The continent’s antiquated banking system (serving mainly the affluent) and largely underbanked population have created the perfect breeding ground for fintech growth, speeding up both development and adoption of new technologies.

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Since its founding in 2013, the challenger bank has grown its user base rapidly — reaching 60M customers as of May 2022, up 61% year-over-year. It notched $877M in revenue in Q1’22, with a gross profit margin of 34%.

In 2011, only 56% of Brazilian adults had bank accounts. To grow that number and take on the country’s financial incumbents, Nubank has offered digital banking products — including a mobile-based credit card with quick approval and no-fee bank accounts — to young consumers, as well as Brazil’s vast under- and unbanked population.

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Funding to Latin America-based challenger banks reached an all-time high in 2020, jumping to $1.2B across 19 deals. The new funding record marked a 55% increase YoY from 2019.

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This momentum has held strong in 2021: as of March, the region has seen nearly $1.3B in equity funding year-to-date. Top deals include a $400M Series G to challenger bank Nubank in January and a $205M Series F to express delivery service Loggi in March (both companies are based in Brazil).

Using CB Insights data, we identified the top-funded tech startups in Latin America and the Caribbean by country, based on disclosed equity funding.

See the infographic below and the complete list of startups at the end of this post.

Our analysis ranks companies based on total disclosed equity funding and only considers tech companies that have raised at least $1M of equity funding. Companies included have all raised equity funding since 2016. We exclude subsidiaries and majority-owned startups.

Please click to enlarge.

KEY TAKEAWAYS

• The most well-funded startup in Latin America is on-demand delivery startup Rappi in Colombia, with over $1.7B in total disclosed equity funding.
• Rounding out the top 3 most well-funded startups in the region are Nubank ($1.5B in funding) and Uruguay-based payments platform dLocal ($200M).
• Four of the 12 companies featured in our map are unicorns (valued at $1B+): Nubank (valued at $25B, Brazil), Rappi ($3.5B, Colombia), enterprise AI platform Afiniti ($1.6B, Bermuda), and dLocal ($1.2B, Uruguay).
• In aggregate, the startups on our map have raised $4.1B.
• The region is home to 7 countries whose most well-funded tech startup has raised at least $100M in funding, including the above-mentioned unicorns, as well as Mexico-based Clip, Chile-based Adexus, and Argentina-based Uala. Only Rappi and Nubank have raised over $1B.
• The least well-funded startup on the map is Ecuador-based online retailer YaEsta.com, with $3.3M raised.
• Fintech startups in Latin American and the Caribbean have been on a recent tear. For companies included on our map, applications  range from banking (Nubank, Uala) to payments (Clip, dLocal) to crypto (Bitt).

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The region is home to over 650M people, with a younger population than most developed economies and an outdated financial system that’s dominated by a few banks. This provides a massive opportunity for digital consumer platforms. 

Venture-backed technology companies like MercadoLibre, Rappi, and Nubank are using these tailwinds to become super apps, or digital platforms that provide consumers with a wide variety of services all-in-one, from online shopping to ride-hailing to payments.

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Today, a host of fintech startups across banking, payments, and lending are attacking the incumbent banks to expand access to financial services, improve customer service, and promote financial inclusion.

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Social, political, and environmental pressures have made the LatAm market highly volatile. This has caused some investors to pull back in the region and challenged startups to raise funding from new investors, as illustrated further below by the number of unique investors and startups in the LatAm fintech market.

Through this tumultuous period, however, fintech has proven resilient.

In this brief, we discuss the key macroeconomic drivers that help explain why the Latin America fintech ecosystem has remained strong despite uncertain market factors. These drivers include massive technological shifts and growth rates in adoption, regulatory tailwinds that favor tech and startups, and continued market and foreign investments.

Massive technological shifts and adoption

LatAm is home to some of the fastest-growing countries in terms of internet and mobile adoption. Internet penetration in LatAm now surpasses 66%, above the world average of 53%, according to the World Bank. Mobile penetration has also been on the rise across Latin American countries, and was forecasted to range between 63% and 75% by 2019.

These massive technological shifts have been a boon for fintech startups to build fully digital products and services and pass cost savings through to customers.

Regulatory tailwinds favor tech

Regulators across LatAm have been borrowing from Europe’s open banking playbook to increase financial inclusion and break up incumbent bank monopolies.

In Mexico and Brazil, new regulations aim to lower barriers to entry for new tech entrants to apply for and receive regulatory approval for lending licenses and bank charters, among others.

Central bank regulators have also been capitalizing on the proliferation of mobile devices to move from physical cash to new digital payment schemes.

Continued foreign investment and positive market outlooks

2019 saw 78 unique investors and 128 fintech startups raise funding. Though down from 2018’s peaks, a pullback wasn’t surprising, considering the political uncertainty around new administrations in Brazil and Mexico, as well as Venezuela’s crippling hyperinflation, among other factors.

Again, deals and funding to LatAm fintech topped a new annual high in 2019, signaling that committed investors are undeterred. Further, positive economic forecasts, renewed consumer optimism, as well as reserve capital from funds dedicated to LatAm, like Softbank’s $5B Latin America tech fund, position the sector for growth in 2020.

Looking ahead, massive technological shifts, regulatory tailwinds, and foreign investments in private markets will be key in fueling future fintech growth in LatAm.

Clients can read more about the rapidly evolving fintech ecosystem in our latest brief “180+ Companies Disrupting Banking & Financial Services In Latin America.”

The post Latin America Is Suddenly Fintech’s Hottest Market. Here Are The 3 Reasons Why appeared first on CB Insights Research.

While lending and payments providers saw the most deals and dollars in the year, startups are increasingly turning their focus to areas like wealth management and investing.

Fintech startups are targeting LatAm’s emerging middle class, building relationships with consumers ahead of wealth generation to boost future client retention. Some, such as Brazil-based companies Orama and Magnetis, are already seeing early traction, but future growth and subsequent consumer demand will depend on market factors like GDP and consumers’ ability to generate wealth. 

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China remains the epicenter of the crisis — all but 1% of cases are in China, and 34% are in Wuhan, which has been on citywide lockdown since January 23. 

The country, and Asia, more broadly, have also been hotbeds for private market financing over the past few years. The latest PwC / CB Insights MoneyTree Report pointed to Asia as the second most active VC market globally, with 5,295 deals and $63B in funding in 2019. 

So how might the Covid-19 outbreak impact the booming private markets in Asia? We look to past outbreaks to answer this question. 

Severe Acute Respiratory Syndrome (SARS) outbreak & Asian funding activity 

The SARS outbreak started in November 2002 in China’s Guangdong province, but the outbreak only became widely publicized 3 months later, when an American businessman died from the disease. Shortly after, the WHO issued a global alert in March, sending the world into a prolonged panic given the disease’s high mortality rate. 

It wasn’t until May 2004 that the WHO announced China free of new SARS cases. 

SARS’s impact on the Asian private markets was swift. Total funding in 2003 and 2004 were 27% and 29% below 2002 levels, respectively. 

Deal volume and funding both started to recover in Q3’04 shortly after the WHO cleared China of SARS, and matched pre-outbreak levels 1 quarter later. Notably, a little over a year after the WHO’s clearance, Asian private market funding hit a new funding high and witnessed a now-fabled deal: Yahoo’s $1B investment in Alibaba.

Zika virus outbreak & South American funding activity 

The Zika outbreak began in early 2015 in Brazil and spread to the rest of South America and other parts of the world, including the US.

It wasn’t until Q1’16 that the mosquito-transmitted virus entered the global consciousness. In January, the US Centers for Disease Prevention and Control (CDC) issued a warning advising against pregnant women traveling to Brazil and other countries in the region due to increasing evidence of the virus’s link to birth defects. In February, the WHO declared the Zika outbreak a global emergency. 

The WHO ended the warning in November 2016. 

Our News tool shows that media coverage of the virus started to spike around when the CDC and WHO issued their warnings. The coverage peaked by September 2016. 

South American private market financing activity also appeared to slow after the outbreak became widely publicized. Funding activity decreased by 50% in 2016, compared to 2015. 

Meanwhile, deal volume in 2016 still outpaced the prior year, but this may be a reflection of how nascent activity was in the region. The deal volume growth rate did slow down when compared to the 2015 rate.

Following the end of the WHO’s global Zika warning, deal and funding activity gained significant momentum. Q2’17 brought a new high in South American private market funding, with a record $2.9B invested in 248 deals.

Looking ahead

If past performance is any indicator of the future, Asia private market financing could experience a slow down in 2020. In addition, China’s ongoing VC slump could further harm private market financing in the region. 

However, both of the past private market downturns that accompanied a major viral outbreak were followed by an eventual bounce back. So at the end of the current coronavirus outbreak, we could see landmark deals or new funding highs in the Asian market.

The post Will Covid-19 Impact Investment In Startups And Tech? appeared first on CB Insights Research.

Currently, cash still accounts for 90% of consumer transactions in Mexico, and Mexico’s population is substantially underbanked: only 47% of adults between 18 and 70 years old have a bank account, according to data from the National Survey of Financial Inclusion.

But the landscape may be changing. Earlier this year, the Mexican government launched a digital payment system: Cobro Digital Systems (CoDi). Built by central bank Banco de México, CoDi will allow customers to make payments online and in person through smartphones free of charge using QR codes. Both Amazon and MercadoLibre have approached the central bank about adopting the QR-code-based payments system.

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The post Fintech In Mexico: 80+ Startups Bringing Financial Innovation To The Region appeared first on CB Insights Research.

1. Amazon taps into new Prime customer base with secured credit offering

Amazon is partnering with Synchrony Financial to create a program that boosts credit for customers in lower income brackets. The program could bring more sub-prime customers into the Prime Amazon credit card ecosystem, which currently caters to higher income brackets.

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The post Client Note: Brex Raises $100M, SoftBank Doubles Down On Latam, Revolve Goes Public, And More appeared first on CB Insights Research.

The Japan-based firm recently announced the launch of a $5B fund devoted solely to companies in Latin America. It has already committed $2B to the fund, and will open offices in major cities across the region. This will be a massive boost to the region, which saw only $2.3B in total disclosed equity funding in 2018.

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The post International Kingmaker: How SoftBank Invests Around The World appeared first on CB Insights Research.

Latin American e-commerce and payments giant MercadoLibre, a publicly traded company, recently announced that it was raising $1.85B in a three-part equity offering: (1) $1B in common stock, (2) a $750M private investment from PayPal, and (3) another $100M in convertible preferred stock from Dragoneer Investment Group.

3 big takeaways

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• 12 cos that kicked the bucket
• SoftBank gives LatAm tech funding a boost
• EdTech’s largest M&A
• Where CVCs are investing in AI
• Pharma cos and digital therapeutics

RIP report: 12 dead cos

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Below, we answer some of our readers’ most pressing questions on the state of fintech, coming straight from our 2019 Fintech Trends To Watch briefing.

1. When talking about VC fintech funding in South America, where is the biggest growth coming from?

VC-backed fintech investing in South America hit a record 55 deals last year. Funding also hit a new high of $540.2M, up 167% year-over-year.

Brazil has been the biggest market for fintech over the past 5 years. In 2018, Brazil saw a new annual high for deals and funding, hitting 38 deals worth $480.8M. The top 2 rounds went to Brazil-based unicorn NuBank, which raised a $150M Series E round in Q1’18, and a $90M corporate minority round in Q4’18.

In second for deals was Colombia (with 6 deals), followed by Argentina (5 deals). In terms of funding, however, Argentina took second place (raising $47.9M), followed by Colombia ($8.9M).

Related research: Zooming out of fintech, Brazil is also the top deal hub for Latin American tech followed by Mexico. Read more here.

2. What markets outside of Europe are ripe for fintech in 2019?

The next generation of digital payments will be driven by the rise of mobility and micro-mobility companies in high-growth markets like Southeast Asia and Latin America. High-utilization is key to building a mobile wallet and mobility companies have an inherently high number of daily active users (DAUs) and repeat rate.

As our fintech analysis highlights, we see early-indicators of this trend taking off in South East Asia, where companies like Go-Jek have successfully launched digital wallets to enable more frictionless payments within its ecosystem.

In 2019, we could see this spreading to regions like Latin America, where there is a large digitally native population and where micro-mobility is growing quickly.

3. Why won’t fintech startups pursue an IPO in 2019?

Fintech startups have been laser-focused on scaling up and building customer-centric products over profits. As a result, many have taken the slow approach to an IPO, and that trend is likely to continue since many of the rumored candidates have enough runway to stay private after record financing rounds in 2018.

In addition, 2018 was a lackluster year for IPOs, further disincentivizing companies from going public. Funding Circle and Greensky, for example, have been struggling in the public markets relative to their pre-IPO valuations and recent market volatility.

4. Last year you predicted Amazon would go deeper into financial services. Can we expect more in the future?

Amazon is laser-focused on building financial services products that support its core strategic goal of increasing participation in the Amazon ecosystem — and this will remain a consistent focus in the future.

Payments is a space to watch. As a recent patent suggests, the company is redrawing the boundaries between online and off-line commerce, which will reduce friction between consumers and merchants, and again drive traffic through Amazon’s platform.

Related research: We dig into Amazon’s moves across financial services here.

If you’d like to participate in upcoming CB Insights briefings, check them out here.

The post Q&A: What Are The Fintech Trends To Watch In 2019? appeared first on CB Insights Research.

Private technology companies in Latin America have raised over $5.8B in funding since 2012. Within Latin America, Brazil stood out for the attention it received. It attracted over three times the number of deals as Mexico.

Investment totals further amplified the skew toward Brazil, with the country raising $4.2B in deals since 2012 — nearly seven times as much as either Mexico or Argentina. Despite closing fewer deals, Argentina brought in approximately $600M worth of deals, slightly above Mexico at about $570M.

MEGA-ROUNDS TO BRAZIL EXPLAIN THE SKEW

Brazil’s large share of regional investment was propelled by mega-rounds (deals above $100M) to the country’s startups. Brazilian companies represented eight of the 10 largest rounds in Latin America since 2012.

The biggest round, however, went to Argentina’s Decolar, which received a $270M corporate minority round in Q1’15 from Expedia. Decolar runs online accommodation and flight booking sites across several countries in Latin America. It went public in Q4’17 and was valued at $1.7B at the time.

Nubank, a Brazil-based fintech that is the most well-funded startup in Latin America, also closed one of the region’s largest rounds, with a $150M Series E round in Q1’18 that included DST Global and Founders Fund.

In total, Nubank has raised $605M in funding across 10 rounds and is considered a unicorn (valued at $1B+). Nubank’s other investors include Tiger Global, Sequoia Capital, and Goldman Sachs.

Other significant deals include those to Brazil’s 99, which raised two rounds worth $100M in Q1’17 and Q2’17. The first round was a Series C round that included Chinese ride-hailing unicorn Didi Chuxing and the second was a private equity round from SoftBank Group.

99 is a ride-hailing company that has also raised funding from Qualcomm Ventures and Tiger Global Management.

The post Multiple Mega-Deals Drive Brazil’s Dominance In Latin American Tech appeared first on CB Insights Research.

Private technology companies in Latin America have raised over $5.8B in funding since 2012.

We used CB Insights data to analyze Latin America’s tech ecosystem and take a look at which countries receive the most investor interest.

deals and dollars to latin america hit a high in 2017

Deals and dollars into Latin America hit a high in 2017 with 379 deals worth a total of $1.35B, according to CB Insights data. Since 2012, investments into the region have nearly tripled.

BRAZIL RECEIVES THE MOST ATTENTION

Within Latin America, Brazil attracted over three times the number of deals as Mexico.

Investment totals further amplified the skew toward Brazil, with the country raising $4.2B in deals since 2012 — nearly seven times as much as either Mexico or Argentina. Despite closing fewer deals, Argentina brought in approximately $600M worth of deals, slightly above Mexico at about $570M.

MEGA-ROUNDS TO BRAZIL EXPLAIN THE SKEW

Brazil has received the lion’s share of investment in the region largely because of the mega-rounds (deals above $100M) that have gone to the country. Brazil took up eight of the 10 largest rounds in Latin America since 2012. However, the biggest round went to Argentina’s Decolar, which received a $270M corporate minority round in Q1’15 from Expedia. Decolar runs online accommodation and flight booking sites across several countries in Latin America. It went public in Q4’17 and was valued at $1.7B at the time.

Nubank, a Brazil-based fintech that is the most well-funded startup in Latin America, also closed one of the region’s largest rounds, with a $150M Series E round in Q1’18 that included DST Global and Founders Fund. In total, Nubank has raised $605M in funding across 10 rounds and is considered a unicorn (valued at $1B+). Nubank’s other investors include Tiger Global, Sequoia Capital, and Goldman Sachs.

Other significant deals include those to Brazil’s 99, which raised two rounds worth $100M in Q1’17 and Q2’17. The first round was a Series C round that included Chinese ride-hailing unicorn Didi Chuxing and the second was a private equity round from SoftBank Group. 99 is a ride-hailing company that has also raised funding from Qualcomm Ventures and Tiger Global Management.

OUTSIDE of BRAZIL, DEALS WERE MUCH SMALLER AND MORE SCATTERED

Companies in Latin American countries outside of Brazil closed only two mega-rounds. Excluding Brazil, 50% of the ten largest deals went to Mexico, 30% to Argentina, and 20% to Colombia.

Colombia’s Rappi, a grocery delivery app, raised two of the region’s largest rounds. In Q1’18, it closed a $185M Series C round that included Andreessen Horowitz, Sequoia Capital, and German delivery service Delivery Hero.

Multiple large rounds went to Mexico’s Linio, including a $79M Series C round in Q3’14 and a $55M Series D round in Q4’16. Linio is an e-commerce site that operates across Latin America.

US INVESTORS SHOW MORE INTEREST BUT TAKE SMALLER SHARE OF ALL DEALS

The most active venture capital investors in Latin America were Tiger Global Management, 500 Startups, and Endeavor Catalyst.

Several accelerators also had a very active presence — the most active by far was 500 Startups, followed by Y Combinator.

Investors from the United States have shown increasing amounts of attention toward Latin American tech. The number of unique deals involving US-based investors increased nearly 60% between 2016 and 2017.

However, investors from other parts of the world also showed more interest. While US-based investors participated in 49% of all 2012 private tech deals in the region, that number declined in the following years. By 2017, only 32% of all tech participation came from United States investors.

2017 also marked the year with the highest activity from Latin American investors yet. 50% of all participation came from investors within the region. Of that number, 60% of investors came from Brazil.

with unstable growth in other markets, brazil continues to dominate

Despite continued dominance in the region, Brazil posted the highest growth numbers of any Latin American market.

In 2016 and 2017, about 60% of funding rounds in the region went to Brazil. Funding in Brazil nearly doubled in that period, from $605M in 2016 to $1.15B in 2017.

Mexico fell from 19% of all deals in 2016 to only 15% in 2017, despite the fact that the number of deals in Mexico increased from 44 to 57 — a drop in a bucket compared to Brazilian growth from 136 to 222.

Albeit slow, other countries did experience growth. Colombia, for example, went from just 3 deals in 2013 to 38 in 2017, its highest number yet. Other countries saw fluctuations in growth. After a slump from 26 deals in 2015 to 18 deals in 2016, Argentina sprang back up to 24.

However, despite on-and-off trends in other countries, we can expect to see Brazil continue to dominate the Latin American region in both growth and sheer numbers. Its proven tech ecosystem and wide range of investors also make it a possible launching point into the other countries in the region.

The post Latin America Tech Booms As Brazil Dominates And Regional Investors Grow appeared first on CB Insights Research.

Using the CB Insights platform, we aggregated data around funding and exit events for startups around the world. The top tech hubs were chosen based on a deal share basis of the global total.

Report highlights:

Silicon Valley still plays a dominant role.

Since 2012, Silicon Valley metro area companies saw 12K deals spread out amongst 7K unique companies – more deals to tech than all non-U.S. metro hubs combined.

Although investment is growing outside of California.

Beijing- and Shanghai-based tech companies take on Silicon Valley.

Beijing and Shanghai are ramping up to compete with Silicon Valley fundraising levels, buoyed by large rounds to hot startups like Didi, Toutiao, Mobike and Ele.me.

The post Global Tech Hubs appeared first on CB Insights Research.

To enter these high-growth countries, many are partnering with regional power producers or launching large-scale energy projects in emerging markets. Few are making investments.

According to CB Insights data, only a single utility stands out for its high level of activity in emerging markets. ENGIE is a French utility company that also generates natural gas, renewable energy, and nuclear energy.

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The startups profiled in this report are headquartered in countries that each take between .01% and .5% of the world’s venture capital deals since 2012. You can see below that 50+ startup frontier markets take only 5% of the world’s VC deals.

REPORT HIGHLIGHTS:

Startup frontier markets are seeing increased deal activity.

Collectively, the 50+ frontier markets we identified have seen rising VC deal activity nearly every year since 2012, with this year being on track to beating last year’s total of ~1500 VC deals.

These companies and ecosystems are young.

The lion’s share of deals to startups in these markets have been at an early stage (Seed/Angel – Series A), including 75% of all deals last year.

Jakarta leads, followed by Dubai, Vienna, and Istanbul.

Of cities in these markets Jakarta, Indonesia, takes the largest share of global VC deals since 2012, almost twice as large a share as Dubai. Jakarta companies saw 47 VC backed deals last year.

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