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Fintech Investment Latin America 2019


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Fintech in Latin America had an amazing year in 2019 with over US$ 2 billion in raised capital. This report analyzes the fintech investments in the region with the goal of shedding light on the fintech environment in the region and its huge potential.

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Fintech Investment Latin America 2019

  1. 1. Thiago Paiva FINTECHMARKETINLATINAMERICA2019: Investmentanddeals By Thiago Paiva
  2. 2. Thiago Paiva 1. Intro 2. The Author 3. Fintech Ecosystem 4. Investments ○ Total Investments in the Region ○ Investments per Country ○ Investments per Month ○ Investments per Industry Segment ○ Main Investments Rounds ○ Most Active Investors in Fintech ○ Debt Financing Deals 5. Merger & Acquisitions 6. Final Thoughts 7. Resources ○ Fintech Radars Index
  3. 3. Thiago Paiva Intro First of all, thanks for reading this material! My name is Thiago Paiva and I'm a fintech entrepreneur, investor, and columnist. I've been working with startups and innovation for the past 9 years in Brazil, Mexico, US, and Singapore. I have invested and accelerated more than 60 startups from which more than 20 were fintech startups from 8 different countries while working at Wayra in Brazil and Startupbootcamp Fintech in Mexico. Since I started to invest in fintechs, in 2013, the market radically changed. In less than 6 years, we saw the birth of the first fintech unicorns in the region, as well as IPOs from Stone (NASDAQ) and Pagseguro (NYSE) in the US. My goal with this report is to shed some light to the fintech ecosystem in Latin America that has been under-appreciated for a long time despite its huge potential. Finally, if you like this material, please, share it! Thiago Oliveira de Paiva
  4. 4. Thiago Paiva The Author I'm a fintech entrepreneur, investor, and columnist! I have been actively engaged in the Latin American ecosystem since 2010. During this period, I have evaluated 2,600+ and invested in 60+ startups from 9 different countries while working at Wayra Brazil and Startupbootcamp Fintech Mexico. I studied Fintech at MIT and Business with Concentration in Finance at UCLA. I write about fintech in Latin America in international and regional publications and also develop reports analyzing the ecosystem. I'm currently a Product Manager at Oyster Financial, a Neobank for SMEs in Latin America, leading its marketplace initiative. I'm also a TechCrunch contributor.
  5. 5. Thiago Paiva FINTECH ECOSYSTEM
  6. 6. Thiago Paiva The fintech ecosystem in Latin America has been growing quite strongly through the past few years, drawing attention from reputable investors such as Andreessen Horowitz, Sequoia Capital, and SoftBank. In Latin America, I believe we have an interesting combination that creates a perfect setup for fintechs to thrive and prosper. Just to highlight some of the main issues: ● People in the region suffered many financial crises, making them very skeptical of banks; ● Poor financial infrastructure excludes people from accessing basic financial services such as payments and credit, leading to a high level of informal economy ; ● Half of it's 640 million population is unbanked; ● In most countries, there is an oligopoly of financial institutions, leading to poor customer support, abusive and hidden fees, and weak efforts to digitalize; On the other side, Latin America has 68% of smartphone penetration with a highly connected population, looking for solutions beyond the traditional financial systems to solve their problems. Under these circumstances, fintechs are starting to draw more and more attention from customers and investors. Fintech Ecosystem in Latin America Source: The Mobile Economy Latin America and the Caribbean 2018
  7. 7. Thiago Paiva 124 Updated Mar/19 394 Updated Jun/19 Number of Fintechs per Country Source: IDB-Fintech Latin America 2018 , and Fintech Radars from Finnovista According to IDB, Latin America has around 1166 fintechs. Brazil (377) and Mexico (394) are leading in number of fintechs, with Mexico having a few more but with Brazilian data a little outdated. The other countries in the region are way behind with Colombia (124) and Chile (112) trying to establish themselves as the third largest ecosystem. 377 Updated May/18 110 Updated Mar/18 112 Updated Aug/19
  8. 8. Thiago Paiva Highlighted Fintechs in the Region
  9. 9. Thiago Paiva Fintech Adoption Source: Consumer Fintech Adoption Index - EY Average 64% Latin America is one of the regions with fastest fintech adoption, according to EY Consumer Adoption Index 2019. It had 3 countries in the Top 10 (Colombia, Peru, and Mexico) and all of the largest economies above the average, 64%, of the 27 researched countries.
  10. 10. Thiago Paiva Most Funded Fintechs ● BR - Nubank (US$ 820M): The largest neobank outside of China with more than 20M customers, worthing US$ 10 billion; ● BR - Quinto Andar (US$ 335M): An unicorn proptech that facilitates the rent of properties by offering financial services; ● BR - Creditas (US$ 314M): A secured online loan to consumers; ● AR - Ualá (US$ 194M): Neobank for personal accounts; ● MX - Clip (US$ 160M): A card payment provider similar to Square; ● MX - Konfio (US$ 143M): An unsecured online loans to SMEs; ● BR - Neon (US$ 121M): A neobank with personal and business account; ● BR - Loft (US$ 88M): Is a proptech that facilitates the purchase and sale of properties; ● BR - GuiaBolso (US$ 66M): PFM and lending, similar to Mint; ● AR - Technisys (US$ 64M): Digital transformation; ● MX - Credijusto (US$ 53M): A secured online loans to SMEs; ● BR - WEEL (US$ 44.5M): Online factoring; ● AR - Ripio (US$ 44.4M): Bitcoin wallet and exchange; ● BR - ContaAzul (US$ 37M): SMEs financial management; ● BR - Ebanx (US$ 30M): An unicorn online payment processor; Source: Crunchbase and startup press releases * Only equity deals were considered
  11. 11. Thiago Paiva Emerging Trends Source: ● Financial services for the gig economy ● Rethinking insurance ● Providing basic financial services to MSMEs ● Everyone wants to be a bank (Banking-as-a-Service) ● Proptech meets fintech Although the fintech ecosystem in the region was impulsed by startups in payment (Stone, Pagseguro, Clip), neobank (Nubank, Ualá, Neon), and lending (Creditas, Konfio, Credijusto), we're starting to see some other emerging trends. Find them below: (if you want to know more, check my TechCrunch article: "A look at Latin America’s Emerging Fintech Trends")
  12. 12. Thiago Paiva INVESTMENTS
  13. 13. Thiago Paiva Since 2011, venture capital investment in Latin America has boomed, achieving more than 150% average compound annual growth. In 2019, according to Crunchbase data, the region reached US$ 4.2 billion raised in 430 equity deals; a 213% increase from the previous year. Fintech is the leading segment in the region with a total of US$ 2.94 B raised (US$ 2.22 B in equity and US$ 720.2 M in debt). Investments in Latin America Source: Data from LAVCA (2011-2018) and Crunchbase (2019)
  14. 14. Thiago Paiva Total Investments in the Region Latin American fintechs raised a total of US$ 2.94 B (US$ 2.22 B in equity and US$ 720.2 M in debt) in 147 deals in 2019, with 26 not disclosing the amount invested. In the Q4 alone, there were US$ 1.089 B in 22 deals. The amounts includes the Softbank equity investment in Banco Inter (BIDI4.SA) (a listed challenger bank) of US$ 331.7 M. Source: proprietary data from deals
  15. 15. Thiago Paiva Number of Equity Investments per Country Source: proprietary data from deals In 2019, Brazil led the investments in the region with 45.5% of all the deals in the region. Mexico secured its second spot while Colombia is positioning itself as the third most dynamic fintech country in the region.
  16. 16. Thiago Paiva Volume of Equity Investments per Country Considering the volume of investments, the Brazilian fintechs captured an impressive 72.2% of all the disclosed investments in the region while Mexico remained in the second position with 16.8%. Although Colombia had more deals, Argentina was able to raise a few large rounds, which enabled it to get the third place. Source: proprietary data
  17. 17. Thiago Paiva Volume of Equity Investments per Month Although the year started with a good amount of deals, the volume invested was not significant compared to the rest of the year. Q2 and Q3 were the most important quarters of the year with most of the activity but also concentrating 73% of all the volume invested, with July saw the most investment, with US$ 733.9 M. Source: proprietary data
  18. 18. Thiago Paiva Equity Investment by Industry Segment Lending (consumer and business) is still a relevant fintech segment in Latin America with a little over 30% of all deals on a total of US$ 519 M in equity investment. Even so, Digital Banking became the hottest segment attracting the largest share of the investors money, 54.3%, on total of US$ 1.058 B. Another trending segment is Mortgage and Real Estate attracting US$ 269.5 M. Source: proprietary data
  19. 19. Thiago Paiva Equity Investment by Industry Segment - 4Q 2019 In the Q4, Digital Banking dominated the VCs interest, attracting 67.5% of all money invested in the quarter. We also saw many Mortgage and Real Estate deals with small value, this is probably the reverberation of the large investments of Loft, Flat, and QuintoAndar generating entrepreneurs and investors interest in this market. Source: proprietary data
  20. 20. Thiago Paiva US$ 96 Million (BR - Nov 19) US$ 150 Million (AR - Jun 19) Largest Deals in 2019 US$ 100 Million (MX - May 19) US$ 231 Million (BR - Jun 19) US$ 400 Million (BR - Jul 19) US$ 331.7 Million Listed Company (BR - Jul 19) US$ 250 Million (BR - Sep 19) Source: proprietary data. Selected investors in the round US$ 100 Million (MX - Dec 19)
  21. 21. Thiago Paiva TOP 10 Deals - Comparative Chart Source: proprietary data Last year was we saw many mega-rounds (over US$ 100 M), Nubank, QuintoAndar, Creditas, Ualá, Clip, and Konfio all raised mega-rounds with Neon almost reaching that mark. Another mega-round was the Softbank investment in the listed company Banco Inter.
  22. 22. Thiago Paiva TOP 10 Deals - Share of Equity Investments Source: proprietary data Venture Capital is a power-law business where usually a few deals concentrate a large share of the total. We can clearly see this happening in 2019 fintech deals, where the TOP 10 deals accumulated 67% of the total volume of equity investments of the total 134 deals.
  23. 23. Thiago Paiva GROWTH-STAGE Highlighted VCs Actively Investing Local Foreigners BRAZIL MEXICO CHILE EARLY-STAGE ARGENTINA
  24. 24. Thiago Paiva Here are the most active equity investors (with exception of accelerators) in 2019. Eight investors had 4 or more investments in fintech; Five are regional funds and three are global funds. Most Active Equity Investors (1 of 2) 7 7 Investors Disclosed Deals Source: proprietary data 8
  25. 25. Thiago Paiva 6 Most Active Equity Investors (2 of 2) 6 6 6 4 Source: proprietary data * Mountain Nazca participated in 2 rounds of investment in Albo in 2019 4
  26. 26. Thiago Paiva Debt Financing Deals On the debt side, although Brazil had almost half of all deals, Mexico led the debt financing in the region with US$ 400 M, 51.9% of all amount in debt financing. Goldman Sachs is positioning it as the most relevant debt finance investor in the region, investing a total of US$ 475 M in 2019. Although there are many investors interested in investing in larger rounds, fintechs are having problems to raise rounds smaller than US$ 50 M. Source: proprietary data
  27. 27. Thiago Paiva Merger & Acquisitions
  28. 28. Thiago Paiva Last year, there were only 13 M&A deals in fintech. Most of them had the amount undisclosed but most likely weren't large exits. The only major deal was the long awaited XP Investimentos IPO, the Brazilian digital broker was listed in NASDAQ, raising US$ 1.96 billion at a US$ 14.9 billion valuation. As the market matures and more money is invested, we should expect to see more deals. Nubank and Creditas both mentioned that they are looking for acquisitions that could fuel their growths. Merger & Acquisitions Source: proprietary data
  29. 29. Thiago Paiva Fintech Exits Acquired by Neon Undisclosed amount (Sep 19) Acquired by Carrefour Undisclosed amount (Oct 19) Acquired by Kushki Pagos Undisclosed amount (Aug 19) Acquired by Yonder Media Mobile Undisclosed amount (Aug 19) IPO - NASDAQ:XP (Dec 19) Market Cap US$ 14.9B Acquired by Rappi Undisclosed amount (Feb 19) Source: proprietary data * Spun-off its e-wallet, now called Mibo
  30. 30. Thiago Paiva Fintech Exits Acquired by Foxbit Undisclosed amount (Nov 19) Acquired by Advent 51% for US$ 725M (Jan 19) Acquired by Polygon Fintech Undisclosed amount (May 19) Acquired by Omni US$ 24.4 M (May 19) Acquired by Grin Undisclosed amount (Jun 19) Acquired by Capital Tech Undisclosed amount (Aug 19) Source: proprietary data
  31. 31. Thiago Paiva Fintech Exits Acquired by Creditas Undisclosed amount (Aug 19) Source: proprietary data
  32. 32. Thiago Paiva FINAL THOUGHTS
  33. 33. Thiago Paiva Final Thoughts Fintech in the region is booming! Latin American fintechs attracted over US$ 2 billion on equity investment in 2019, overcoming the previous year total venture capital investment in the region. The success of Stone, Nubank and other fintechs is attracting attention from global investors that are eager to invest in the potential of the region. Softbank started the year commiting a US$ 5 billion fund for the region, and started to deploy this capital quite fast. With so many mega-rounds, some local investors are worried about high valuations and excess cash in the market. I don't think that is the case, we're still far away from other more developed regions and even compared regions such as Southeast Asia. Brazil is still the leading market in the region but Mexico is quickly gaining relevance. Following them, Colombia is trying to positioning itself as the third fintech market in the region, Rappi success case helped foster an entrepreneurial culture and attract investors interest. Following a global trend, the most relevant segment is digital banking with Nubank, Neon, and Ualá as the leading players. Lending and Payments are still quite relevant, however, Mortgage & Real Estate is a relevant emerging trend that is attracting high profile investors to the region. Continue in the next slide
  34. 34. Thiago Paiva Final Thoughts Of course, Latin America has still a long way to go to compete with the main fintech hubs in the world. Although moving in the right direction, banking and fintech regulation in the region is evolving at slower pace than Europe and Asia. The lack of technical talent such as developers and product managers is a key challenges fintechs face, leading many of them to import talent and even a few to structure teams outside of the region. This in-flow of foreign talent and investors is bringing a stronger startup culture as well as the state of the art techniques. This combination is helping strengthening the local ecosystem. The lack of more relevant exits was a low-light of 2019, with XP Investimentos IPO been the only major deal. Despite that, 2020 has all the ingredients to have a more active M&A environment with well-funded fintechs looking to aggressively expand regionally. Despite of the challenges, the region is at a turning point now! We have never seen so much capital and talent invested in creating amazing companies, trying to become the next Nubank! Do you agree with me? I would love to hear your opinion! Send me a message at Share this Report
  35. 35. Thiago Paiva RESOURCES
  36. 36. Thiago Paiva Materials by the Author ● Report: ○ Banking and Fintech Market in Latin America 2019 ○ Fintech Investment Report Latin America 1H2019 ○ Fintech Investment Report Latin America 3Q2019 ○ Fintech Market in Singapore 2018 ● Iupana Monthly Column : ○ Fintech Snapshot of the Latin American Market ● TechCrunch Article: ○ The Emergence of Super Apps in Latin America ○ The Battle to Become the Mexican Nubank Just Started ○ A Look at Latin America's Emerging Fintech Trends
  37. 37. Thiago Paiva Resources ● IDB Report - Financial Latin America 2018: Growth and Consolidation ● LAVCA Report - Latin America Startup Heatmap ● GSMA Intelligence Report - The Mobile Economy Latin America and the caribbean 2018 ● Finnovista Fintech Radar Mexico 2019 ● Finnovista Fintech Radar Brazil 2018 ● Finnovista Fintech Radar Colombia 2019 ● Finnovista Fintech Radar Argentina 2018 ● Finnovista Fintech Radar Chile 2019 ● ALLVP - Early Stage VCs Active in Latin America ● Crunchbase ● EY Fintech Adoption Index 2019
  38. 38. Thiago Paiva Fintech Radar - Mexico Source: Finnovista Fintech Radar Mexico 2019
  39. 39. Thiago Paiva Fintech Radar - Brazil Source: Finnovista Fintech Radar Brazil 2018
  40. 40. Thiago Paiva Fintech Radar - Colombia Source: Finnovista Fintech Radar Colombia 2019
  41. 41. Thiago Paiva Fintech Radar - Argentina Source: Finnovista Fintech Radar Argentina 2018
  42. 42. Thiago Paiva Fintech Radar - Chile Source: Finnovista Fintech Radar Chile 2019
  43. 43. Thiago Paiva THANKSFORREADING! Please, don't be shy and share this material! @ThiagoPaivaFollow me at: