LATAM Sees New Foreign Entrants in Fintech and Communications Sectors

Feature stories this week include: Mexico-based mobile lending platform Baubap raises $3M growth round; Chilean startup backed by Jeff Bezos, NotCo, eyes unicorn status; LATAM banks could face disruption from cheaper payment systems; and in Chile, Carlos Slim’s America Movil lures a brash rival with years of success.

Mexico Micro Lender Baubap Banks $3M Growth Round For Mobile Platform

Baubap, a Mexico-based mobile lending platform, closed on a $3 million growth round from Mexican financial services firm Grupo Alfin to continue developing its proprietary technology aimed at boosting financial inclusion and education.

Co-Founders Roberto Salcedo and Luis Villarreal decided to start Baubap in 2018 with a shared vision of providing financial stability to customers.

“Most banks require users to have healthy credit and a relationship with banks,” Villarreal said in an interview. “Most people don’t have that, so we came up with an alternative scoring technology.”

Baubap offers simple loans integrated with financial education. Its proprietary underwriting technology provides a customer’s credit rating using alternative data.

Its first product, a micro-loan of 500 to 5,000 pesos, is granted in minutes with the only requirements being a current Mexican voter registration card and access to an Android cellphone. Borrowers can save up to 50% in interest with on-time payments.

Loan approval rates vary over time, but are averaging 25%, Salcedo noted. Meanwhile, the average loan is approximately 50 pesos, meaning most borrowers are looking to solve small liquidity problems, such as an emergency. In addition, 40% of borrowers are self-employed and are using the loans to invest in their businesses, something he said is one of the best uses of Baubap’s offerings.

“Access to money was a problem during the pandemic, so we adjusted the mechanisms and lowered the approval rates for new borrowers, as well as opened the funnel to existing borrowers and increased the amount given,” Villarreal said.

Including the new raise, Baubap’s total funding to date is $3.5 million, Salcedo said. Funds will be used to grow its loan portfolio, in which the co-founders expect to grant more than 220,000 loans and are looking to grow its customer base to 100,000 by the end of the year.

Bezos-Backed NotCo Eyes 'Unicorn' Status

The explosion in global sales of plant-based foods has NotCo, a Chilean startup backed by Jeff Bezos, targeting a record valuation for the country. NotCo SpA., maker of the vegan NotMilks sold at U.S. Whole Foods stores, is determined to reach so-called “unicorn” status (valuation of $1B+) in its next funding round.

The company is citing a 2021 outlook of a fourfold increase in sales and a fivefold jump in volumes as the basis for what could be a tripling of its current worth, which some reports have put at more than $300 million. The company is funded through this year, and will only take money before that to reach its goals more quickly, Chief Executive Officer Matias Muchnick said in an interview.

If NotCo succeeds, it will be a first for Chile. Chile’s last biggest startup deal was the 2019 sale of a controlling interest in Santiago-based online grocery delivery firm Cornershop to Uber Technologies for $459 million.

NotCo, founded in 2015 by Muchnick, Karim Pichara and Pablo Zamora, has raised $120 million in three funding rounds. Among its investors are Jeff Bezos’ Bezos Expeditions, Catterton Partners, Kaszek Ventures, Twitter Co-Founder Biz Stone, and 3G investment arm The Craftory, among others.

Muchnick is betting that the company’s rapid growth will justify the valuation and a potential initial public offering of shares in 2023.

Thus far, NotCo has entered the Argentine, Brazilian and U.S. markets, outsourcing production activities to local food suppliers. It is in talks with supermarkets in Canada to sell NotMilk, and also eyeing an entry into Colombia, Mexico and Peru.

LATAM Banks Could Face Disruption from Cheaper Payment Systems

SumUp, a London-based startup that helps businesses power revenues through card payments by way of physical readers, online payments, invoices and other services, announced new financing totalling €750 million euros (around $895 million USD).

The new capital will be used to continue expanding its business, and more specifically, for acquisitions; to launch in new markets in Europe, Latin America and Asia; and to build out the suite of services that it provides to businesses.

The company is already active in 33 countries (most recently Chile, Colombia and Romania) and has some 3 million businesses as customers. Over the years, SumUp has picked up a number of other startups to expand the services that it offers, as well as its markets. Most recently, these deals included acquisitions of the business-focused mobile banking platform Paysolut in Lithuania, as well as Goodtill and Tiller to expand into point-of-sale for bigger venues.

“We’re proud to be backing SumUp once again and we recognize the truly impressive strides made by the company over the past couple of years. We have huge admiration for what SumUp is doing for small businesses across the world in helping them to keep trading and flourishing in some of the most trying economic circumstances imaginable,” said Tom Maughan of Bain Capital Credit in a statement. “The doubling down of our investment in SumUp in this round is both a demonstration of our confidence in the company today and its strong future.”

Carlos Slim’s America Movil Lures a Brash Rival With Years of Success

Wom, a company with no profits, no revenue and no customers, is being faced with multiple lawsuits from giants of the mobile industry, including billionaire Carlos Slim’s America Movil SAB and Spain’s Telefonica SA; all seeking to block Bannister’s company from ever signing up a single subscriber.

The company’s Founder, Chris Bannister, is an outsider from the UK who has made a career of showing up in foreign places and using over-the-top publicity campaigns to quickly grab market share from the entrenched mobile carriers. He did it in Vietnam, Azerbaijan, Poland, Nigeria, Sweden and, most recently, Chile.

The entrance into Chile sent C-suites across Bogota into a panic. With the backing of the same man who’s seeding the Colombian venture, Icelandic entrepreneur Thor Bjorgolfsson, Bannister carved out a 20% market share for Wom in a span of just five years. A chunk of that business was taken from the Chilean units of America Movil and Telefonica.

Wom has been put on a “collision course” with the market leader, America Movil’s Claro, especially in rural areas where the incumbent spent heavily on infrastructure, explained Wally Swain, a Bogota-based Latin America telecommunications analyst at Omdia, a research company.

Wom entered in 2015 by buying Nextel’s operations and quickly grew to 4.9 million customers. With a track record of success, Wom poses a “clear risk” for incumbents in Colombia, said Arturo Langa, a Mexico City-based analyst for Itau BBA who covers America Movil.

Last year, Colombia accounted for roughly one-third of America Movil’s $2.2 billion of net income, according to data compiled by Bloomberg.

“The Colombian mobile market is dynamic and highly competitive,” America Movil said in a statement responding to questions. Asked about Wom’s entry to Colombia during a February 10 conference call, CEO Daniel Hajj said, “We’re prepared to compete, as we compete in other places with new competitors.”

Telefonica, which runs the second-place Movistar brand, called on Wom to follow the rules of the game but said it welcomed the competition.

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