The audio and video are in Spanish. These notes are a translation.
Fintech is the industry that has attracted the most capital and talent in the Latin American startup ecosystem. Many of these businesses took advantage of the low interest rate context to finance themselves. But today, the macroeconomic context is very different, and that is why I was wondering how the next generation of fintechs in Latin America will look.
To talk about this, I invited Adriana Saman, director of investments at Clocktower Technology Ventures, a United States investment fund specialized in fintech, where she leads investments in Latin America. Her portfolio includes unicorns such as Habi and Kushki, and well-known startups such as Flink and Global 66.
In this episode we talk about:
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Why fintech attracts so much venture capital investment
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The current state of fintech in Latin America: pending challenges, competition from corporates, and investment trends
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The characteristics of the business models of the best fintechs
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Finally, we talk about how she would design the business plan of a fintech startup
If you are interested in fintech, this episode is a masterclass from one of the most active and experienced fintech investors in Latin America.
Youtube Timestamps*
[01:34] - Current State and Future of Fintech
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How did Adriana arrive at the fascinating world of startups?
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What investment banking skills at JP Morgan helped Adriana as an investor, and what skills has she had to learn from scratch? And how did she do it?
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What are the most important mistakes she has made when evaluating founders, and what has she learned from that?
Every investor and founder repeats to the point of exhaustion that the fintech opportunity in Latin America is enormous, and they attribute it to data such as the lack of financial inclusion, which to the average person sounds like a lot and like nothing.
- Adriana helps us understand why fintech is such a large and attractive opportunity for Venture Capital. She uses numbers so it is easier to grasp the scale, and she focuses on Mexico for simplicity.
At the beginning, the banks were completely outpaced by the fintechs, but in the last 3 to 5 years we have seen corporates investing resources to become more agile and to innovate from the inside.
In Mexico, cases such as GBM+, Oxxo with Spin, and Banorte with HeyBanco are entering the game, taking advantage of their large distribution capabilities.
- How does this competition from incumbents influence her investment decisions? Has it influenced her thesis in any way?
There is a phrase from an economist that says “regulation benefits the incumbent”.
- How does Adriana see fintech regulation in Mexico affecting the sector? Does she see more startups, fewer startups, or does it have no impact?
Being at a US fund investing in Latin America, many investors probably ask her about the region.
- What is the perspective of investment funds in the US on Latin America?
[28:56] - Fintech Business Models
During 2021 and 2022, many fintechs raised rounds of several million dollars, even from the pre-seed stage, and these round sizes were justified because building a fintech is “expensive”.
- How has the rise in interest rates impacted the type of fintech businesses (credit, payments, infra, etc.) that are emerging in Latin America?
Adriana’s team mentioned that her identification of the set of opportunities was what convinced Clocktower to launch a fund dedicated to Latin America.
- How has her appetite for fintech businesses evolved in the last 2 years? Which opportunities interested her before, and which ones attract her today?
There are several trends with opposing effects. On one hand, regulation and the lower availability of capital. On the other hand, the appearance of more infrastructure services.
- How much does it cost to start a fintech today? How much capital is needed to have a chance to compete? At least at the early stage. Adriana gives an approximate calculation.
Looking at the dozens of fintechs that emerged in recent years in Latin America and disappeared so prematurely.
- What would she say are the biggest mistakes she has seen fintechs make in terms of business model?
Adriana spends a lot of time studying technology businesses at Clocktower.
- What have been her biggest lessons? What, in her opinion, makes a Fintech business excellent instead of a mediocre one?
Several of the fintech success stories in Latin America have been digital products focused on an audience that already had access to financial services.
- What does Adriana believe is missing for this financial innovation to reach people who have less access to quality services?
[46:11] - How to Build in Fintech
Fintech is still the most “hot” sector in Latin America. This attracts more young people, and people less experienced in the financial industry, to build in fintech.
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Under what framework or key aspects would she recommend they think about and evaluate their idea? (Questions such as: which product to start with, which distribution channel to choose, which type of users to go after first, how to obtain data, etc.)
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Looking at her investment portfolio, do most of them have experience in financial services? How key is it to have that experience?
An interesting trend is the verticalization of fintechs: digital banks for independent workers, financing for importers, payments for restaurants, credit for agriculture, etc.
- How do you think about the advantages and disadvantages of a fintech business focused on a specific industry or customer niche?
If they presented Adriana with software that digitizes bakeries:
- What would she say is the right moment for these businesses to think about Fintech and about offering financial services?
In fintech, there is a lot of innovation in the business model. Neobanks do not charge commissions, Flink or GBM do not charge commissions for buying or selling shares, etc.
- How does Adriana think about the choice of business model (business model fit)?
[55:51] - Rapid-Fire Round
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If Adriana had to start her career over from scratch, what would be the main piece of advice she would give herself?
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What has been the most influential book on her path through the world of startups?
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What would she like to change about the world of startups in Latin America?
Episode Mentions
You can find Adriana on LinkedIn
Recommended book: eBoys: The First Inside Account of Venture Capitalists at Work by Randall E. Stross
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Follow Enzo Cavalie on X: @enzocavalie.