The Dispute to be the NASDAQ of the Security Token Begins!

Image result for stock exchanges

While the crypto market seems to be going through a crypto-winter, it appears that the sun is shining quite well for the new security token / digital assets market. All the blockchain and crypto events that I go, it seems that everyone is declaring: “ICOs are dead, long live to STOs” (Security Token Offers).

Since I joined the security token market a couple of months ago, the market went from almost no one caring about security tokens to everyone wanting their own piece.

Although I truly believe the potential of this market, I also know that it will take some time to the market to take off and anyone in the market looking for short-term profits will be disappointed. A whole new market is being created, with many necessary pieces still under-construction and still many problems to solve.

Even though, I’m quite confident is that there is no turning back. Everything (asset or financial product) that can be tokenized, will be tokenized in just a couple of years. Luckily, I’m not the only one thinking that way, as many startups and large corporations are positioning themselves not to lose this next wave.

One of the biggest promises of the security token market is: “Freeze the investment not the investor”, implying that will create liquidity to assets with low liquidity or illiquid. However, a quick research reveals that still there isn’t any real trading of compliant security tokens in the market.

Due to that scenario, exchanges are one of the main topics right now as the kick-off of trading security tokens will propel investors in participating in STOs, which will generate more trading, creating a positive feedback loop that will accelerate this already fast-moving industry.

Using a parallel to the traditional stock market as well as the crypto one, it becomes quite clear that exchanges are not only a key player in the market but also a fantastic business opportunity. Just a few examples:

  • Nasdaq, Inc (NASDAQ Operator): Market Cap US$14.28 Billion
  • Intercontinetal Exchange, Inc (NYSE Operator): Market Cap US$ 44.96 Billion
  • Binance (largest crypto exchange): Expects to profit US$ 1 Billion in 2018
  • Coinbase (largest US crypto exchange): The last round of investment valued it at US$ 8 Billion

That been said, many players are trying to enter this market to become the next NASDAQ or Binance (or to not stop to be them).

Here follows a quick analysis of the different kinds of players entering the market:

Traditional Stock Exchanges:

As you would expect, the incumbents are not watching the disruption of the market happen standstill. Many of them understood that the market is moving toward a tokenized market; therefore, they are positioning themselves to not only try to survive but to be able to compete well in this market.

These players understand quite well how the financial market works, already have licenses to operate, and have the necessary money to invest. However, they move slow and aren’t as familiar with blockchain technology. They probably won’t lead this market due to being more afraid of damaging their main companies than to be a first mover; however, I believe they will be fast followers.

  • SIX Swiss Exchange: Announced in July 2018 that was launching a spin-off focused on digital assets, SIX Digital Exchange (link)
  • Singapore Stock Exchange (SGX): Invested in November 2018 in iStox, a digital assets exchange (link)
  • Malta Stock Exchange (MSX): Announced in September 2018 that it’s partnering with Binance to launch a security token trading platform (link).
  • Nasdaq: Invested through Nasdaq Ventures in a digital asset tradings platform (link), ErisX, and is looking into launching its own platform (link).
  • Intercontinetal Exchange, Inc (NYSE Operator): Is launching in January 2019 a digital asset exchange, Bakkt (link).

As you can see, they are exploring different forms of entering this market.

Crypto Exchanges:

With the crypto markets going down and the ICO party ending, many crypto exchanges started to become more interested in this new thing called security tokens. A few years ago, most of the crypto exchanges operated without any license under gray areas. However, many countries started to regulate crypto exchanges demanding them to be more strict with KYC/AML and obtain the necessary permits, starting a run of the big crypto exchanges to find the best regulatory environment for them to operate.

Although crypto exchanges don’t have the experience dealing with regulation as the traditional exchanges, they were already starting to move toward a regulated environment, which might make it a little more easier for them to enter the security token market. Although regulation is their Achilles’ Heel, they move much faster and also have much more experience with blockchain and smart contracts than the incumbents. A few big players have not only the money but also a global scale, making them some good candidates to be leading players in the market.

  • Binance: As mentioned before, it is partnering with MSX to launch a security token trading platform.
  • Coinbase: The leading American crypto exchange acquired a few financial institutions to obtain the necessary licenses to start to trade security tokens (link). It is also making other moves in the market such as an investment in the security token issuance platform, Securitize, in November 2018 (link).
  • Circle: Acquired Poloniex in February (link) and SeedInvest in October (link).
  • Bithumb: The Korean exchange announced in November it was launching a security token exchange in the US (link).

New Entrants:

A new market means an opportunity for new entrants to compete for their spot under the sun. These new players are starting from day one as a security token exchange, giving them an advantage as all the systems and process are designed for this new market.

Many of them raised millions of dollars through ICOs (while it was still a thing, remember? So 2017 that…) to enable the development of their platform. Their lack of experience and track record are their biggest challenges to overcome.

  • OpenFinance: Listed SPiCE VC security token in November (link).
  • tZero: It’s a spin-off of Overstock.com and one of the first security token exchanges around.
  • Gibraltar Stock Exchange (GSX): The GSX was launched in 2014 as a stock exchange but it’s already positioning itself to be one of the leading players in this new market. In October 2017, it announced a subsidiary, the Gibraltar Blockchain Exchange (GBX), focused on utility token, later on, in July 2017, it confirmed a shift to focus to become a security token exchange (link).
  • iStox: A new digital assets exchange based in Singapore which received invest SGX and Temasek (link).

Decentralized Crypt Exchanges:

The DEX, acronym for Decentralized Exchanges, has been a hot topic in the crypto world for a while. However, if you’re not from the crypto world, you probably never heard about them. They are basically exchanges that enable peer-to-peer transactions using the blockchain and smart contracts as a settlement engine, therefore enabling a more decentralized crypto economy while reducing the transactional costs and the hacking risk, as the users hold their cryptocurrency in their own wallets instead of an exchange wallet attractive to hackers due to its high amount hold.

As security tokens require that investors pass through a KYC/AML and also comply with some other regulations (such as the lock-up period and the number of investors restriction), the trading isn’t completed decentralized as it still needs to go through this process on a centralized entity, a whitelist. I don’t think they will be competing to become the leading exchanges; however, they might have an essential role as liquidity providers to the ecosystem.

  • AirSwap: Started as crypto DEX, but it saw an opportunity to also offer security token peer-to-peer trading. In November, it did the first compliant security token transaction, however, it was a test transaction and still there isn’t trading on the platform (link).
  • Bancor: Developed its own protocol to enable peer-to-peer transactions for tokens. It started announced that in July that Alchemy would be the first listed security token in its network (link).
Private Marketplaces:
A more accessible path to create a secondary market for security tokens are the private markets. The main advantage is that licenses are much easier to get compared to exchanges. I don’t think they will compete head-on-head with the exchanges (unless they decide to become one themselves), instead, they will complement the ecosystem by providing access to more investors.

  • Templum: Supported the Aspen Digital Security Token to fundraise in August (link).
  • Sharespost: Created a Global Liquidity And Settlement System (GLASS) with OKCoin giving project access to US investors (link)
  • HighCastle: An UK-based investment platform focused on alternative assets that is entering the security token market.

*There are already quite a few players in each category, the listed companies are just a few examples of this evolving market.

Conclusion

From the Amsterdam Stock Exchange in 1602 (the first stock exchange in history) to Binance, exchanges were always the heart of all the trading markets. The security token market won’t be different, creating a massive opportunity for different players to try to become the leading ones in this new market and become the NASDAQs of tomorrow.

It’s still too early to understand how this market will evolve but, as we have seen, different types of players will be competing head-to-head, each one with its advantages and disadvantages.

Exciting times are coming and it will be interesting to watch how this market will unfold in 2019.

Who do you think will be the NASDAQs and NYSEs of tomorrow? Will crypto exchanges such as Binance and Coinbase lead the way? Or maybe a new kid on the block will surprise everyone?
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Startup Ecosystem in Latin America and Southeast Asia

Startup Ecosystem in Latin America and Southeast Asia
When I moved to Singapore 2 months ago, I was excited to go to a different part of the world but a little scared to go to a totally different region with many unknown unknowns.

During these months, I did a deep dive into the region to understand more not only about Singapore but also Southeast Asia as a whole, and I was quite surprised to learn that Latin America and Southeast Asia (SEA) might not be as different as I thought they were.

First of all, both regions have roughly the same population, Latin America with 646 million and SEA 641 million. Their two largest countries by population are Brazil (205M) and Mexico (130M) for Latin America, and Indonesia (267M) and the Philippines (106M) for SEA. Not that different, right?

In economy, Latin America had US$ 10 trillion in GDP PPP (Purchasing Power Parity) while SEA US$ 7.9 trillion (PPP GDP is a better approach for comparison as the currencies in the SEA are more devalued than in Latin America). However, Latin America should grow only 2% in 2018 while SEA will grow 5%. Although Latin America is ahead, for now, SEA should catch-up quite quickly as it’s growing on average 5% for the past 10 years and there are no signs of slowing down, which is quite impressive!

On the social side, things are a little bit different. Latin America is a quite homogenous region with all the countries, except for Brazil, speaking Spanish and all the countries are predominantly Catholic countries. This social design facilitates startups such as Mercado Libre, Despegar and OLX to expand well regionally. On the other hand, Southeast Asia is a little bit more complicated. Just Indonesia has more than 700 languages spoken on its many islands and even Singapore, which is one of the easiest places to do business, has 4 official languages. Things are no different in religion, the most practiced religion is Islam with only 40% of the total population with Buddhism and Catholic as the other two main religions.

Although the SEA market seems very fragmented, the main cities in the regions behave in a similar way. To understand that, it’s worth checking this material by Jungle Ventures: SEA Venture: Discovering Opportunities in a Fragmented Market

On the other side, Internet and social penetration in those regions are similar. Latin America leads the internet penetration with 66% while the SEA has 58% while social penetration is 60% and 55%, respectively.

In the startup ecosystem, it seems that Latin America has been fostering for a long time now but SEA is leapfrogging the Latinos due to a massive investment in the region. The Latin America startup ecosystem has been around for more than 10 years now. Just to put some perspective, Monashees, one of the first venture capital funds in the region, was launched in 2005. Also, Mercado Libre went public in 2007 and Buscape was acquired by Nasper in 2010.

Singaporean startup ecosystem, arguably the most developed in the SEA, has only around 5 years old with its first VC funds appearing around that time. 500 Startups Durian and Golden Gate were one of the first funds in the region and they were launched in 2014 and 2015, respectively.

Pushed by the local governments as well as foreign investments, Southeast Asia had an incredible growth in venture capital investment in the past few years, passing Latin America by far.

chart - Funding .png

In 2017, the Venture Capital funding market reached US$ 7.86 billion while, in the same year, Latin America just crossed for the first time US$ 1 billion investment (link). Singapore alone received a total of US$ 5.6 billion in startup investment in 2017, which is quite impressive.

As the startup ecosystem in the SEA is quite new, there are just a few success stories to tell so far. The most relevant ones are: Grab (valued at US$10 bi), Go-Jack (valued at US$ 5 bi), Lazada (sold to Alibaba at an undisclosed amount), SEA – former Garena (IPO with current market cap at US$ 5 bi), and Tokopedia (valued at US$ 1.3 bi).

As Latin America has a long history in the startup world, it has more success cases to show. Here follows a few: Mercado Libre (IPO with a current market cap at US$ 15 bi), PagSeguro (IPO with a current market cap at US$ 8 bi), 99 (sold by US$ 1bi), Nubank (valuation around US$ 2bi), and Buscape (acquired by US$ 342 M).

Although at first, those regions seem quite different, as shown, they had many similarities that might make then a better comparison to each other than to compare to US, Europe or China, at least in the startup ecosystem development.

The Latin American startup ecosystem is starting to mature with some big exits this year such as 99 and PagSeguro as well as big investment rounds in Nubank (US$ 150M), Movile (US$ 124M). On the other side, SEA is at an incredible pace with Grab raising another mega round of US$ 1bi and Go-Jek of US$ 1.5 bi.

I’m quite excited to see how both ecosystems are going to develop themselves!

And you, what’s your opinion about this?

Financial institutions relationship with Fintechs in Latin America

Financial institutions relationship with Fintechs in Latin America

What’s in it for me:

  • Learn how the financial institutions in Latin America are working with fintechs
  • Find out which financial institutions are the most innovative 
  • Learn which countries in Latin America financial institutions have been working longer with fintechs 

In my last post, I mentioned why fintechs in Latin America have the Perfect Storm on their side. However, financials institutions aren’t waiting to see what happens. The leading financials institutions in Latam have seem what is happening in more mature markets and are trying be proactive.

How financial institutions are defending themselves from fintechs in Latin America? Collaboration is the key word, here follows a highlight of how the main financial institutions in the region are working with fintechs. Just to be clear, here are structured programs that they developed to work with startups, I’m not counting hackathons or unstructured initiatives.

BRAZIL

Brazilian banks are the leading institutions in Latin America, therefore, they were the first ones to start structured relationship with startups. They started earlier than their counterparts, learned through trial and error, and now are expanding their initiatives.

Bradesco: A pioneer in Latin America, Bradesco started working with fintech in 2014 with its competition InovaBRA, where the selected startups have the opportunity to develop a project with the bank supported by senior executives. When I worked at Wayra in Brazil, we had 2 startups (QueroQuitar and Qranio) that participated in this program. In 2016, Bradesco launched the first Corporate Venture of a Latin American bank, which has R$ 100 millions (around US$ 30 millions) to invest in startups. Last year, Bradesco launched its own coworking space for startup, InovaBRA Habitat, to compete with Itaú’s Cubo.

Itaú: Since 2015, partnered with one of the main Venture Capital firms in Brazil, Redpoint e.Ventures, to create Cubo, a huge coworking space that enables Itaú executives to be close with fintechs and also to identify the ones that they could work with. In 2017, Itaú annouced that it would increase 4 times Cubo’s current size to accommodate 210 startups.

Santander Brasil: Although the bank always had a good relationship with entrepreneurs, it didn’t had any specific program with startups. That changed last year when Santander launched an acceleration program together with Endeavor, the Empreenda Santander 2K17.

Banco do Brasil: The bank decided, in 2016, to create an advance laboratory in the Silicon Valley to co create with startups, called Labbs and is based at Plug’n’Play facilities. A year later, it opened a Labbs in Brasília.

Porto Seguro: This Brazilian insurance company is the most innovative in the market and launched the first acceleration program by an Latin American insurance company in 2015. The program is called Oxigenio and is a partnership with Plug’n’Play and operated by Liga Ventures.

Visa Brazil: Visa launched in 2016 its Visa Innovation Center in São Paulo to co-create payment solutions with startups. In the same year, it launched its acceleration program Ahead with the support of Startup FarmStartup Farm. In 2017, kicked-off another acceleration program called Track in partnership with GSV Labs and Kyvo.

MEXICO

Mexico is the second most important market in Latin America, Mexican financials institutions started to move a little bit later than their Brazilian counterparts, however, they are investing well in that relationship.

BBVA: Probably the most innovative bank in Mexico, BBVA has been working for the past few years with its regional startup competition, OpenTalent. In 2016, the bank bought the Mexican startup Open Pay. Last year, it launched BBVA Open Sandbox, an open innovation initiative to select startups to have the opportunity in work together with the bank to develop projects.

SURA Mexico: Sura just hosted last week its Demoday for its first acceleration program, Aceleradora Sura, with Bluebox support. Although Sura calls it an acceleration program, it’s more like an open innovation program to work in projects with Sura.

Citibanamex: The Mexican branch of Citi Bank moved took a little longer to start and, in 2017, partnered with Village Capital to accelerate startups in the region, Village Capital Fintech: Latam 2017.

Santander Mexico: In 2017, Santander Mexico decided to work more closely with startups, launching a digital factory called Spotlight, which is a coworking space for up to 120 startups to work closely with the bank.

Banregio, Visa, HSBC and Gentera: The beginning of 2017, Banregio, Visa, HSBC Mexico, Fiinlab by Gentera, Ignia, EY Mexico and White & Case, came together with Finnovista and Startupbootcamp to launch Startupbootcamp Fintech Mexico City. An acceleration program focused on fintechs in Latin America.

COLOMBIA

A part from Grupo Sura, the Colombian financial institutions aren’t moving as fast as the Brazilian and Mexico.

Grupo Sura: The Colombia pension fund, Sura, partnered, in 2016, with Veronorte to create a Corporate Venture fund, Sura Ventures.

Bancolombia: A few days ago, Bancolombia just signed a partnership with Plug’n’Play to participate on Plug’n’Play Fintech accelerator.

CHILE

Chilean financial institutions are still starting to work with startups.

Banco BCI: The Chilean bank launched, in 2016, the BCI Labs as a acceleration program and a coworking space with the support of NXTP.

Banco Estado: The public bank kicked-off its open innovation program called Emprende + Empresas, which select startups to work closely with the bank in projects.

ARGENTINA

Argentina still doesn’t have many financial institutions programs to work with startups, but, in 2017, six Argentinian banks launched a fund called Arfintech to start investing in fintechs (link).

Also there are some regional initiatives that needs to be highlighted:

Scotiabank: The Canadian bank, that has some local operations in Latin America, partnered with the American Venture Capital fund QED, which is focused on Fintechs, to invest in fintechs in the region.

Visa: The payment giant is really concerned about its position in this new environment, therefore, it launched last year a fintech competition called Visa Everywhere Initiative, supported by Finnovista.

In summary, financial institutions in most countries in Latin America started to work with startups, however, most of them started in the past 2 years. Since Brazil is the biggest market in Latam, it was expected that Brazilian banks would lead and Mexican banks took a few years to realize that they needed to move. The most impressive is that Colombian and Argentinian banks are way behind on that regard.

It will be interesting to see how this relationship will evolve in 2018!

Key Takeaways:

  • Brazilian financial institutions are leading the relationship with fintechs with the main players having their on initiatives
  • Mexican financials institutions took more time to start working with fintechs them their Brazilian counterparts but are investing a lot now. Most of them through partnership with companies that have experience working with startups.
  • Colombian and Argentinian banks took longer to realize they need to cooperate with other banks.
  • Many banks, instead of starting their own initiative, decided to partner with accelerators or startup specialities to start working with startups
  • Still not many financial institutions are directly investing or buying startups

 

Fintech in Latin America, the Perfect Storm

The Perfect Storm

What’s in it for me:

  • An increasing number of fintechs are growing in Latin America, understand why that is happening
  • Have a better understanding of the financial environment in Latin America
  • Realize the opportunity fintechs are exploring in Latin America

As you could see in my last post (2017, a Great Year to Latin American Fintechs), Fintech in Latin America is booming! But what makes Latin America a great place for fintechs to develop themselves? Why so many fintech entrepreneurs are bullish about the opportunities while so many financial institutions are scared to lose market?

Latin America has 5 factors that create the perfect storm for the fintech development, let’s take a look and analyze each one of those factors:

  • High interest rates  

Latin America has one of the highest interest rates in the world. In 2016, Brazil had a real interest rate of 40.4%, Colombia 8.3%, Paraguay 12.2%, Peru 12.4%. While developed countries such as United States, and China had rates of 2.2% and 3.1%(Source).

That happens even thought the federal fund rates in Brazil is currently the lowest in more than 20 years, 7% in December 2017.

Because of that financial institutions have a huge spread, in 2016 Brazil had a 22% spread and Mexico 9.1% compared to 5.5% in Germany and 5.2% in the United States (Source),  which make them highly profitable, leading to our second factor.

  • Banks huge profit margin

Banks in Latin America are much more profitable than their counterparts in the rest of the world. They have the highest Return on Equity (ROE) globally, according to the research McKinsey Global Banking Annual Review 2016, 22.6%, that would be 235% more than the global average, 9.6%.

Because of that, banks are very powerful in Latin America, influencing government and being profitable even during terrible crises. All this in expense of the population. This lead us to our third factor.

  • A distrust in the financial institutions

Due to the many financial crisis that the region went through, high interest rates they charge, and many shady things they did and do, the financial institutions in Latin America have the greatest mistrust from their population in the world (Source).

In other countries, Banks trust is one of their greatest competitive advantage against fintechs, because people are skeptical to let small startups to handle their money.

However, in Latin America is pretty much the opposite. People don’t have bank accounts because they don’t trust financial institutions. They are more willing to trust fintechs than in banks which takes us to our fourth factor.

  • A large number of unbanked people

According to the World Bank research The Global Findex Database, in 2014 , only 51% of the Latin America population with more than 15 years had a bank account. While in a global level that number was 62%, reaching as high as 92% in the United States and 99% in the United Kingdom.

Also, only 14% of the population had formal savings and 11% borrow formally, while Americans had 54% and 23%, respectively.

Finnovista launched together with the IADB a report worth checking about the Fintech innovation in the region, with a great emphasis on financial inclusion.

So, there is a huge untapped market that the current financial institutions weren’t able to reach so far due to the mistrust the population has on them but that fintechs can provide services. This is possible due to the massification of technologies such as the smartphone, which is exactly our last factor.

  • A growing penetration of smartphones

According to GSM Mobile Economy 2017 report, smartphone penetration in Latin America was 55% in 2016 and expected to grow to 71% by 2020. In Europe, this number was 65% in 2016 and will be 76% in 2020. Therefore, Latin America is catching up Europe in a few years in smartphone access.

However, the impact of the smartphone in Europe is totally different than in Latin America, because Europeans already had access to internet through other devices. The smartphone is the first internet connected device that many of the Latin Americans have, which will add, by 2020, an extra 100 million people to the internet changing enormously the behaviour of those people, especially regarding access to financial services.

Concluding

All of the factors mentioned above results on a high adoption of fintech services in Latin America, as showed by the EY Fintech Adoption Index, which shows Brazil with a 40% adoption rate and Mexico 36%, above the average of the 20 top countries of 33%.

Also, it makes the incumbents fear losing market to the fintechs more than in any other part of the world, with a whooping 93% of the incumbents fearing to lose part of their business to fintechs in the next 5 years. (PwC Global Fintech Survey 2017).

The whole scenario is attracting venture capitalists attention. Investment in Fintech, in 2016, represented 27% of all venture capital investment in technology in the region.

Startups such as Nubank, Creditas, Kueski, and Afluenta are attracting millions of dollars in investment to disrupt the market.

Banks know that situation and aren’t staying still, they’ve been working closely with startups for the past few years with initiatives such as Startupbootcamp Fintech Mexico City, InovaBraCubo, we’re going to discuss how those initiatives work in a later post.

As we could see, Latin America is an amazing place for fintechs with an unique opportunity to disrupt the market. It’s a great moment to be working on a fintech or investing on one. I’m very happy to be supporting amazing entrepreneurs to create great fintechs in Latin America through the acceleration and Scale program of Startupbootcamp Fintech.

And you, what do you think about the fintech environment in Latin America? Leave your comment below.

Key Takeaways:

There are 5 main reasons that makes Latin America a perfect place for fintechs to grow:

  • Financial institutions charge high interest rate with a high spreads
  • Banks have huge profit margin, in expense of the population
  • Banks aren’t seen as trustworthy as in other parts of the world
  • Latin America has a large number of unbanked that don’t trust financial institutions
  • Smartphone penetration is growing quickly and it is the first device a good part of population has that can connect to the internet

 

 

 

 

 

 

2017, a great year to Latin American Fintechs

fintech, latin america, payment, blockchain, bitcoin, cryptocurrency, disruption, innovation, bank

What’s in it for me:

  • Learn what is happened in Latin America about fintech in 2017
  • Find out the main investment rounds in fintech in Latin America in 2017
  • Find out the main exits fintechs in Latin America had in 2017

In 2016, we had a boom of fintechs in Latin America with investments raising 30% in value (US$ 186M in 2016) and 81% in number of deals (38 in 2016) compared to 2015. Therefore, 2017 had all t be even better… and it was!

Last year was a great year for the fintech ecosystem in Latin America with many relevant investments, many milestones, and even a few first exits. There are now around 1,000 fintechs in Latin America with Brazil and Mexico leading with almost half of the total.

The following list isn’t supposed to be exhaustive, especially because many things happened in 2017, but rather be a highlight of the most relevant events.

Relevant Events

  • March (Mexico) –Startupbootcamp together with Finnovista launched its first acceleration program in Latin America focused in Fintech and based in Mexico City.
  • April (Brazil) – Equity crowdfunding is regulated in Brazil (link Portuguese).
  • April (Argentine) –MercadoLibre launched MercadoCredito to offer credit to SMEs (link Spanish).
  • May (Latin America) –IDB launched with Finnovista a report about the fintech innovation in Latin America (link).
  • June (Mexico) –BBVA Bancomer launched its open innovation initiative Open Sandbox to collaborate with startups (link Spanish).
  • July (Mexico) –Sura launched its acceleration program to work with startups (link Spanish).
  • July (Argentine) – Six Argentinian banks launched a fund called Arfintech to invest in fintechs (link).
  • July (Latin America) – Visa launched a regional competition with Finnovista looking for the best fintechs in Latin America (link).
  • August (Brazil) – Itaú announced that it was expanding 4 times its coworking space Cubo to accommodate 210 startups (link Portuguese).
  • August (Brazil) –Bradesco launched a coworking space for fintechs to compete with Cubo (link Portuguese).
  • August (Brazil) – A fintech hub was launched in São Paulo, the House of Fintech (link)
  • October (Brazil) –Nubank started to offer a 100% digital bank account without fees to compete with Brazilian big banks (link).
  • December (Mexico) – The Mexican Fintech Law was approved in the Senate, putting Mexico in the frontier of fintech regulation. (link)
  • December (Mexico) –Startupbootcamp Scale was launched as the first fintech program in the region focused on supporting scaling fintechs (link).
Largest Investment Rounds
  • February (Brazil) –Creditas received an investment of R$ 60M (US$ 19M).
  • May (Brazil) –Avante received an investment of R$ 38M (US$ 12M) (link Portuguese).
  • June (Mexico) – ComparaGuru received a Series A investment of US$ 7M (link Spanish).
  • August (Brazil) –Nubank received a debt round of R$455 M (US$140 M) to finance its revolving credit portfolio (link).
  • September (Colombia) –Sempli received a Series A investment of US$ 3.6M (link).
  • October (Brazil) –GuiaBolso received a Series D investment of R$ 125M (US$ 39M) (link).
  • October (Mexico) –Konfio received a Series B investment of US$ 10M (link).
  • November (Argentine) –Ripio raise US$ 37M from its ICO (link).
  • December (Brazil) –Creditas received an investment of R$ 165M (US$ 51M) (link Portuguese).
Exits

If you there was any other relevant event that you think should be mentioned here, please let me know by posting a comment below.

As you can see, 2017 was a great year for fintechs in Latin America, but still we have a lot to go to catch up eith some more developed markets such as USA, UK, Singapore, and China. Even though, I’m confident that Latin America has a great potential for fintechs, next post I will explain why I believe this. Stay tuned!

What do you think about what happened in 2017? Do you think 2018 will be even better? Please comment and let me know!

 Key Takeaways:

  • Latin America fintech ecosystem is growing rapidly with Mexico and Brazil positioning themselves as the leaders and Colombia and Argentine behind
  • Financial institutions are even more interested in collaborating with startups, launching many initiatives
  • The market is starting to see a few initial exits and some bigger rounds of investments
  • Lending was the most relevant segment in Latin America in 2017

I wish a great 2018 to everyone and many more investments and exits for the Latin American fintechs!

Culture Eats Strategy for Breakfast

Culture Eats Strategy for Breakfast

What’s in it for me:

  • Why is culture so important for startups?
  • What is a Culture of Growth?
  • What are the traits of a Culture of Growth?

“Culture eats strategy for breakfast”, I heard this phrase some days ago and since then it stuck in my head. This quote is attributed to the management guru Peter Drunk. I really appreciated because its highlight the importance of the culture in the success of a company.

I’ve been studying about the topic, especially focused on startups.

First of all, let’s understand better what is a startup. There are a couple of different definitions, here follow two relevant ones:

“Startup is an organization formed to search for a repeatable and scalable business model.”

Steve Blank,

serial entrepreneur and professor of entrepreneurship at the University of California Berkeley.

“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth. Everything else we associate with startups follows from growth.”

Paul Graham,

co-founder of Y Combinator

Both definitions above, as most of the startup’s definition, consider growth and scale an essential part of a startup. The reason is that startups are focusing on a market opportunity that is based on technology with a limited window of opportunity and in a market with some degree of winners-take-all characteristic.

Although growth is so important, startups don’t have as many resources to achieve their growth as big corporations.

I guess the important question then is: How can a few guys in a garage not only fight but defeat big corporations?

Startups rely only on highly motivated and skilled team, so do many big corporations.

So, what is the difference? The difference is in their culture. While a startup has a Culture of Growth, most big corporations have a culture that undermines innovation and disruption, limiting their growth.

Culture is what drives how a team works and what it can accomplish. Most people already heard about the importance of culture, but what exactly is a corporate culture? The simplest and best definition of culture that I’ve seen is:

“Culture is what your employees do when you’re not around”

Robbert Sutton and Huggy Rao,

authors of Scaling Up Excellence

As companies grow, the founders won’t always be around to help the employees decide what to do, however, in a fast paced environment that changes all the time, such as in an innovative market, the company can’t rely only on the decisions made by the management team. Therefore, making sure that employees make the best decision for the company in incredible fast starts to be surprisingly important.

Based on that, my definition of culture is:

A set of values and behavior in a corporation that influences employees decision-making not only on big decision moments but also in daily activities.

Companies that have a culture that enables fast and reliable decision-making have an unfair competitive advantage.

Not only that, the right culture is a valuable asset to hire the best employees. People are motivated in two different ways: Intrinsic motivation and Extrinsic motivation.

Extrinsic motivation is related to rewards such as money, fame, and others. Startups don’t have enough resources to fight big corporations for the best talent regarding this kind of motivation.

On the other hand, intrinsic motivation is related to internal rewards such as a sense of accomplishment and belonging. Studies by Karl Duncker show that intrinsic motivation is more effective when working on a problem that needs innovation and hard thinking, which are the kinds of problems faced when disrupting a market.

Great people are more motivated by intrinsic values than extrinsic ones, therefore, startups use their culture to foster intrinsic motivation to attract the best talent and also to empower them to perform at their best.

 

Ok, but what is a Culture of Growth?

A Culture of Growth is a culture developed to enable high growth in a company, especially startups. Although each company will have its own and unique culture, I have identified 10 traits that are present in most companies with strong cultures that foster high growth. Below follow the list in no specific order:

  • Owner’s Mindset
  • Talk Straight and Feedback
  • Customer Centric
  • Communication and Transparency
  • Result-Oriented and Data-Driven
  • Trust
  • Excellence and Big Thinking
  • Accountability
  • Alignment
  • Test and Learn

In the next few posts, I will detail each one of those traits and how a startup can implement tools to cultivate them.

I would like to hear how is in your company? Does it have all these traits? Does it work well?

Key Takeaways:

  • Culture is a set of values and behavior in a corporation that influences employees decision-making not only on big decision moments but also in daily activities;
  • A Culture of Growth is a culture developed to enable high growth in a company;
  • A great culture is an unfair advantage and helps attract the best talent;