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Fintech Success In Latin America Opens Doors For US Venture Funds

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Latin America’s fintech industry is booming, and U.S. venture capital firms are not only taking notice, but are backing that growth with some significant investments.

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More than $7 billion has been invested into Latin American financial services companies since 2016, according to Crunchbase data. Annual investment dollars have also grown since 2018, rising to $2 billion in 2020. So far this year, dollars invested in the sector are already neck-and-neck with last year’s total, meaning 2021 investment will almost certainly eclipse 2020.

A big chunk of that investment has gone to a single company: Digital banking giant Nubank, which has raised $950 million of its $1.5 billion in total known funding in just the past three years.

Since the start of the year, several U.S. venture firms voiced their intentions to focus on Latin America’s financial technology firms, including QED Investors and Clocktower Technology Ventures, while Andreessen Horowitz laid out a lengthy case for why there is so much demand.

“What we are witnessing in real time is the flywheel of Latin American innovation,” Ben Savage, a partner at Clocktower, told Crunchbase News. “It is fun and exciting, and we are honored to be a part of it. I have no doubt that what happened over a five- or six-year period with U.S. fintechs could happen in 18 months in Latin America.”

Inside the new funds

In March, Clocktower launched the firm’s first venture capital fund dedicated to financial services innovation in Latin America, targeting a total of $25 million.

Savage initially set out to gradually raise capital for the fund. The reality was different: Rather than months, it only took weeks, and shortly after announcing the fund, Clocktower committed to 12 investments — a sign that everything is moving quickly as opportunities are recognized, he added.

He sees a compelling story happening in Latin America around fintech over the next 20 years, but believes we are still in the early innings of a big wave of venture capital being infused into the region broadly, being led by fintech investments.

“Part of our job as early-stage investors is to anticipate the capital flow that will provide that rocket fuel for growth,” Savage said.

QED sees a similar phenomenon. The firm’s first investment into the region was in Nubank in 2014, said Bill Cilluffo, partner and head of international investments at QED.

Now with an established presence, QED announced the Fontes fund in May; $12 million targeting pre-seed and seed fintech startups in the region. The name is the Latin word for fountains.

“We didn’t know a lot about the region when we made the Nubank investment, but we figured we would learn about the geography as we went along,” Cilluffo said. “Our new fund, Fontes, is us doubling down in the region.”

One of the early lessons QED learned was that banking in Latin America is highly concentrated. Four big players may control 80 percent of banking in Brazil, Cilluffo said. Little competition and a focus on more affluent customers has led to higher costs for services, such as getting a loan, and underwhelming experiences for customers who do not fit into that category.

In Mexico alone, it is estimated that 42 million people are unbanked, with millions more considered “underbanked,” meaning their bank doesn’t provide a wide range of services, or they are generally unhappy with the service.

That’s opened the door for fintech startups to come in with lower costs, better customer experiences — such as digital applications — and even offer options typical to the U.S., but not widely available in Latin America, like home equity or car loans. Those services are resonating with customers, according to Ana Cristina Gadala-Maria, QED principal and head of the Fontes program.

“Fintech’s success in Latin America is mimicking behaviors of the underbanked, which is still a large part of the population,” Gadala-Maria said in an interview. “Payment systems like Pix in Brazil are enabling more fintechs to offer services and meet customers where they are at.”

Although QED typically comes in at a Series A level, positioning Fontes at an earlier stage is a natural extension of what the firm is doing and enables it to leverage Latin America’s fintech evolution, she added.

‘Competition is increasing’

Fintech continues to be a leading category in both deals and dollars invested due to the opportunity to make good returns, according to Carlos Ramos de la Vega, manager of venture capital for the Latin American Private Equity & Venture Capital Association, a not-for-profit membership organization supporting the growth of the private equity and venture capital industry in Latin America.

The level of sophistication in targeting certain customers has grown, too. Starting with debit cards, companies are now developing apps for niche markets, such as teenagers or Gen Z, as well as adding features to be more inclusive of customers not already using a bank, Ramos de la Vega said.

“One of the reasons lending and credit platforms have had success is the ability to underwrite a huge segment of the population,” he added. “Competition is increasing, but there is the need for a bigger skill set because financial needs are changing and people are more educated with technology.”

The venture capital network is also growing. In addition to QED and Clocktower, other U.S. firms have been dedicating dollars to the region over the past five years, including Ribbit Capital, Lightspeed Venture Partners and General Catalyst, which led spend management company Clara’s $3.5 million pre-seed round in March and followed on a $30 million Series A in May, according to Crunchbase data.

Local venture capital fund managers are also eager to partner with foreign firms after growing and developing the ecosystem for more than a decade, Ramos de la Vega said.

“Last year we saw 83 percent of local investors be part of local deals, while 39 percent were involved in deals with international investors,” he added. “Foreign fund managers see local firms as good resources when it comes to understanding fintech. The dynamic is more of a collaboration approach.”

ONEVC Partner Arthur Brennand also sees it as collaboration versus competition. Last month, the seed-stage venture firm, with offices in São Paulo and San Francisco, announced the first close — $18 million — of its second fund, targeted at up to $40 million.

“We are proud to collaborate with most of the funds, and view them as a trusted partner looking at the region,” he said in a recent interview. “It is unique to be part of the rounds and not competing directly. We’ve been able to build relationships with funds across the U.S. and Europe.”

The future of LatAm fintech

All of the venture capitalists we spoke with said Latin America has no shortage of interesting fintech investment prospects. And, unlike the U.S., there is still some runway for companies to grow without a dozen competitors appearing soon after launch, Cilluffo said.

“We feel good about our place in the ecosystem and its development is fun to watch,” Cilluffo said. “We are excited about the pace of change, and there are no signs of it slowing down.”

Opportunities for fintech in the region are already blurring into other sectors, such as real estate and  e-commerce, as well as human resources in payroll and pension management, Ramos de la Vega said.

In addition, the regulatory environment is improving, particularly in countries like Mexico, where many fintech companies are awaiting approvals, he added.

“The regulatory aspect is changing, and great progress has been made in Mexico since 2017,” Ramos de la Vega said. “There is a big pipeline of companies waiting for regulatory approvals, but we expect that to get moving in the next year.”

Crunchbase Pro queries listed for this article

The query used for this article was Investments Into Latin American Financial Services Companies, in which “financial services” was the industry group and companies headquartered in Latin America.

All Crunchbase Pro Queries are dynamic with results updating over time. They can be adapted with any company or investor name for analysis.

Illustration: Dom Guzman

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Israel’s WalkMe Stock Price Falls On First Day Of Trading

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Digital adoption platform WalkMe closed at $28.81 on Wednesday, 7 percent below its IPO price.

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The Israel-based company raised $287 million through its IPO after pricing its shares at $31, the middle of the $29 to $32 price range it had set. At its IPO price, the company reached a valuation of $2.5 billion.

WalkMe’s platform helps organizations measure how their software investments are working for and benefiting them. As digital transformation accelerated during the COVID-19 pandemic, so did WalkMe’s growth. The company, which was founded in 2011, reported revenue of $148.3 million in 2020, up 41 percent from 2019’s $105.1 million. 

“What we saw during the pandemic was companies gearing up to this new normal,” CEO Dan Adika said in an interview. “We don’t believe most of the companies will go back to what they were. And if they are, they’ve discovered new opportunities to make the world more digital.”

WalkMe’s public debut was likely affected by news that the Federal Reserve increased its expectations for inflation, and that it could increase interest rates by 2023, rather than 2024. In addition, the Dow Jones Industrial Average fell more than 260 points. WalkMe Chief Financial Officer Andrew Casey acknowledged the news in an interview with Crunchbase News, noting that the Fed was “throwing cold water” on the market Wednesday. 

The company wanted to go public now to raise awareness for its category, according to Adika.

“The main reason was getting more acknowledgement of our category,” Adika said. “Creating a category is very challenging, and at the end of the day we got to a critical mass where we … can get to the next phase.”

Illustration: Li-Anne Dias

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Stork Club Secures $30M Series A To Deliver Better Maternity Care, Family-Building

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When Jeni Mayorskaya sought answers to questions related to her reproductive health, she not only found that maternity care had gaps, but that care requires different services depending on family dynamics.

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She set out to provide a new approach to care, founding San Francisco-based Stork Club in 2017, a maternity care platform that extends traditional insurance coverage to provide all possible options to anyone who wants to have a baby.

The company partners with major insurance providers to tell people how much they’ll pay out-of-pocket for maternity and fertility care up front so they can make informed decisions.

“Communication is so broken,” Mayorskaya told Crunchbase News. “You get a quick appointment, but everything happens so fast and you can feel alone. We prioritize the patient and create concierge guidance about the next steps and what are their responsibilities. For such expensive services, it can be stressful, so we communicate financial responsibility before receiving care. It’s such a tiny thing, but so good for people.”

Stork Club is now infused with $30 million in Series A funding, one year after the company raised a $2.7 million seed round led by Bowery Capital and Slow Ventures.

General Catalyst led the newest capital infusion with existing investors Bowery Capital and Slow Ventures participating again, as well as a group of angel investors, including Jack Altman, Zach Sims, Oleg Rogynskyy and Kevin Mahaffey.

Maternity care, with insurance, is often the largest expense for companies, costing them $130 billion a year, according to Mayorskaya.

Those costs are driven by what she calls “million-dollar babies:” Births of multiple babies and premature babies who often spend time in the neonatal intensive care unit. In vitro fertilization methods often result in twins or triplets, she said. For a company with a few thousand covered employees, Stork Club is able to save it between $500,000 and $3 million dollars per year, she added.

Stork Club app

In the year since Stork Club’s seed round, the company saw massive demand for its services, Mayorskaya said. During that time, new customers came on board, including Ropes & Gray, Corgan and Fors Marsh Group.

She saw women feeling burned out during the global pandemic, which was leading to the equity and gender gap getting wider. However, some companies were incentivized to close the gap.

“It shows how these types of services are necessary for this market,” she added. “We thought it would be hard given the environment, but we saw companies prioritize the cost of health and the importance of these types of benefits — reproductive, fertility, pregnancy, adoption and postpartum care.”

Last year, Stork Club experienced 5x growth in revenue, despite many fertility clinics being shut down and others struggling during the pandemic, Mayorskaya said. Its network currently includes more than 250 fertility clinic locations across the United States.

To meet the demand, the company intends to use the new capital to hire more talent, as well as continue developing its products and services. As part of the investment, General Catalyst Managing Director Hemant Taneja is joining Stork Club’s board of directors.

“This is not just a fancy perk, but a way to reduce overall maternity costs, retain and attract talent, and reduce costs while improving clinical outcomes,” Mayorskaya added.

Loren Straub, principal at Bowery Capital, said in an interview that she froze some of her eggs five months before meeting Mayorskaya. She and her husband were told it could cost between $10,000 and $30,000, but that was a large funding gap.

“I’ll never forget when Jeni told me about her approach to provide clarity on what you are going to pay for, which is a novel part of this industry, and she would do it because Stork Club is integrated with plan administrators, which is the only way they can provide this additional level of clarity,” Straub said. “Building out relationships with clinics and insurance companies, as well as prioritizing quality, is their secret sauce. Now they have actual case studies in place and success stories that they can reduce costs, help with retention and create a better experience for everyone.”

Feature photo of Stork Club founder Jeni Mayorskaya and inset screenshot courtesy of Stork Club.
Blogroll illustration: Dom Guzman

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Templafy Rakes In $60M To Help Hybrid Workforces Get What They Need

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As more companies move to a hybrid workforce model, Templafy has closed $60 million to help make sure employees have access to the documents and emails they need to do their jobs.

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The new round was led by Blue Cloud Ventures with participation from all previous investors including Insight Partners, Seed Capital, Dawn Capital and Damgaard Co. Founded in 2014, the company has now raised $125 million.

Templafy’s content enablement platform allows companies to store needed work items like  documents, presentations and emails so employees have secure and easy access, said CEO Jesper Theill Eriksen. The platform integrates with popular office applications such as Microsoft and Salesforce1, so no matter what an employee is using they can retrieve what is needed for a document they are writing or a presentation they are putting together.

“The dispersed workforce has grown,” Theill Eriksen said. “We can provide employees with what they need to work — especially now when you cannot just ask your colleague next to you, ‘Where did you find that?’”

Timing right

The nearly 400-person company does not release revenue numbers, but Theill Eriksen said it has more than 600 customers and saw a 121 percent increase in net new ARR additions during the first quarter this year compared to the same quarter last year.

That growth came after the company raised a $25 million Series C in April of last year. Theill Eriksen said the new funding will be used to continue to push the growth of the company — which has no true headquarters but large offices in Copenhagen and New York — and show companies the importance of content in the business enablement stack.

Jonathan Rosenbaum, vice president at Insight, said while his firm has been an investor in the company for the last several years, this round was even more exciting because of all that has changed when it comes to the workplace over this past year.

“The future of work is top of mind for everyone and as we navigate remote and hybrid set-ups, the need for tech solutions that enable businesses is more important than ever,” Rosenbaum said.

While Templafy estimates the market for content enablement to be around $14 billion, Theill Eriksen agreed it is not the only company in the space. Companies such as Colorado-based Conga — which was bought by Apttus in a $715 million deal last year — and PandaDoc also compete in the growing market, he said. However, Theill Eriksen said his company’s platform is less automated and more flexible than Conga’s offerings, and PandaDoc sells into the medium-sized enterprise space while Templafy mainly focuses on large enterprises.

With both the market and its platform, Rosenbaum believes Templafy eventually will have many options in its future.

“Given its technological leadership and wide applicability, Templafy will of course have suitors as there are many large companies which want to take more ownership of the business user,” he said. “But it has an opportunity to be a growing, independent company for quite some time.”

Illustration: Li-Anne Dias.

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Exclusive: Handdii Raises $3M Seed Round For Property Claim Management

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Property claim management platform Handdii has raised $3 million in a seed round led by Brick and Mortar Ventures, the company told Crunchbase News.

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Handdii’s software works between insurance companies and vetted contractors, partnering with insurance companies like Hippo Insurance and Allianz. The company typically handles small claims — usually around the $20,000 mark. 

As CEO Christie Downs put it, the company targets claims for the small headaches like a roof leak that can be a big headache with insurance companies.

“If you think about all the parties in a property claim, there’s the insurance company, the homeowners and the contractor. And then there can be other parties like independent adjusters and attorneys,” said Downs in an interview with Crunchbase News. “It can be a cumbersome manual process … so we made software to make it more streamlined.”

Downs has a background in construction, while co-founder Kathryn Wood’s background is in insurance. The two came together to digitize the property claim process, launching Handdii in Australia in 2019.

Nine Four Ventures also participated in the seed round, along with Australia’s Scale Investors and Fifty-Second Celebration. 

With the new funding, the company plans to invest in the product, with several integrations in the works, and in expanding across the United States, Downs said. Handdii plans to expand to six states in the United States by the end of the year, and expand in Australia as well. It’s currently available in the U.S. in cities across California, Texas and Ohio (which launched this week). The company will be in Georgia next.

“There’s a solid business there, it’s only going to be growing,” Brick and Mortar Managing Director Darren Bechtel said in an interview. “And there’s also the ability to expand into commercial multifamily property management companies. The growth is overwhelming.”

Handdii last raised money with a $1.9 million seed round led by Scale Investors in August 2019, per Crunchbase data. 

Illustration: Li-Anne Dias

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