Building growth as a fintech startup in LATAM – interview with Startupbootcamp

According to the recently published report, Fintech in Latin America 2018: Growth and Consolidation, by the Inter-American Development Bank and Finnovista, 1,166 fintech startups were identified in the LATAM region, a rise of 66% since the first study published by the two organisations in 2017. Can you tell us more about the LATAM fintech landscape at this moment and its rise to this point?

There was a very interesting growth over the last year in terms of number of fintechs in Latin America. Geographically, that growth was led by Brazil, which has 380 fintechs, and then Mexico with 273. After that, there is a bit of a drop off to countries such as Colombia, Argentina etc. Then, the composition of total fintechs in Latin America is led by payments, at 25%, lending with 18% and, lastly, enterprise financial management with 16% - those being the top segments of services fintechs are offering. The number and the growth of fintechs in Latin America recently is just a reflection of the gap in financial services available to the grand population. The growing consumer class requires financial services that the current banking and financial system isn’t equipped to service.

Furthermore, over the last year we’ve also seen an interesting trend towards B2B, with more fintechs in this space than in the B2C space (across OECD countries which includes Mexico, comprise 72% of all businesses and contribute 52% of GDP).

More and more people are starting their own businesses and there aren’t a lot of solutions in terms of lending, credit, financial management – all these needs that a small business can have are not serviced by existing financial institutions or banks. More often than not, although business is growing, financial institutions might not have the solutions, nor the capabilities to customize offers for small and medium sized enterprises.

Fintech Mexico City is the key Startupbootcamp programme dedicated to accelerating growth for startups all over the world that want to launch in the LATAM region. What does it entail? What are the most important criteria when selecting a startup?

We currently have two programmes in the Startupbootcamp Mexico City umbrella with our key one, the Startupbootcamp Scale, launched in April 2018 as a response to a need we saw in the market for already-established startups that, even though they have clients and generate revenue, they strive for faster growth. We are talking about startups that have reached a stage where they are pretty stable, maybe they are growing 4 to 5% per year, and they are looking to get to that next level.

Within the scale programme, we work with startups that are between a seed round and a series A. They already have seed funding, and for series A investors are going to be looking for repeatable sales, to see that you understand your sales process and where your sources of growth are, where you can get more clients, and also that you have a platform and a team that can scale with your growth.

What we offer that is different from other programmes is that it’s completely customised, and for that reason we choose to work with a smaller number of startups, to deliver a personalised experience (in the accelerator programme we typically work with ten startups per year, whereas in the Scale programme we only work with five).

We perform needs assessments, not only at the beginning of the programme, but all throughout the process to adjust to the fast growing needs and priorities. It’s a semi-presencial programme – since these companies are already operating and have to attend their day-to-day needs, the programme is structured over six months, with their presence required one week per month. It is a super-intensive week, in which we have masterclasses, workshops, chats with successful entrepreneurs, the top VCs in the region, as well as a lot of peer-to-peer learning. Because who better to help answer questions of their peers, if not other fintech entrepreneurs?

We have experiment designs via two-weeks sprints, while also including failure metrics for each experiment, to make sure that you don’t keep working on something that you have already proved that it doesn’t work. What we have found through all of these different steps and two-week experiments are various new sources of sustainable growth for the startups who went through the programme last year.

For example, we had four startups that went through the programme, with success stories from all four of them, which have experienced triple-digit growth as a result. An interesting use-case of a startup that underwent our programme is Quotanda, a platform for online student lending, whose white-label Lending-as-a-Service technology helps schools, universities, financial institutions, fundraisers and governments manage financial aids by outsourcing loan and scholarship origination and servicing. They were able to grow the number of generated loans by 4.5 times, they doubled the number of clients that they had in their portfolio, and when they started the programme they were operating in three countries and during the programme they were able to grow that to six. Among some of the investors they worked with, we can count VC Fintech, FIS, Village Capital, and Access Ventures.

In December 2018, they had just signed another B2B client, and they are now expanding to eight countries – that growth is continuing. And that’s our objective in the programme.

What are some of the most important players in the fintech market or banks that you work with?

In the Startupbootcamp Scale Mexico City programme we have eight corporate partners. They are Fiinlab, which is the innovation arm of Gentera, a regional bank, BanRegio, another regional bank, HSBC, the global banking group, Visa, EY, the consulting firm, Ignia, a venture capital firm based in Mexico, heavily focused on fintech. We also have on board Latinia, a software house for financial institutions and banks in Latin America, and White and Case, which is a global law firm.

What can a global-scale fintech or an important bank offer startups during their partnership with the fintech accelerator? Can you share with us some of the means used by major fintechs and banks to support fintech startups through Startupbootcamps programmes?

Throughout the programme we have successful fintech entrepreneurs constantly coming in, at least one or two on site per week. What we normally do is a fireside chat so they can talk about their experiences, their successes, their failures in this stage. This stage can create awkward moments – with big highs and equally big lows –, yet, because we have a smaller group, it’s a really warm and informal chat, making it comfortable for everyone. Everyone is sitting down talking, or chatting over lunch, creating relationships and thus feeling more open to call upon these successful entrepreneurs if they encounter problems in the future. It’s great to see the level of collaboration and mentorship that people are really open to.

Our corporate partners take part of our programme because they basically have a lot of opportunities to collaborate commercially with these fintech startups. Obviously, we can never actually guarantee anything, because banks and financial institutions have different strategies and needs, but usually we are looking to see if there is an opportunity for a pilot or a white label to be created, and, in other cases, we also offer mentorship.

On the other side, we actually have great participation from fintech entrepreneurs, as well as banks and financial institutions, as a result of them wanting to see what’s going on in the industry. Even if a fintech or a bank is not yet equipped or prepared to respond to the needs of a market, getting to know somebody who is a lot earlier in the game allows the bigger players to see what needs the startups are addressing and what their approach is to doing that.

Also, it’s good as a community for everyone to be connected, to find synergies. There are some things that a bank, with its bureaucratic structure, is never really going to be able to address. Yet, I think banks realized that fintechs can move a lot faster and that it might be smarter at some point in time to invest or acquire the startup, as we’ve seen, for example with BBVA. BBVA Bancomer Mexico have done a couple of strategic acquisitions of fintechs who have done really well and are addressing a need that, if BBVA would have wanted to take it on themselves, it would have taken them five to ten years to develop.

You recently attended Finnosummit in Miami, in October, an event dedicated to fintech innovation. What are the key-takeaways from the event? What new ideas and perspectives did you leave with for 2019?

Finnosummit was the second event that we’ve done in Miami and my first. It’s great to see Miami positioned as a fintech hub for all of Latin America. I think it’s where everybody goes to see what’s going on in the ecosystem, make their connections and also just to strategize on a regional level. That’s where the real momentum is going to pan out of.

One simple example is the legal and regulatory environment. Last year, in 2018, Mexico passed Fintech Law, a first-of-its-kind not only in the region, but on a global level as well, and a lot of other countries have those conversations going on. Peru, Chile, Colombia are now focusing on the same matters now at a certain extent as well. What’s more, what we saw at Finnosummit Miami is that people are really starting to harness the power of a more regional perspective, so that fintech will continue to grow and to succeed in Latin America.

About Christine Chang

Christine is Finnovista’s program director for Startupbootcamp Scale, working with growth-stage FinTech start-ups looking to expand into Mexico. Driven by a continual desire to learn, evolve and build things, she moved to Mexico in 2015 convinced that Latin America and emerging markets are the breeding grounds for authentic, impactful innovation that comes out of organic need and great ambitions. Christine has worked on a variety of projects related to transformation, growth and strategy execution over 15 years and across three continents within various oneworld airlines, a Swiss bank, Big 4 consulting firm and early-stage HR Tech and Consumer Tech companies. She has been recognized for her commercial expertise as well as talent for preparing gluten-free desserts and Thanksgiving turkeys. Christine has a B.S. in International Business from Pepperdine University, an MBA from IE Business School and is currently working on her yoga handstand and Python skills.

About Startupbootcamp Scale FinTech Mexico City

Startupbootcamp Scale FinTech Mexico City is an innovation program for high growth FinTech companies to expand globally, increase their revenues, and access leading funding opportunities. By focusing on seed-funded companies with validated business models, the program is designed to help founders tackle the many challenges related to scaling their technology business. A particular emphasis is placed on increasing revenues through targeted access to industry partners. The program also supports founders as they build scalable international operations and prepare for growth stage funding.