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After a year in which the digitization of processes was key to sustaining the collection and payment market in LatAm, finally, financial inclusion begins to be an opportunity to boost the economy of the true protagonists in the creation of value and opportunities: the SMEs. According to the Study on the Digitization of Companies in 2021 by Innovation People, 83% of small and medium-sized companies declare that they have accelerated and are investing a large part of their budget in the implementation of new digital strategies.
The large VC funds ( Venture Capital ) are attentive to this opportunity represented by the SME segment and the dealbooks (book / purchase / sale book) are beginning to realize it; In this sense, startups that are capable of offering solutions according to the user profile and that resolve both charges and payments will undoubtedly be the ones that obtain the best chips.
In a context in which large funds disburse double- and triple-digit rounds, and sometimes even much more, willing to promote user development and acquisition, the segment that attracts the most attention is that of payments in the B2B vertical between small and medium businesses.
If we take as a reference the fintech category – parent category of the payments segment – registered a new increase in the first half of 2021, according to the KPMG report “Pulse of Fintech” , about investment trends in the sector. Funding in this segment went from $ 87.1 billion in the second half of 2020 to $ 98 billion in the first half of 2021.
In 2020, the list of Latin American unicorns was 22, while, to date, there are already 24. That is, 2 new unicorns in the region were born in just one semester. And not coincidentally, among the set of local unicorns, one of them, Nubank, a fintech, occupies the eleventh position among those with the highest valuation worldwide, according to the measurement of CB Insights.
The top ten unicorns in the region are:
- Nubank, Brazil, $ 30 billion.
- C6 Bank, Brazil, $ 5.9 billion.
- Kavak, Mexico, $ 4 billion.
- QuintoAndar, Brazil, $ 4 billion.
- Rappi, Colombia, $ 3.5 billion.
- WildLife Studios, Brazil, $ 3 billion.
- Loft, Brazil, $ 2.9 billion.
- Creditas, Brazil, $ 1.75 billion.
- LifeMiles, Colombia, $ 1.5 billion.
- iFood, Brazil, $ 1 trillion.
The B2B opportunity in the SME market
Under pressure to increase the speed of digital transformation and improve the necessary technology tools, various companies became fully involved in venture capital operations and invested approximately $ 21 billion in almost 600 operations globally, according to the KPMG report. . In this way, many companies realized that it was faster to achieve this by partnering with, investing in, or acquiring fintech companies.
B2B startups paved the way for fintech startups. Latin America is experiencing a perfect storm that positions it as a market to watch closely for years to come. The technology sector will lead the economic growth of the region, with fintech at the forefront.
In the United States, traditional service companies accounted for 90% of the top most valuable national companies. Only 10% were technological. Today, more than 50% of the best valued companies are digital technology-based, that is, 6 out of 10. And the same could happen in Latam.
Meanwhile, a study carried out by Finnovista indicates that today 210 insurtech (insurance fintech), 491 lendingtech (loan fintech), 601 paytech (payment fintech) and 222 wealthtech (investment fintech) operate in Latin America. This means that the head is carried by the fintech payments (39% of the total of the institutions that offer financial technology services in the region).
For these reasons, the platforms that integrate simultaneous payment and collection solutions oriented to the B2B market are currently the vertical with the greatest capacity to impact the regional economy.
The increasingly close relationship between SMEs and VC
SMEs in Latin America generate approximately two-thirds of employment, a quarter of GDP and, by number, represent more than 99% of all existing businesses. Only these data are enough to measure its importance.
“Entrepreneurs have accelerated the reconfiguration of the business model of large and small companies, they have renewed and are looking for investment alternatives. This has become the main catalyst for digital transformation, which has impacted revenue and has attracted the attention of venture capitalists (Venture Capital), ”adds Schorr, CEO of Flexio.
According to LAVCA (Association for Private Capital Investment in Latin America), e-commerce, fintech, logistics, health and biotechnology, prop tech, market place, smart cities and mobility are the sectors that are obtaining the greatest benefits from Venture Capital.
According to this same association, despite the difficulties introduced by the pandemic, the raising of private capital funds in the region increased by 30% in 2020, compared to 2019. As for Mexico, today it represents a venture capital opportunity of 2.4 billion per year in the average emerging market, 3.3 times more than in 2019.
For its part, the report made by the research area of the Mexican venture capital fund Antoni Lelo de Larrea Venture Partners (ALLVP), one of the most active Venture Capital firms, states that during the second quarter of 2020 a total of 133 investments in startups in Latin America. The largest number of investments occurred in seed capital rounds.
Returning to the Mexican case, there are currently in the country at least 126 Venture Capital investment funds recognized by the Mexican Association of Private Capital (Amexcap). So it seems that 2021 is the time to invest in Latin American companies, in general, and Mexican companies in particular.