LATAM Venture Capital Powerhouse Raises $600M Across Two Funds
Kaszek Ventures Raises $600M Across 2 New Funds
Kaszek Ventures, a venture capital firm that has been an essential player in the recent boom in Latin American startup financing and expansion, just raised $600 million across two new funds.
The new capital commitments (raised in about two months) put the firm’s total capital under management at roughly $1 billion. Kaszek Ventures is now the first local early-stage investor to hit the $1B milestone.
“In the eight years since Hernan Kazah and Nicolas Szekasy launched Kaszek Ventures in 2011, the startup ecosystem in Latin America has experienced a renaissance, with investments in the region surging to nearly $2 billion in 2018” (Tech Crunch).
The exponential growth and astounding success of Kaszek’s current portfolio- which includes companies like Konfio, Nubank, Gympass, Creditas and Loggi- has been instrumental in shaping the region’s flourishing startup environment.
The firm’s first fund- a “relatively modest $95 million investment vehicle”- made one of its preliminary investments in Nubank: the Brazilian consumer credit company valued today at roughly $10 billion.
“[Kaszek Ventures] had very relevant experience in scaling a tech company to multiple countries in the region. In the early days, the firm’s partners were involved in all stages of the company’s growth, from helping recruit talent like country managers in different regions to localizing the pitch for different countries. They were very active and continue to be very active around marketing and product. They helped us develop our first website and craft our pitch to consumers and eventually develop a lot of the digital marketing muscle.”
Nubank may have been the firm’s first success story to come from its portfolio, but Kaszek has gone on to secure multiple other wins from its later funds. Standouts from the firm’s $200 million third investment vehicle include NotCo: a food company that managed to attract the attention of Jeff Bezos’ Bezos Expeditions fund. Other notable portfolio companies include Kavak, a car marketplace; and Credijusto, an online lending company that just raised $42 million from Goldman Sachs (and other investors) this week.
Kaszek recently announced the close of their $375 million main fund, as well as their first “Opportunity Fund”: a $225 million investment vehicle that will allow the company to maintain its stakes in later-stage companies as they raise increasingly large rounds.
Co-Founder Kazah expects that the firm will invest slightly larger amounts in about the same number of companies, with each fund making between 25 and 30 new investments.
As is the case for other rapidly maturing technology ecosystems, increasingly large funding rounds have become today’s norm in Latin America.
This rapid growth has been parlayed into returns that represent an 8x multiple on invested capital for Kaszek Ventures’ first fund, a 5x multiple on the second fund, while the third fund has already demonstrated a 2x return.
Coinbase Acquires Argentinian Cryptocurrency Platform Xapo for $55M
This recent acquisition increases Coinbase’s total assets to over $7 billion USD worth of cryptocurrencies- accounting for 5% of all circulating bitcoins in the world (Contxto).
Prior to this sale, Xapo made headlines for storing its bitcoins in a vault under a Swiss mountain. Launched in 2013 as a bitcoin trading platform, the custody business model originated from wealthy bitcoin investors needs to securely store their funds somewhere (Contxto).
In an interview with Fortune, Xapo’s CEO Wences Casares said that the retail exchange business has always been the company’s core focus, while the custody business developed “as a sideline at a time when wealthy Bitcoin investors needed a secure place to park their digital wealth”.
“It’s hard to do a consumer business well at the same time as an institutional business. Earlier this year, we looked for a home for it,” Casares said.
As reported by Fortune, the majority of Xapo’s biggest clients have agreed to transfer their assets to Coinbase; therefore giving the company control of over 514,000 Bitcoins. The remaining Xapo customer accounts are reportedly worth more than $3.5 billion. If Coinbase can sign on these remaining customers as well, the company will control more than 860,000 Bitcoins.
According to Coinbase CEO Brian Armstrong, the company is averaging 10 new custody customers a week and $200 million in new assets. Following the Xapo acquisition, Coinbase now has over 150 clients for its custody business (Fortune).
Huawei Expresses Interest in Building the First Undersea Fiber-optic Cable between South America and Asia
This week, Huawei Technologies Co Ltd. said it was “very actively” interested in building the first undersea fiber-optic cable between South America and Asia.
In an interview with Reuters, Huawei’s Chief Executive in Chile David Dou Yong stated,
“This bidding process has several steps …We are ready and we will follow the process until the bid to select a vendor to implement it starts and for sure we will be part of the tender process.”
Young’s comments come two months after another Chinese telecoms firm, Hengtong Optic-Electric Co Ltd, confirmed that it had signed a letter of intent with Huawei to buy its 51% stake in Huawei Marine Systems Co Ltd, the company’s submarine cable business.
On Wednesday, Huawei launched a data center with locally-hosted cloud storage services in Santiago: an investment of more than $100 million.
Huawei has continuously lobbied the Chilean government to store its data in the cloud. According to Reuters, over the past three years, senior Huawei executives have held “dozens of meetings with city mayors and government ministers and officials from the Chilean police, its central bank, its tax authority, its army, the state development agency and the ministries of mining, health, economy, transport, energy and interior to lobby for cloud computing and facial recognition software technology.”
Argentina Seeks to Extend Maturity of $101B of Debt
Following a collapse in the peso and government bonds, the Argentine government is seeking to extend maturities on tens of billions of dollars of debt and delay repayments to the International Monetary Fund.
According to Economy Minister Hernan Lacunza, the government will postpone $7 billion of payments on short-term local notes held by institutional investors this year and will seek the “voluntary reprofiling” of $50 billion of longer-term debt. The government will also start talks over the repayment of $44 billion it has received from the IMF (Bloomberg).
“The government is aiming to clear the outlook for the financial program in the short, medium and long-term horizon. This is due to short-term liquidity stresses and not due to problems with the solvency of the debt,” Lacunza said.
It has been a turbulent week for Argentina, as bonds fell to a record low and the peso declined. By the end of trading on Wednesday, “investors were pricing in a near 90% chance that the country will default in the next five years” (Bloomberg).
As the crisis worsened during August, the central bank rolled over less than 10 percent of Treasury bills falling due and held by the private sector.
“We are surprised by the timing of the measure and skeptical that it will achieve the desired results. Postponing payments may provide temporary relief, but does not change the crux of the matter,” Bloomberg Economics analyst Adriana Dupita said.
Argentina’s financial markets have been in decline since August 11, when a shocking primary result showed acting President Mauricio Macri trailing his populist opponent by 15 percentage points ahead of the October 27 election. The next Presidential administration would take over on December 10.
This week, officials from the IMF came to Buenos Aires to meet with policy makers and the opposition. IMF officials are “in the process of analyzing the measures announced Wednesday”, according to a statement.
Bloomberg reports that “foreign-currency reserves have plummeted more than $10 billion in the past month as policy makers sought to shore up the peso after the primary. The currency has tumbled 28% since the obligatory nationwide primary election, even as the central bank takes increasingly drastic action to defend it. The bank sold $367 on the currency market Wednesday and $302 million the day before,” according to a person with knowledge of the matter.
Mercado Libre and Uniko Partner to Capture LatAm's $12B Gift Registry Industry
Founded in Mexico City in 2015, Uniko is a tech company that provides an easy-to-use online tool for newlyweds to register for gifts, experiences, and cash.
Through its recently announced partnership with the region’s largest e-commerce platform Mercado Libre, Uniko now allows its customers to buy goods sold via Mercado Libre, using its secure-payment system Mercado Pago.
Research confirms that guests are more interested in buying gifts online, rather than department stores, and also prefer to have the flexibility to choose products from a variety of vendors.
According to Yahoo Finance, Uniko found that over 60% of newlyweds would exchange gifts received for alternative goods; and at least 10% of all wedding gifts in the United States go to waste because they do not satisfy couples’ wants or needs.
Mercado Libre powered by Uniko looks to solve these problems. The joint platform offers products from over a dozen brands at the best prices, with direct home shopping. This integration combines Uniko’s first rate mastery of the gift registry industry with Mercado Libre’s e-commerce leadership in the region; providing customers with a one-stop-shop experience.
Tere Cremona, Co-Founder and CEO of Uniko, stated
“Thanks to our technology and knowledge of the wedding gifts industry, we are empowering Mercado Libre to democratize the gift industry in Latin America. We’re thrilled to be partnering with such an experienced and impactful company to improve the gift experience for newlyweds and their family and friends alike” (Yahoo Finance).
Latin America’s Rapidly Expanding Mobile Market
Latin America is the second fastest-growing market in the world for mobile subscribers, behind Sub-Saharan Africa.
Recent predictions say that by 2020, 63% of Latin America’s population will have access to the mobile Internet. These findings are crucial for both large international mobile providers as well as local tech companies, as the region’s demographic has proven itself to be highly adaptable (Nathan Lustig).
Back in 2015 when only 32% of Latin Americans had a smartphone, Wharton published an article naming Latin America “the next big mobile battleground”. The article predicted that up to 50% of the region would have access to the Internet via mobile devices by 2020. By 2018, this metric was surpassed, with research confirming that over half of the region’s mobile users were accessing the Internet via smartphone.
This surge in mobile accessibility is largely the result of the declining price of smartphones. Tech giants like Samsung and Huawei have successfully driven the price of smartphones down to just $30 or $40 for a low-end model, effectively “democratizing access”. Samsung is the biggest provider of smartphones in Latin America, capturing between one-fourth to one-third of the market in the six largest mobile markets – Brazil, Mexico, Chile, Argentina, Colombia, and Peru.
“Latin America’s mobile market is one of the most lucrative in the world. In 2016, the mobile industry contributed US$260B or 5% of the regional GDP. By comparison, the mobile industry only provides 2% of yearly GDP in the United States” (Nathan Lustig).
Despite being the region’s second largest mobile market, only 90.3% of Mexico’s population has access to mobile broadband connections- making it the only major economy in Latin America with a mobile connection penetration totaling less than 100% of the population. This disparity is a product of regulations that lowered competition in the country’s telecom services market, allowing America Movil’s Telcel to dominate roughly 70% of the market. Until recently, the lack of competition has created a barrier to entry for many Mexican consumers who could not afford mobile services.
Until recently, the majority of mobile money platforms were designed for “feature” phones rather than smartphones; based on the false assumption that the unbanked population could not afford smartphones. In Latin America, however, smartphone penetration has grown at 12% per year, while the banked population statistic remains at a mere 2% growth rate per year.
“While Latin America’s fintech market shows promise for regional financial inclusion, the reality is that the majority of Latin Americans are still not using credit cards. As a result, app providers have not been able to monetize apps in the same way as they did in the United States” (Nathan Lustig).
As the demographics of Latin America’s unbanked population change, there is now a large populace of unbanked, tech-savvy Millennials. While startups like Nubank, Clip, and Latin Fintechgain traction, mobile money efforts in the region may be on the rise.
Mexican Startup’s Artificial Tree Combats Air Pollution
Meet BioUrban, the artificial tree that sucks up as much air pollution as 368 real trees.
“What this system does, through technology, is inhale air pollution and use biology to carry out the natural process (of photosynthesis), just like a tree,” said Jaime Ferrer, one of BiomiTech’s founding partners.
Ferrer insists that the idea of the BioUrban is not to replace real trees, but to complement them in areas where “planting a forest would not be viable” (Tech Xplore).
Launched in 2016, BiomiTech has “planted” three trees to date: one in central Mexico’s city of Puebla (where the company is headquartered), one in Colombia, and one in Panama. The company also has a contract to install two more in Turkey, and projects are in the works to install them in Mexico City and Monterrey.
Mexico City- home to over 20 million people- is highly polluted with emissions from the city’s five million cars. According to Ferrer, the company’s goal is to achieve cleaner air in targeted urban areas where planting large numbers of trees is not possible.
“[BioUrban] can be used in high-traffic areas, transportation terminals, where you can’t just plant a hectare of trees. The system isn’t going to end air pollutionin Mexico City. But it can alleviate the problem in high-traffic areas,” he said.
Thus far, the BioUrban artificial trees have been primarily sold to local governments, though private donors are providing the funding in Monterrey- an industrial hub that is also no stranger to air pollution.