 2020 across 139 deals, according to a report from CB Insights.
Investors in the round include new investors like LGT Lightstone, Tarsadia Capital, Wellington Management, e.ventures and an affiliate of Advent International, Sunley House Capital. Previous investors including SoftBank Vision Fund 1, SoftBank Latin America DFund, VEF, Kaszek and Amadeus Capital Partners also returned to put more money into the company.
“Creditas is still in the early innings of penetrating the huge untapped secured lending market in Brazil and Mexico” says Paulo Passoni, managing partner of SoftBank Latam fund, in a statement.
The company’s growth is a testament both to the need for new lending products across Latin America and the perspicacity of investors like Kaszek Ventures, whose portfolio has included several massive wins from bets on startups tackling financial services in Latin America.
“The journey since our investment in the Series A has been absolutely extraordinary. The team has executed on its vision, and Creditas has evolved into an asset-light ecosystem that resolves key financial needs of its customers throughout their lifetimes,” says Nicolas Szekasy, managing partner of Kaszek Ventures, in a statement.
Another big winner is Redpoint’s e.ventures fund, which has focused on investments in Latin America for the last several years.
“By empowering Brazilians to take control of their lending needs at reasonable rates, Creditas creates a beloved consumer product that will drive significant value for customers and investors. Having been involved since the seed stage through Redpoint e.ventures, we’re thrilled to support the company with our Global Growth Fund as well, as they change the Brazilian fintech landscape,” said Mathias Schilling, co-founder and managing partner of e.ventures.
Creditas has plans to use the cash to expand its home and auto lending as well as a payday lending service based on customers’ salaries and a retail option to sell through buy now, pay later loans based on a customer’s salary.
The company is also looking to expand to other markets, with an eye toward establishing a foothold in the Mexican market.
Founded in 2012, when the founders worked out of a five-square-meter office on Berrini Avenue in São Paulo, the company now boasts a robust business with hundreds of employees and a business resting on a secured lending marketplace and independent home and auto lending operations.
The company also released quarterly results for the first time, showing losses narrowing from 74.9 million Brazilian reals to 40.5 million reals in the year ago quarter.
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UPDATE: Parrot Software has $2.1 million to grow its restaurant point-of-sale and management service in Mexico
The two founders of Parrot Software, Roberto Cebrián and David Villarreal, first met in high school in Monterrey, Mexico. In the 11 years since, both have pursued successful careers in the tech industry and became family (they’re brothers-in-law).
Now, they’re starting a new business together leveraging Cebrián’s experience running a point-of-sale company and Villarreal’s time working first at Uber and then at the high-growth scooter and bike rental startup, Grin.
Cebrían’s experience founding the point-of-sale company S3 Software laid the foundation for Parrot Software, and its point-of-sale service to manage restaurant operations.
“Roberto has been in the industry for the past six or seven years,” said Villarreal. “And he was telling me that no one has been serving [restaurants] properly… Roberto pitched me the idea and I got super involved and decided to start the company.”
Parrot Software co-founders Roberto Cebrían and David Villarreal. Image Credit: Parrot Software
Like Toast in the U.S., Parrot manages payments, including online and payments and real-time ordering, along with integrations into services that can manage the back-end operations of a restaurant too, according to Villarreal. Those services include things like delivery software, accounting and loyalty systems.
The company is already live in more than 500 restaurants in Mexico and is used by chains including Cinnabon, Dairy Queen, Grupo Costeño and Grupo Pangea.
Based in Monterrey, Mexico, the company has managed to attract a slew of high-profile North American investors, including Joe Montana’s Liquid2 Ventures, Foundation Capital, Superhuman angel fund and Ed Baker, a product lead at Uber. Together they’ve poured $2.1 million into the young company.
Since its launch, Parrot has managed to land contracts in 10 cities, with the largest presence in Northeastern Mexico, around Monterrey, said Villarreal.
The market for restaurant management software is large and growing. It’s a big category that’s expected to reach $6.94 billion in sales worldwide by 2025, according to a report from Grand View Research.
Investors in the U.S. market certainly believe in the potential opportunity for a business like Toast. That company has raised nearly $1 billion in funding from firms like Bessemer Venture Partners, the private equity firm TPG and Tiger Global Management.
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Mexican challenger bank albo raises $45 million to expand
With nearly half a million customers across Mexico and a network of 30,000 retail locations where representatives can take deposits, the challenger bank albo is already on its way to becoming a dominant player in Mexico’s emerging fintech industry.
And the company has recently raised another $45 million to consolidate its position.
“When your mission is to build the biggest bank in Mexico, you will need a ton of money,” said albo founder Angel Sahagún.
The company received its license to operate as a full depository bank in Mexico, and is slowly working toward being the premier internet-based financial services provider for Mexico’s large and growing middle class, Sahagún said.
“We are targeting a similar target market to Chime,” the albo founder and chief executive said. “We are targeting people who are underbanked and don’t have access to all the financial products in the market.”
Sahagún said the money will be used to expand into lending and insurance products the range of services albo offers. That’s a path that has already produced one multi-billion-dollar business in Nubank, Brazil’s wildly successful fintech company, which planted a flag for a new generation of Latin American startups.
While many challenger banks in the region pursued a strategy targeting upper-class and upper-middle-class consumers, Sahagún said his service had chosen a different path.
The company is trying to bring the middle and low-income Mexican consumers into the banking system by making it easy for them to move from a cash-based world to a digital one. “Where 90% of transactions are cash-based you need a value proposition that fits very well on that cash-based society,” Sahagún said.
It’s why the company set up a network of 30,000 locations, including convenience stores and drug stores, so that it can accept deposits at the places where its customers frequent.
That growth, and the company’s 40% share of the digital banking market in Mexico, according to data from Apptopia cited by the company, is why investors like Valar Ventures, Greyhound Capital, Mountain Nazca and Flourish Ventures were willing to invest as part of the $45 million round.
“albo has proven its ability to drive sustainable growth and is leading the market. This is the team that is going to transform banking in the region and we are proud to be supporting them in that,” said James Fitzgerald of Valar Ventures, in a statement.
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YC-backed Heru raises $1.7M to build software services for Latin American gig workers
Given the attention that TechCrunch pays to Y Combinator’s Demo Days, we also try to keep tabs on the same startups as they scale and raise more capital. Yesterday we covered YC Winter 2020 participant BuildBuddy, for example. Today we’re taking a look at Heru, a startup based in Mexico City that is announcing a $1.7 million raise after taking part in YC’s Summer 2019 session.
The pre-seed round was led by Mountain Nazca, and participated in by Magma Partners, Xtraordinary Venture Partners, Flourish Ventures, YC itself and a handful of angels. The investment was raised in two pieces: a $500,000 check in February and the other $1.2 million closing a few weeks ago.
Heru wants to provide software-based services for gig workers in Mexico, and eventually other countries. Its founders, Mateo Jaramillo and Stiven Rodríguez Sánchez, are both ex-Uber employees, which is how they wound up in Mexico from their native Colombia.
But Heru didn’t have a straightforward path to existence. The founding duo told TechCrunch their original idea, something similar to OYO, was what they went through Y Combinator and initially raised money for. But after finding OYO already in their target market, the company took three months to rethink and, keeping investors on board, pivoted to Heru.
Heru is a package of software products aimed at delivery drivers and the like, helping provide insurance, credit and tax preparation support. The tax element is key, as the company’s founders explained to TechCrunch that Mexico now expects independent workers to file taxes on a monthly basis. Folks need help with that, so Heru built them a tool to do so.
There’s competition to that element of its product, Heru said, noting that there are accountants in the market that will do the work for $25 to $30. Heru’s tax service, in contrast, costs a smaller $5 each month (100 pesos). Insurance is another $5 each month for accident-related coverage. The startup worked with an insurance provider to build what it describes as a “tailor-made” policy for gig workers who need low-cost coverage.
The founding duo, via the company.
Heru is not only targeting Uber drivers and their like, however. The company noted that it also wants to support freelancers more broadly, a population that is much larger than the three million gig workers it counts in the Mexican market.
The company’s app has been soft-launched in the market for a few weeks, with the startup now making more noise about its existence. According to its founders, around 1,200 users were accepted during its test period. Another 20,000 are in line.
Among its early user base, customers are buying on average 1.2 Heru products, a number that I’ll track as the startup scales.
Heru’s app is neat, its market large and the need it is serving material. But in the background of the software story is a brick-and-mortar tale. The startup, in addition to building its app, put together a number of so-called “Heru Casas,” places where gig workers can recharge their phones and use a bathroom. You need the app to enter a Heru Casa, helping the startup find early users.
Currently all Heru Casas are located in Mexico City. The startup is not sure about expanding that part of its efforts to more cities where its app may attract users. Why? It’s hard to scale physical build-outs, it told TechCrunch. Software is much better for quick expansion, and as that’s the name of the startup game, holding off on more physical locations could make good sense until the company can raise more capital.
Heru has big plans to double-down its product work, and eventually add more countries to its roster. The Latin American market is a ripe place for startups to shake things up. Let’s see how quickly Heru can make its mark.
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