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Brands building for scale should look to hypercultural Latinx consumers
Ilse Calderon is an investor at OVO Fund where she specializes in pre-seed investments across capital-efficient markets. Prior to OVO, Ilse spent a year at Silicon Valley Bank rotating across consumer and software teams.
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Kathleen Garcia-Manjarres (Kat Garcia) is a Growth Architect at BCG Digital Ventures (BCGDV) where she invests, invents, builds and scales startups with the world’s most influential companies.
As two female investors who themselves identify as hypercultural (HC) Latinx, we see much potential for brands and startups that invest in this demographic.
For the purpose of this article, we will focus on 13-to-25-year-old individuals who can trace their heritage to a Latin American country who have spent the majority of their lifetime in the U.S. Whether they were born in the U.S. doesn’t matter as much as how much time they have spent immersed in mainstream American culture. This is important to note because this demographic is largely defined by always having one foot in their parents’ native country and another in the United States.
In simplest terms: A Latinx person has origins from a country in Latin America, like Mexico or Brazil, while a Hispanic person has origins from a country where Spanish is the dominant language, such as Mexico or Spain. A Pew Research study found that one in four people who describe themselves as Hispanic or Latino have heard of the non-gendered “Latinx,” but only 3% of them use the term in everyday life.
So what makes the hypercultural Latinx so unique and worthy of pursuit? It’s not a secret that they have massive purchasing power behind them (a collective $1.9 trillion to be exact). However, they are also different from their mostly white counterparts in the way they vigorously engage with technology, their obsession with being online at all times and their unique shopping habits.
Hypercultural Latinx consumers are accustomed to being early adopters of new technology: 81% of them say they like to learn about the latest technology (overindexing their white counterparts by 36%). Latino households are filled with the latest gadgets and smart tech toys. Although we assume most Gen Zers and young millennials love technology, HC Latinx love tech at astronomical rates and shell out more dollars than their white, mostly monocultural counterparts.
This makes sense given that 60% of HC Latinx grew up in the internet age versus only 40% of their white counterparts. Across levels of HC Latinx income (or their parents’), there is always a budget for technology. In my own Mexican household (Ilse), I grew up prioritizing tech over other (sometimes more important) categories like books or vacations.
The online lives of the HC Latinx can be summed up by one statistic: 24% spend three hours or more on social media per day. compared to only 13% of their white counterparts. So much time is spent online by this Latinx youth that they are able to create a digital comunidad where they thrive socially and intellectually. This comunidad has so much influence in how the HC Latinx thinks about what they purchase and how loyal they are to the brands they buy from.
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Miami-based Marco Financial is launching a revenue-based lending service for Latin American SMEs
Marco Financial, a new Miami-based startup, is looking to take a piece of the roughly $350 billion trade finance market for Latin American exporters with its novel factoring services business.
Small and medium-sized businesses in Latin America can have trouble getting the financing they need to launch export operations to the U.S. and Marco said it aims to bridge that gap with new risk modeling and management tools that can make better decisions on who should receive loans.
“For smaller businesses in Latin America, accessing trade finance to export their goods is a major concern and a top reason why many don’t succeed,” said Javier Urrutia, director of Foreign Investments at PROCOLOMBIA, an organization that promotes foreign investment and non-traditional exports in Colombia, in a statement from the company. “In Colombia alone, a 1% increase in exporter productivity in our textile industry would result in 500,000 new jobs for the country.”
The company is backed by a small seed round from Struck Capital and Antler and over $20 million in a credit facility underwritten by Arcadia Funds.
“As a former owner of a small business in Latin America, I saw firsthand how difficult it is for SMEs in this region to access trade financing that will let them export their goods while retaining enough capital to keep their business running,” said Peter D. Spradling, COO and co-founder of Marco, in a statement. “Access to trade finance is one of the greatest hurdles in business operations and the traditional system dominated by banks is simply not working anymore, disproportionately hurting SMEs and further restricting economic mobility and job creation in emerging markets. Equity funding and a material credit facility let us serve this underserved market in Latin America and help build a healthier, more equitable trade ecosystem reflective of an increasingly borderless global economy.”
Spradling met his co-founder Jacob Shoihet through the Antler accelerator, a Singapore and New York-based early-stage investment and advisory services program that connects entrepreneurs and tech operators to launch new businesses.
Shoihet, a classically trained musician who fell in with the startup scene in New York through work at Yelp, was eager to launch his own company and connected with Spradling over shared interests in intermittent fasting and sports.
Small and medium businesses have a hard time receiving loans from traditional lenders thanks to tighter regulations and capital controls dating back to the 2008 financial crisis, according to Marco’s founders. And the long periods that companies have to wait between when goods are shipped and orders are payed can put undue pressure on business operations. Factoring solves the gap by lending to merchants based on their receivables.
Marco said that it can reduce the length of the loan origination process from over two months to one week and provide funding to approved exporters within 24 hours.
The company is initially focused on Mexico, Uruguay, Chile, Colombia and Peru, and chose those markets because of Spradling’s previous experience as an importer and exporter across the region.
“We look for companies that not only target massive, sleepy industries but also for ones that are led by management teams with fresh perspectives and asymmetric information that position them to upend incumbents,” said Yida Gao, partner at Struck Capital, in a statement. “In short order, Marco has assembled a world-class team to tackle the multi trillion-dollar trade finance market in a post-Covid time when SMEs around the world need, more than ever, reliable capital to fund operations and growth. We are excited to be part of Marco’s journey to support the suppliers that are the backbone of global trade.”
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Lana has launched in Latin America to be the one-stop shop for gig workers’ financial needs
Lana, a new startup based in Madrid, is looking to be the next big thing in Latin American fintech.
Founded by serial entrepreneur Pablo Muniz, whose last business was backed by one of Spain’s largest financial services institutions, BBVA, Lana is looking to be the all-in-one financial services provider for Latin America’s gig economy workers.
Muniz’s last company, Denizen, was designed to provide expats in foreign and domestic markets with the financial services they would need as they began their new lives in a different country. While the target customer for Lana may not be the same middle to upper-middle-class international traveler that he had previously hoped to serve, the challenges gig economy workers face in Latin America are much the same.
Muniz actually had two revelations from his work at Denizen. The first — he would never try to launch a fintech company in conjunction with a big bank. And the second was that fintechs or neobanks that focus on a very niche segment will be successful — so long as they can find the right niche.
The biggest niche that Muniz saw that was underserved was actually in the gig economy space in Latin America. “I knew several people who worked at gig economy companies and I knew that their businesses were booming and the industry was growing,” he said. “[But] I was concerned about the inequalities.”
Workers in gig economy marketplaces in Latin America often don’t have bank accounts and are paid through the apps on which they list their services in siloed wallets that are exclusive to that particular app. What Lana is hoping to do is become the wallet of wallets for all of the different companies on which laborers list their services. Frequently, drivers will work for Uber or Cabify and deliver food for Rappi. Those workers have wallets for each service.
(Photo by Cris Faga/Pacific Press/LightRocket via Getty Images)
Lana wants to unify all of those disparate wallets into a single account that would operate like a payment account. These accounts can be opened at local merchant shops and, once opened, workers will have access to a debit card that they can use at other locations.
The Lana service also has a bill pay feature that it’s rolling out to users, in the first evolution of the product into a marketplace for financial services that would appeal to gig workers, Muniz said.
“We want to become that account in which they receive funds,” he said. “We are still iterating the value proposition to gig economy companies.”
Working with companies like Cabify, and other, undisclosed companies, Lana has plans to roll out in Mexico, Chile, Peru and, eventually, Colombia and Argentina.
Eventually, Lana hopes to move beyond basic banking services like deposits and payments and into credit services. Already hundreds of customers are using the company’s service through the distribution partnership with Cabify, which ran the initial pilot to determine the viability of the company’s offering.
“The idea of creating Lana was initially tested as an internal project at Cabify,” Muniz wrote in an email. “Soon Cabify and some potential investors saw that Lana could have a greater impact as an independent company, being able to serve gig economy workers from any industry and decided to start over a new entrepreneurial project.”
Through those connections with Cabify, Lana was able to bring in other investors like the Silicon Valley-based investment firm Base 10.
“One of the things we’ve been interested in is in inclusion generally and in fintech specifically,” said Adeyemi Ajao, the firm’s co-founder. “We had gotten very close to investing in a couple of fintech companies in Latin America and that is because the opportunity is huge. There are several million people going from unbanked to banked in the region.”
Along with a few other investors, Base 10 put in $12.5 million to finance Lana as it looks to expand. It’s a market that has few real competitors. Nubank, Latin America’s biggest fintech company, is offering credit services across the continent, but most of their end users already have an established financial history.
“Most of their end users are not unbanked,” said Ajao. “With Lana it is truly gig workers… They can start by being a wallet of wallets and then give customers products that help them finance their cars or their scooters.”
The ultimate idea is to get workers paid faster and provide a window into their financial history that can give them more opportunities at other gig economy companies, said Ajao. “The vision would be that someone can plug in their financial information for services. If they’re working for Rappi and have never been an Uber driver and they want to be an Uber driver, Lana can use their financial history with Rappi to offer a loan on a car,” he said.
That financial history is completely inaccessible to a traditional bank, and those established financial services don’t care about the history built in wallets that they can’t control or track. “Today if you’ve been a gig worker and you go to a bank, that’s worth nothing,” said Ajao.
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Raising $22.5 million, Liftit looks to expand its logistics services in Brazil, Mexico, Chile and Ecuador
The Colombian trucking and logistics services startup Liftit has raised $22.5 million in a new round of funding to capitalize on its newfound traction in markets across Latin America as responses to the COVID-19 epidemic bring changes to the industry across the region.
“We’re focusing on the five countries that we’re already in,” says Liftit chief executive Brian York.
The company recently hired a head of operations for Mexico and a head of operations for Brazil as it looks to double down on its success in both regions.
Funding for the round was led by Cambridge Capital and included investments from the new Latin American-focused firm H20 Capital along with AC Ventures, the venture arm of the second-largest Coca-Cola bottler in LatAm; 10x Capital, Banyan Tree Ventures, Alpha4 Ventures, the lingerie brand Leonisa; and Mexico’s largest long-haul trucking company, Grupo Transportes Monterrey. Individual investor Jason Radisson, the former chief operating officer of the on-demand ride hailing startup 99, also invested.
The new capital comes on top of Liftit’s $14.3 million Series A from some of the region’s top local investors. Firms like Monashees, Jaguar Ventures and NXTP Ventures all joined the International Finance Corp. in financing the company previously and all returned to back the company again with its new funding.
Investors likely responded to the company’s strong performance in its core markets. Already profitable in Chile and Colombia, Liftit expects to reach profitability across all of its operations before the end of the year. That’s despite the global pandemic.
Of the 220 contracts the company had with shippers, half of them went to zero and the other half spiked significantly, York said. While Liftit’s major Colombian customer stumbled, new business, like Walmart, saw huge spikes in deliveries and usage.
“Managing truck drivers is incredibly difficult, and trucking, in our opinion, is not on-demand,” said York. “At the end of the day the trucking market in all of Latin America is a majority of independent owners. They’re not looking for on-demand work… they’re looking for full-time work.”
Less than 1% of the company’s deliveries come from on-demand orders; instead, it’s a service comprised of scheduled shipments with optimized routes and efficiencies that are bringing customers to Liftit’s virtual door.
“We do scheduled trucking delivery so we integrate with existing systems that shippers have and start planning how many trucks they’re going to need and the routes they’re going to take and … tee it up exactly what is going to happen regardless what the traffic conditions are so we have been able to reduce the delivery times for the trucks,” said York.
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Extra Crunch support expands into Argentina, Brazil and Mexico
We’re excited to announce that Extra Crunch is now available to readers in Argentina, Brazil and Mexico. That adds to our existing support in the U.S., Canada, the U.K., and select European countries.
You can sign for Extra Crunch here.
Latin America has always caught the eye of big tech. For companies like Facebook, Amazon and Uber, Latin America has represented a massive growth opportunity. But it’s not just big tech that’s investing in Latin America. The startup scene is booming. According to Crunchbase, VCs invested billions into Latin America in 2018 and 2019.
In 2018, the TechCrunch team took a trip to São Paulo, Brazil to host Startup Battlefield Latin America. We knew about the hot startup scene and massive investments, and wanted to meet the founders fueling the fire in person.
The excitement, wit, creativity and energy of the entrepreneurs in Latin America was impressive. We were dazzled by the pitches from budding startup teams, and we were enlightened by the investors sharing their wealth of knowledge about the ecosystem. What we saw in person helped us tie the funding to the faces of the teams building the future. The entrepreneurial mentality of Silicon Valley doesn’t have borders; it’s alive and well across Latin America.
We wanted to bring Extra Crunch to Latin America to help support the startups and investors in this market because community has always been our top priority. We hope that Extra Crunch’s deep analysis and company-building resources will help the Latin America tech community grow even stronger than it is today.
We’ve been polling our audience about expanded country support for over a year now, and Argentina, Brazil and Mexico have always been near the top of the list. Now, we’re delivering on the promise to bring Extra Crunch to everyone who asked for it.
We’re optimistic that Extra Crunch will be a big hit in Latin America, and we hope entrepreneurs and investors in the region who have not yet heard of TechCrunch will give it a try.
You can sign for Extra Crunch here.
What is Extra Crunch?
Extra Crunch is a membership program from TechCrunch that features research and reporting, reader utilities and savings on software services and events. We deliver more than 100 exclusive articles per month, with a focus on startup teams and investors.
Our weekly Extra Crunch investor surveys will help members find out where startup investors plan to write their next checks. Extra Crunch subscribers will be able to build a company better with how-tos and interviews from experts on fundraising, growth, monetization and other key work topics. Readers can also learn about the best startups through our IPO analysis, late-stage deep dives and other exclusive reporting delivered daily.
Here’s a taste of the articles you can expect to see in Extra Crunch:
- Women are the secret ingredient in Latin America’s outsized returns
- You need a minimum viable company, not a minimum viable product
- 6 strategic stages of seed fundraising in 2020
- Latin American startup deals see major drop in COVID-19 era
Beyond articles, Extra Crunch also features a series of reader utilities and discounts to help save time and money. This includes an exclusive newsletter, no banner ads on TechCrunch.com, Rapid Read mode, List Builder tool and more. Committing to an annual or two-year Extra Crunch membership will unlock discounts on TechCrunch events and access to Partner Perks. Our Partner Perks can help you save on services like AWS, Brex, Canva, DocSend, Zendesk and more.
Thanks to all of our readers who voted on where to expand support for Extra Crunch, and thanks to all who participated in the Extra Crunch beta in Latin America. If you haven’t voted and you want to see Extra Crunch in your local country, let us know here. We’re actively working on expanding support to more countries, and input from readers is greatly appreciated.
You can sign up or learn more about Extra Crunch here.
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La Haus is bringing US tech services to Latin America’s real estate market
The alchemy for a successful startup can be hard to parse. Sometimes, it’s who you know. Sometimes it’s where you go to school. And sometimes it’s what you do. In the case of La Haus, a startup that wants to bring U.S. tech-enabled real estate services to the Latin American real estate market, it’s all three.
The company was founded by Jerónimo Uribe and Rodrigo Sánchez Ríos, both graduates of Stanford University who previously founded and ran Jaguar Capital, a Colombian real estate development firm that had built over $350 million worth of retail and residential projects in the country.
Uribe, the son of the controversial Colombian President Daniel Uribe (who has been accused of financing paramilitary forces during Colombia’s long-running civil war and wire-tapping journalists and negotiators during the peace talks to end the conflict) and Sánchez Ríos, a former private equity professional at the multi-billion-dollar firm Lindsay Goldberg, were exposed to the perils and promise of real estate development with their former firm.
Now the two entrepreneurs are using their know-how, connections and a new technology stack to streamline the home-buying process.
It’s that ambition that caught the attention of Pete Flint, the founder of Trulia and now an investor at the venture capital firm NFX. Flint, an early investor in La Haus, saw the potential in La Haus to help the Latin American real estate market leapfrog the services available in the U.S. Spencer Rascoff, the co-founder of Zillow, also invested in the company.
“Latin America is very early on in its infancy of having really professional agents and really professional brokerages,” said Flint.
La Haus guides home buyers through every stage of the process, with its own agents and salespeople selling properties sourced from the company’s developer connections.
“The average home in the U.S. sells in six weeks or less,” said La Haus chief financial officer Sánchez Ríos in an interview. “That timing in Latin America is 14 months. That’s the dramatic difference. There is no infrastructure in Latin America as a whole.”
La Haus began by reaching out to the founders’ old colleagues in the real estate development industry and started listing new developments on its service. Now the company has a mix of existing and new properties for sale on its site and an expanded geographic footprint in both Colombia and Mexico.
“We have a portal… that acts as a lead-generating machine,” said Sánchez Ríos. “We aggregate listings, we vet them. We focus on new developers.”
The company has about 500 developers using the service to list properties in Colombia and another 200 in Mexico. So far, the company has facilitated more than 2,000 transactions through its platform in three years.
“Real estate now is turning fully digital and also in this market professionalizing,” said Flint. “The publicly traded online real estate companies are approaching all-time highs. People are just prizing the space that they spend their time in… the technologies from VR and digital walkthroughs to digital closes become not just a nice to have but a necessity. “
Capitalizing on the open field in the market, La Haus recently closed on $10 million in financing led by Kaszek Ventures, one of the leading funds in Latin America. That funding will be used to accelerate the company’s geographic expansion in response to increasing demand for digital solutions in response to the COVID-19 epidemic.
“Because of Covid-19, consumers’ willingness to conduct real estate transactions online has gone through the roof,” said Sánchez Ríos, in a statement. “Fortunately we were in the position to enable that, and we expect to see a permanent shift online in how people conduct all, or at least most, of the home-buying process. This funding gives us ample runway to build the end-to-end real estate experience for the post-Covid Latin America.”
Joining NFX, Rascoff, and Kaszek Ventures are a slew of investors, including Acrew Capital, IMO Ventures and Beresford Ventures. Entrepreneurs like Nubank founder David Velez; Brian Requarth, the founder of Vivareal (now GrupoZap); and Hadi Partovi, CEO and founder of Code.org, also participated in the financing.
“We backed La Haus because we saw many of the same ingredients that resulted in a fantastic outcome for many of our successful companies: A world-class team with complementary skills; a huge addressable market; and an almost religious zeal by the founders to solve a big problem with technology,” said Hernan Kazah, co-founder and managing partner of Kaszek Ventures.
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Fintech regulations in Latin America could fuel growth or freeze out startups
Ximena Aleman is co-founder and chief business development officer at Prometeo, an open banking platform that serves Latin America.
It may have entered the game later than other leading regions such as Europe and North America, but Latin America’s fintech industry is dynamic and growing fast. The sector was recently given a valuation of more than $150 billion and continues to expand year-on-year.
And while the longer-term impact of COVID-19 on the sector is yet to be determined, there’s no doubt that the demand for certain fintech solutions is on the rise. As smaller financial institutions across the region are under pressure to digitize, many are calling on fintechs to help them along this journey. In addition, a number of SMEs are seeking out digital loan services to help them get through the crisis.
The sector’s speedy expansion has meant that regulators in LatAm are under increasing pressure to enact legislation that addresses the murky waters of fintech activity, providing confidence to consumers and investors alike. However, regulation across the region must be careful to not quash innovation, while startups must figure out how to be agile in an environment which is becoming increasingly regulated. Let’s take a closer look at what impact regulation has had so far in LatAm, and what needs to happen to strike a balance between sector growth and public trust.
The development of fintech regulation across LatAm
Mexico is currently leading the way when it comes to fintech regulation in LatAm, thanks to its comprehensive 2018 fintech Law. The law covers most fintech activities, including crowdfunding, virtual wallet, transactions carried out with cryptocurrencies and open banking. In addition, Mexico has certain financial laws that regulate financial entities in their execution of transactions using fintech. The law also provides a regulatory sandbox for both licensed and non-licensed companies.
Brazil is the furthest ahead after Mexico, as it individually legislates crowdfunding and peer-to-peer lending, while a special congressional commission is working on a broader legislative strategy. Brazil’s Central Bank also endeavors to make open banking legislation effective by the third quarter of 2020, which will pave the way for a thriving open banking ecosystem.
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Omidyar-backed Spero Ventures invests in Mexico City’s Mati, a startup pitching ID-verification
Spero Ventures, the venture capital firm backed by eBay founder Pierre Omidyar, has gone to Mexico City for its latest investment, backing the identity verification technology developer Mati.
Launched in San Francisco, the two co-founders Filip Victor and Amaury Soviche, decided to relocate to Mexico because of its proximity to big, untapped markets in Mexico, Brazil and Colombia.
“After developing the technology in San Francisco, we chose to start commercially in Latin America. It has been the perfect petri dish for us: the markets here, especially in Mexico, Brazil and Colombia, are very exciting. These countries have the highest payments fraud rates in the world, which makes their identity issues the most interesting,” said Victor in a statement.
The rise of a new generation of fintech startup across Latin America creates a unique opportunity for Mati in a number of markets — and so does a new generation of financial services regulations, the company said. “We view the fintech regulations sweeping across LatAm as an opportunity to help a lot of promising fintechs and marketplaces get to the next level,” Victor said.
Already working across three countries, with operations in Mexico City, St. Petersburg and San Francisco, Mati is an example of the global scope that even very early-stage companies can now achieve.
Identity verification is at the core of much of the modern gig economy and much of the social networking defining life during a pandemic.
The company said it will use the capital investment — it would not disclose the amount of money it raised — to continue product development and expand its geographic footprint.
The scope of the identity verification problem is what brought Spero to the table to discuss an investment, according to a statement from Shripriya Mahesh, the founding partner at Spero.
“For us, identity is foundational to scaling the vast array of gig economy, fintech, social and commerce platforms that represent our collective future of work,” Mahesh said. “The ability to have safe and trusted interactions at an unprecedented scale, especially with people in places where national identity infrastructure is limited, will create opportunities and global connections we can’t yet even forecast.”
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Hims & Hers launch Spanish language telemedicine services
Hims & Hers, the startup focused on providing access to elective treatments for things like hair loss, skin care and erectile disfunction and online telemedicine services, is expanding its services to include a Spanish language option, the company said.
After Mexico, the U.S. has the second-largest Spanish speaking population in the world, with an estimated 41 million U.S. residents speaking Spanish at home. The population also prefers to receive healthcare information and frequent facilities that offer resources in Spanish.
Now, with a shortage looming in primary care physicians for rural areas and inner cities and a sky-high rate of Hispanics living without any form of healthcare coverage (roughly 15.1%, according to data provided by the company), Hims & Hers is pitching its telemedicine offering as an option.
“Language, cost, and location should not be barriers to receiving quality care, which is why we are launching a Spanish offering on our telemedicine platform,” the company said in a statement.
The company’s $39 primary care consultations at its Hims and its Hers websites will be in Spanish. That will include everything from communications like the patient intake form and instructions to prepare for an online consultation along with a connection to Spanish-speaking healthcare provider.
“The reason we created Hims & Hers was to break down barriers and provide more people with access to quality and convenient care,” the company’s co-founder and chief executive, Andrew Dudum, said in a statement. “As a telemedicine company, we recognize the need and understand the importance of serving the Spanish-speaking population. We hope those seeking access to care in Spanish find our platform to be a welcoming, inclusive, quality experience.”
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Peru’s startup scene is ready for more
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.
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