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Main article: Latin america

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Topics from 1 to 10 | in all: 145

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

01:07 | 22 February

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

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

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

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

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

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

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

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

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

The company hopes to have over 1 million guests in 2020 in their hotels. With rooms listing at $20 per-night including amenities and an around the clock customer support team.

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

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

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

 


0

Peru’s startup scene is ready for more

22:55 | 12 February

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

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

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

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

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

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

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

Fueling Peru’s growing fintech sector

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

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

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

Impact investing opportunities

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

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

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

Supporting long-term startup growth

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

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

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

 


0

Latin America takes the global lead in VC directed to female co-founders

00:08 | 7 February

Claire Diaz-Ortiz Contributor
Claire Diaz-Ortiz is an angel investor and bestselling author of nine books that have been published in more than a dozen countries. An early employee at Twitter, she was called “The Woman Who Got the Pope on Twitter” by Wired and holds an MBA and other degrees from Stanford and Oxford.

When Flavia Deutsch and Paula Crespi were raising a groundbreaking $1.7 million seed round for their parenting startup in Brazil, they had to turn away male investors.

“The men were already writing us checks, but the women — we had to convince them,” Deutsch explained of the seed round for Theia, which ended the year as the largest all-female founded company raise in Latin America. “For every male investor we had, we wanted one female investor as well,” Deutsch said. And for good reason.

Many studies have established that female-founded companies outperform their all-male counterparts. Boston Consulting Group reports that for every dollar a female founder or co-founder raises, she generates 2.5X more revenue than a male founder.1 First Round Capital’s research held that the female-founded companies it backed performed 63% better than all-male founding teams.2 The Ewing Marion Kauffman Foundation’s showed that return on investment from women-led teams is 35% higher than their all-male counterparts.3 AllRaise, a nonprofit promoting women in VC, found that “companies with women on their founding teams are likely to exit at least one year faster compared to the rest of the market, and the number of exits for companies with at least one female founder is growing at a faster rate year-over-year than exits for companies with only male founders.”4 Jen Neundorfer, founding partner at Jane VC, succinctly explains her fund’s thesis of investing in female founders as, “investing in an overlooked asset class that is overperforming.” After all, it’s a “trillion-dollar opportunity.”5

And in the 2020s, much of that opportunity will be in emerging markets. The first year that the largest IPOs globally came from emerging markets was 2017. Since then, it has been a straight line up and to the right. Nazar Yasin, who invests in emerging markets as the founder of Rise Capital, says, “this trend isn’t going away.” Given that most GDP growth now coming from emerging markets, where most global internet users live, “the future of market capitalization growth in the internet sector globally belongs to emerging markets.”

Latin America takes the global lead in funding women

And it just may belong to the women who start companies there.

New data from Gene Teare at Crunchbase shows that Latin America currently takes the global lead in investment dollars directed to women.

via Crunchbase

In 2019, investments into mixed female-male founding teams represented 16% of dollars invested in Latin America, 9% in the U.S. and only 8% in Europe.

This number includes a $400 million Series F into Nubank, the Brazilian challenger bank co-founded by Cristina Junqueira, who was — not for the first time — pregnant at the time of the raise. Junqueira is not only the female co-founder currently leading the largest neobank in the world, she is also the female co-founder currently leading the world’s largest venture-backed company.

via Crunchbase

Overall, total investment dollars into both mixed male-female teams and female-only teams represented 17% of total dollars invested in Latin America, 13% in the U.S. and 9% in Europe.

In terms of deal volume, mixed female-male founded teams make up 15% of investments in 2019 in Latin America, in comparison with 14% in the U.S. and 11% in Europe. One contributor is fintech. In Latin America, 35% of fintech companies have a female co-founder, 5X more than the global average of 7%.6

That said, in terms of funding all-female teams, the U.S. still leads. In Latin America, the women-only teams made up 4% of investment deals in 2019, on par with Europe but behind the U.S. average of 8%.

Read the conclusion, Women are the secret ingredient in Latin America’s outsized returns, on Extra Crunch.

 


0

Women are the secret ingredient in Latin America’s outsized returns

00:07 | 7 February

Claire Diaz-Ortiz Contributor
Claire Diaz-Ortiz is an angel investor and bestselling author of nine books that have been published in more than a dozen countries. An early employee at Twitter, she was called “The Woman Who Got the Pope on Twitter” by Wired and holds an MBA and other degrees from Stanford and Oxford.

Read the first part of this article, “Latin America takes the global lead in VC directed to female co-founders,” on TechCrunch.


Latin America lags when it comes to female investors

Interestingly, these positive numbers for Latin America come in spite of a lack of female investing partners in Latin America.

New data shows that only 7% of VCs with check-writing ability in Latin America are women. This is just over half the current U.S. average of 12%.

See the full data set here.

This is a critical finding, given that studies indicate that investments in female founded or co-founded teams increase when more women sit across the table as investors.1 Specifically, 2019 research shows that women invest in female entrepreneurs at nearly three times the rate of male investors.2

This means that Latin America could be on the early side of a positive cycle. In other words, more female investors in Latin America would lead to more female co-founders, and faster exits at higher valuations.

Other parts of the world have seen the effects of this positive cycle. Sophia Bendz, a partner at leading European VC Atomico, has watched this happen: “I’ve seen first-hand the impact having female investment partners can have on increasing the amount of investment into female-led companies.”

 


0

Africa Roundup: Trump’s Nigeria ban, Paga’s acquisition and raises — Fluterwave $35m, Sendy $20M

08:34 | 4 February

The first month of the new-year saw Africa enter the fray of U.S. politics. The Trump administration announced last week it would halt immigration from Nigeria — Africa’s most populous nation with the continent’s largest economy and leading tech sector.

The presidential proclamation stops short of a full travel ban on the country of 200 million, but suspends immigrant visas for Nigerians seeking citizenship and permanent resident status in U.S.

The latest regulations are said not to apply to non-immigrant, temporary visas for tourist, business, and medical visits.

The new policy follows the Trump’s 2017 travel ban on predominantly Muslim countries. The primary reason for the latest restrictions, according to the Department of Homeland Security, was that the countries did not “meet the Department’s stronger security standards.”

Nigeria’s population is roughly 45% Muslim and the country has faced problems with terrorism, largely related to Boko Haram in its northeastern territory.

Restricting immigration to the U.S. from Nigeria, in particular, could impact commercial tech relations between the two countries.

Nigeria is the U.S.’s second largest African trading partner and the U.S. is the largest foreign investor in Nigeria.

Increasingly, the nature of the business relationship between the two countries is shifting to tech. Nigeria is steadily becoming Africa’s capital for VC, startups, rising founders and the entry of Silicon Valley companies.

Recent reporting by VC firm Partech shows Nigeria has become the number one country in Africa for venture investment.

Much of that funding is coming from American sources. The U.S. is arguably Nigeria’s strongest partner on tech and Nigeria, Silicon Valley’s chosen gateway for entering Africa.

Examples include Visa’s 2019 investment in Nigerian fintech companies Flutterwave and Interswitch and Facebook and Google’s expansion in Nigeria.

On the ban’s impact, “U.S. companies will suffer and Nigerian companies will suffer,” Bosun Tijani, CEO of Lagos based incubator CcHub, told TechCrunch .

Nigerian entrepreneur Iyinoluwa Aboyeji, who co-founded two tech companies with operations in the U.S. and Lagos — Flutterwave and Andela — posted his thoughts on the latest restrictions

“Just had an interesting dinner convo about this visa ban with Nigerian tech professionals in the U.S. Sad …but silver lining is all the amazing and experienced Nigerian talent in US tech companies who will now head on home,”

.

Notable market moves in African tech last month included an acquisition, global expansion and a couple big raises.

Nigerian digital payments startup Paga acquired Apposit, a software development company based in Ethiopia, for an undisclosed amount.

The Lagos based venture also announced it would launch its payment products in Mexico this year and in Ethiopia imminently, CEO Tayo Oviosu told TechCrunch

The moves come a little over a year after Paga raised a $10 million Series B round and Oviosu announced the company’s intent to expand globally, while speaking at Disrupt San Francisco.

Paga will leverage Apposit — which is U.S. incorporated but operates in Addis Ababa — to support that expansion into East Africa and Latin America.

Paga has created a multi-channel network to transfer money, pay-bills, and buy things digitally. The company has 14 million customers in Nigeria who can transfer funds from one of Paga’s 24,411 agents or through the startup’s mobile apps.

With the acquisition, Paga absorbs Apposit’s tech capabilities and team of 63 engineers.  The company will direct its boosted capabilities and total workforce of 530 to support its expansion.

On the raise side, San Francisco and Lagos-based fintech startup Flutterwave (previously mentioned) raised a $35 million Series B round and announced a partnership with Worldpay FIS for payments in Africa.

FIS also joined the round, led by US VC firms Greycroft and eVentures, with participation of Visa and African fund CRE Venture Capital .

The company will use the funding to expand capabilities to provide more solutions around the broader needs of its clients. Uber, Booking.com and Jumia are among the big names that use Flutterwave to process payments.

Last month, Africa’s logistics startup space gained another multi-million-dollar round with global backing.

Kenyan company Sendy — with an on-demand platform that connects clients to drivers and vehicles for goods delivery — raised a $20 million Series B led by Atlantica Ventures.

Toyota Tsusho Corporation, a trade and investment arm of Japanese automotive company Toyota, also joined the round.

Sendy’s raise came within six months of Nigerian trucking logistics startup Kobo360’s $20 million Series A backed by Goldman Sachs. In November, East African on-demand delivery venture Lori Systems hauled in $30 million supported by Chinese investors.

The company plans to use its raise for new developer hires, to improve the tech of its platform, and toward expansion in West Africa in 2020.

Sendy’s $20 million round also includes an R&D arrangement with Toyota Tsusho Corporation, to optimize trucks for the West African market, Sendy CEO Mesh Alloys told TechCrunch.

More Africa-related stories @TechCrunch

African tech around the ‘net

 


0

Nigeria’s Paga acquires Apposit, confirms Mexico and Ethiopia expansion

08:30 | 22 January

Nigerian digital payments startup Paga has acquired Apposit, a software development company based in Ethiopia, for an undisclosed amount.

That’s just part of Paga’s news. The Lagos based startup will also launch its payment products in Mexico this year and in Ethiopia imminently, CEO Tayo Oviosu told TechCrunch

The moves come a little over a year after Paga raised a $10 million Series B round and Oviosu announced the company’s intent to expand globally, while speaking at Disrupt San Francisco.

Paga will leverage Apposit — which is U.S. incorporated but operates in Addis Ababa — to support that expansion into East Africa and Latin America.

Repat founders

Behind the acquisition is a story threaded with serendipity, return, and collaboration.

Both Paga and Apposit were founded by repatriate entrepreneurs. Oviosu did his MBA at Stanford University and worked at Cisco Systems before returning to Nigeria.

Apposit CEO Adam Abate moved back to Ethiopia 17 years ago for an assignment in the country’s Ministry of Finance, after studying at Brown University and working in fintech in New York.

“I put together a team…to build…public financial management systems for the country. And during the process…brought in my best friend Eric Chijioke…to be a technical engineer,” said Abate.

The two teamed up with Simon Solomon in 2007 to co-found Apposit, with a focus on building large-scale enterprise software for Africa.

Apposit partners (L-R) Adam Abate, Simon Solomon, Eric Chijioke, Gideon Abate

A year later, Oviosu met Chijioke when he crashed at his house while visiting Ethiopia for a wedding. It just so happened Chijioke’s brother was his roommate at Stanford.

That meeting began an extended conversation between the two on digital-finance innovation in Africa and eventually led to a Paga partnership with Apposit in 2010.

Apposit dedicated an engineering team to build Paga’s payment platform, Eric Chijioke became Paga’s CTO (while maintaining his Apposit role) and Apposit backed Paga.

“We aligned ourselves as African entrepreneurs…which then developed into a close relationship where we became…investors in Paga and strategically aligned,” said Abate.

African roots, global ambitions

Fast forward a decade, and the two companies have come pretty far. Apposit has grown its business into a team of 63 engineers and technicians and has racked up a list of client partnerships. The company helped digitize the Ethiopian Commodities Exchange and has contracted on IT and software solutions with banks non-profits and brick and mortar companies.

For a decade, Apposit has also supported Paga’s payment product development.

Paga Interfaces

Over that period, Oviosu and team went to work building Paga’s platform and driving digital payment adoption in Nigeria, home to Africa’s largest economy and population of 200 million.

That’s been no small task considering Nigeria’s percentage of unbanked was pegged as high as at 70% in 2011 and still lingers around 60%, according to The Global Findex database.

Paga has created a multi-channel network to transfer money, pay-bills, and buy things digitally. The company has 14 million customers in Nigeria who can transfer funds from one of Paga’s 24,411 agents or through the startup’s mobile apps.

Paga products work on iOS, Android, and basic USSD phones using a star, hashtag option. The company has remittance partnerships with the likes of Western Union and allows for third-party integration of its app.

Since inception, the startup has processed 104 million transactions worth $6.6 billion, according to Oviosu.

With the acquisition, Paga absorbs Apposit’s tech capabilities and team of 63 engineers.  The company will direct its boosted capabilities and total workforce of 530 to support expansion.

Paga plans its Mexico launch in 2020, according to Oviosu.

Adam Abate is now CEO of Paga Ethiopia, where Paga plans to go live as soon as it gains a local banking license. The East African nation of 100 million, with the continent’s seventh largest economy, is bidding to become Africa’s next startup hub, though it still lags the continent’s tech standouts — like Nigeria and Kenya — in startup formation, ISP options and VC.

Ethiopia has also been slow to adopt digital finance, with less than 1% of the population using mobile-money, compared to 73% for Kenya, Africa’s mobile-payments leader.

Paga aims to shift the financial needle in the country. “The goal is straight-forward. We want Ethiopians to use the Paga wallet as their payment account. So it’s about digitizing cash transactions and driving financial services,” said Oviosu.

Paga CEO Tayo Oviosu

With the Apposit acquisition and country expansion, he also looks to grow Paga’s model in Africa and beyond, as an emerging markets fintech solution.

“There are several very large countries around the world in Africa, Latin America, Asia where these [financial inclusion] problems still exist. So our strategy is not an African strategy…We want to go where these problems exist in a large way and build a global payments business,” Oviosu said.

Fintech competition in Nigeria

As it grows abroad, Paga faces greater competition in Nigeria. For the last decade, South Africa and Kenya — with the success of Safaricom’s  M-Pesa product — have been Africa’s standouts in digital payments.

But over the last several years, Nigeria has become a magnet for VC and fintech startups. This trend reached a high-point in 2019 when Chinese investors put $220 million into Opera owned OPay and Transsion backed PalmPay — two fledgling startups with plans to scale in Nigeria and broader Africa.

That’s a hefty war chest compared to Paga’s total VC haul of $34 million, according to Crunchbase.

Oviosu names product market fit and benefits from the company’s expansion as factors that will keep it ahead of these well-funded new entrants.

“That’s where the world-class technology comes in,” he said.

“We also take a perspective that we cannot build every use-case,” he said — contrasting Paga’s model to Opera in Africa, which has launched multiple startup verticals around its OPay product, from ride-hailing to food-delivery.

Oviosu compares Paga’s approach to PayPal, which allows third-party developers to shape businesses around PayPal as the payment solution.

With its Apposit acquisition and plans for continued expansion, PayPal may become more than a model for Paga.

Founder Tayo Oviosu sees big fintech players, such as PayPal and Alipay, as future competitors with Paga’s planned expansion into more emerging markets.

 


0

Glovo exits the Middle East and drops two LatAm markets in latest food delivery crunch

18:00 | 21 January

The new year isn’t even a month old and the food delivery crunch is already taking big bites. Spain’s Glovo has today announced it’s exiting four markets — which it says is part of a goal of pushing for profitability by 2021.

Also today, Uber confirmed rumors late last year by announcing it’s offloading its Indian Eats business to local rival Zomato — which will see it take a 9.99% stake in the Indian startup.

In other recent news Latin America focused on-demand delivery app Rappi announced 6% staff layoffs.

On-demand food delivery apps may be great at filling the bellies of hungry consumers fast but startups in this space have yet to figure out how to deliver push-button convenience without haemorrhaging money at scale.

So the question even some investors are asking is how they can make their model profitable?

Middle East exit

The four markets Glovo is leaving are Turkey, Egypt, Uruguay and Puerto Rico.

The exits mean its app footprint is shrinking to 22 markets, still with a focus on South America, South West Europe, and Eastern Europe and Africa.

Interestingly, Glovo is here essentially saying goodbye to the Middle East — despite its recent late stage financing round being led by Abu Dhabi state investment company, Mubadala. (It told us last month that regional expansion was not part of Mubadala’s investment thesis.)

Commenting on the exits in a statement, Glovo co-founder and CEO, Oscar Pierre, said: “This has been a very tough decision to take but our strategy has always been to focus on markets where we can grow and establish ourselves among the top two delivery players while providing a first-class user experience and value for our Glovers, customers and partners.”

Last month Pierre told us the Middle East looks too competitive for Glovo to expand further.

In the event it’s opted for a full exit — given both Egypt and Turkey are being dropped (despite the latter being touted as one of Glovo’s fastest growing markets just over a year ago, at the time of its Series D).

“Leaving these four markets will help us to further strengthen our leadership position in South West and Eastern Europe, LatAm and other African markets, and reach our profitability targets by early 2021,” Pierre added.

Glovo said its app will continue to function in the four markets “for a few weeks” after today — adding that it’s offering “support and advice to couriers, customers and partners throughout this transition”.

“I want to place on record our thanks to all of our Glovers, customers and partners in the markets from which we’re withdrawing for their hard work, dedication, commitment and ongoing support,” Pierre added.

The exits sum to Glovo withdrawing from eight out of a total 306 cities.

It also said the eight cities collectively generated 1.7% of its gross sales in 2019 — so it’s signalling the move doesn’t amount to a major revenue hit.

The startup disclosed a $166M Series E raise last month — which pushed the business past a unicorn valuation. Pierre told us then that the new financing would be used to achieve profitability “as early as 2021”, foreshadowing today’s announcement of a clutch of market exits.

Glovo has said its goal is to become the leading or second delivery platform in all the markets where it operates — underlining the challenges of turning a profit in such a hyper competitive, thin margin space which also involves major logistical complexities with so many moving parts (and people) involved in each transaction.

As food delivery players reconfigure their regional footprints — via market exits and consolidation — better financed platforms will be hoping they’ll be left standing with a profitable business to shout about (and the chance to grow again by gobbling up less profitable rivals or else be consumed themselves). So something of a new race is on.

Back in November in an on-stage interview at TechCrunch Disrupt Berlin, Uber Eats and Glovo discussed the challenges of turning a profit — with Glovo co-founder Sacha Michaud telling us he expects further consolidation in the on-demand delivery space. (Though the pair claimed there had been no acquisition talks between Uber and Glovo.)

Michaud said then that Glovo is profitable on a per unit economics basis in “some countries” — but admitted it “varies a lot country by country”.

Spain and Southern Europe are the best markets for Glovo, he also told us, confirming it generates operating profit there. “Latin America will become operation profitable next year,” he predicted.

Glovo’s exit from Egypt actually marks the end of a second act in the market.

The startup first announced it was pulling the plug on Egypt in April 2019 — but returned last summer, at the behest of its investor Delivery Hero (a rival food delivery startup which has a stake in Glovo), according to Michaud’s explanation on stage.

However there was also an intervention by Egypt’s competition watchdog. And local press reported the watchdog had ordered Glovo to resume operations — accusing it and its investor of colluding to restrict competition in the market (Delivery Hero having previously acquired Egyptian food delivery rival, Otlob).

What the watchdog makes of today’s announcement of a final bow out could thus be an interesting wrinkle.

Asked about Egypt, a Glovo spokesperson told us: “Egypt has been a very complex market for us, we were sad to leave the first time and excited to return when we did so last summer. However, our strategy has always been to be among the top two delivery players in every market we enter and have a clear path to profitability. Unfortunately, in Egypt there is not a clear path to profitability.”

Whither profitability?

So what does a clear path to profitability in the on-demand delivery space look like?

Market maturity/density appears to be key, with Glovo only operating in one city apiece in the other two markets it’s leaving, Uruguay and Puerto Rico, for example — compared to hundreds across its best markets, Spain and Italy, where it’s operating out of the red.

This suggests that other markets in South America — where Glovo similarly has just a toe-hold, of a single or handful of cities, and less time on the ground, such as Honduras or Panama — could be vulnerable to further future exits as the company reconfigures to try to hit full profitability in just around a year’s time.

But there are likely lots of factors involved in making the unit economics stack up so it’s tricky to predict.

Food delivered on-demand makes up the majority of Glovo’s orders per market but its app also touts being able to deliver ‘anything’ — from groceries to pharmaceuticals to the house keys you left at home — which it claims as a differentiating factor vs rival food-delivery-only apps.

A degree of variety also looks to be a key ingredient in becoming a sustainable on-demand delivery business — as scale and cross selling appear to where the unit economics can work.

Groceries are certainly a growing focus for Glovo which has been investing in setting up networks of dark supermarkets to support fast delivery of convenience style groceries as well as ready-to-eat food — thereby expanding opportunities for cross-selling to its convenience-loving food junkies at the point of appetite-driven (but likely loss-making) lunch and dinner orders.

Last year Michaud told us that market “maturity” supports profitability. “At the end of the day the more orders we have the better the whole ecosystem works,” he said.

While Uber Eats’ general manager for Northern and Eastern Europe, Charity Safford, also pointed to “scale” as the secret sauce for still elusive profits.

“Where we start to see more and more trips happening this is definitely where we see the unit economics improving — so our job is really to figure out all of the use cases we can put into people’s hands to get that application used as much as possible,” she said.

It’s instructive that Uber is shifting towards a ‘superapp’ model — revealing its intent last year to fold previously separate lines of business, such as rides and Eats, into a single one-stop-shop app which it began rolling out last year. So it’s also able to deliver or serve an increasing number of things (and/or services).

The tech giant has also been testing subscription passes which combine access to a range of its offerings under one regular payment. While Glovo launched a ‘Prime’ monthly subscription offering unlimited deliveries of anything its couriers can bike around for a fixed monthly cost back in 2018.

When it comes to the quest for on-demand profitability all roads so seem to lead to trying to become the bit of Amazon’s business that Amazon hasn’t already built out and swiped.

 


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Catalyst Fund gets $15M from JP Morgan, UK Aid to back 30 EM fintech startups

08:09 | 20 January

The Catalyst Fund has gained $15 million in new support from JP Morgan and UK Aid and will back 30 fintech startups in Africa, Asia, and Latin America over the next three years.

The Boston based accelerator provides mentorship and non-equity funding to early-stage tech ventures focused on driving financial inclusion in emerging and frontier markets.

That means connecting people who may not have access to basic financial services — like a bank account, credit or lending options — to those products.

Catalyst Fund will choose an annual cohort of 10 fintech startups in five designated countries: Kenya, Nigeria, South Africa, India and Mexico. Those selected will gain grant-funds and go through a six-month accelerator program. The details of that and how to apply are found here.

“We’re offering grants of up to $100,000 to early-stage companies, plus venture building support…and really…putting these companies on a path to product market fit,” Catalyst Fund Director Maelis Carraro told TechCrunch.

Program participants gain exposure to the fund’s investor networks and investor advisory committee, that include Accion and 500 Startups. With the $15 million Catalyst Fund will also make some additions to its network of global partners that support the accelerator program. Names will be forthcoming, but Carraro, was able to disclose that India’s Yes Bank and University of Cambridge are among them.

Catalyst fund has already accelerated 25 startups through its program. Companies, such as African payments venture ChipperCash and SokoWatch — an East African B2B e-commerce startup for informal retailers — have gone on to raise seven-figure rounds and expand to new markets.

Those are kinds of business moves Catalyst Fund aims to spur with its program. The accelerator was founded in 2016, backed by JP Morgan and the Bill & Melinda Gates Foundation.

Catalyst Fund is now supported and managed by Rockefeller Philanthropy Advisors and global tech consulting firm BFA.

African fintech startups have dominated the accelerator’s startups, comprising 56% of the portfolio into 2019.

That trend continued with Catalyst Fund’s most recent cohort, where five of six fintech ventures — Pesakit, Kwara, Cowrywise, Meerkat and Spoon — are African and one, agtech credit startup Farmart, operates in India.

The draw to Africa is because the continent demonstrates some of the greatest need for Catalyst Fund’s financial inclusion mission.

By several estimates, Africa is home to the largest share of the world’s unbanked population and has a sizable number of underbanked consumers and SMEs.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

Collectively, these numbers have led to the bulk of Africa’s VC funding going to thousands of fintech startups attempting to scale finance solutions on the continent.

Digital finance in Africa has also caught the attention of notable outside names. Twitter/Square CEO Jack Dorsey recently took an interest in Africa’s cryptocurrency potential and Wall Street giant Goldman Sachs has invested in fintech related startups on the continent.

This lends to the question of JP Morgan’s interests vis-a-vis Catalyst Fund and Africa’s financial sector.

For now, JP Morgan doesn’t have plans to invest directly in Africa startups and is taking a long-view in its support of the accelerator, according to Colleen Briggs — JP Morgan’s Head of Community Innovation

“We find financial health and financial inclusion is a…cornerstone for inclusive growth…For us if you care about a stable economy, you have to start with financial inclusion,” said Briggs, who also oversees the Catalyst Fund.

This take aligns with JP Morgan’s 2019 announcement of a $125 million, philanthropic, five-year global commitment to improve financial health in the U.S. and globally.

More recently, JP Morgan Chase posted some of the strongest financial results on Wall Street, with Q4 profits of $2.9 billion. It’ll be worth following if the company shifts any of its income-generating prowess to business and venture funding activities in Catalyst Fund markets like Nigeria, India and Mexico.

 


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ProducePay nabs $190 million debt financing to lend to farmers

16:31 | 10 December

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

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

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

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

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

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

 


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A look at Latin America’s emerging fintech trends

23:28 | 5 December

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

Although the 2008 global financial crisis sparked the fintech movement, in Latin America, the rise of ecommerce was responsible for the first wave of fintech startups.

Because digital payments were key to enabling the growth of ecommerce, investors funded companies like Braspag, PagSeguro, PayU, Mercado Pago and Moip in the early 2000s to take advantage of this opportunity.

Payment is still the most relevant segment, with successful cases like Stone and PagSeguro, but after the financial crisis, we started to see the rise of financial technology in lending and neobanking, generating impressive cases like Nubank, Neon, Creditas, Credijusto and Ualá.

As the ecosystem evolves and expands, let’s take a closer look at emerging trends in Latin America that might give us a hint about where to expect its next fintech unicorns.

Financial services for the gig economy

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

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

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

Rethinking insurance

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

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

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

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

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

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

 


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