Latin America’s Next Potential Unicorns
In May 2019, Auth0 became Argentina’s fifth unicorn and the region’s eighteenth. Globally, there are 326 ‘unicorn’ startups, a moniker that denotes a $1B valuation for a company that is still privately-held.
These $1B startups were once rare, with ~82 globally in 2015, but startups are now taking longer to IPO and pushing valuations to new heights. Before Uber’s IPO in May 2019, the rideshare startup was worth $72B, the most valuable privately held VC-backed startup ever. The next most-valuable unicorns, including Airbnb, Stripe, SpaceX, and Palantir, are all valued above $20B.
While unicorns have become relatively common in the US, they hadn’t been in Latin America until 2018, when a new batch of unicorns emerged on the scene. Based on growing $100M+ investments, another batch of companies is close to breaking into Latin America’s unicorn club; a few may already have a valuation above $1B but have not yet shared this information publicly.
Some of startups may soon join TOTVS, MercadoLibre, Globant, Loggi, OLX, Despegar, Auth0, 99, iFood, Nubank, Gympass, Stone Co, Ascenty, PagSeguro, Arco Educacao, Rappi, Prisma, Softtek, Movile and KIO Networks, who make up Latin America’s unicorns.
Here are some of my predictions for Latin America’s next unicorns, as well as startups that could grow into unicorns over the next few years.
1. The “Almost Unicorns” Club
Latin America’s top five funding rounds in 2018 topped $100M per round and totaled $1.2B, more than the total VC raised by Latin American startups in 2017. Softbank’s rounds for Colombia’s Rappi and General Atlantic’s investment into Mexico’s Clip, Brazils Creditas, and more already top $1.3B, with Softbank already deploying $1.5B. Expansion rounds are becoming more common in Latin America, with new record-breaking rounds driving investment dollars in 2018 and 2019.
Several startups in Latin America who raised large Series C+ rounds in the past 12 months may well already be unicorns, or they rest on the cusp of becoming one.
Here are some of the startups that are close to becoming unicorns in the short/medium term.
Creditas, founded by Sergio Furio, is a Brazilian secured lending platform that is working to lower consumer interest rates in Brazil. In July 2019, Creditas $231M in new financing led by SoftBank Vision Fund and SoftBank Group. Creditas previously raised a $55M Series C led by Vostok Emerging Finance, Kaszek Ventures, Quona Capital, QED Investors, International Finance Corporation, and Naspers Fintech, along with new investors, Amadeus Capital Partners and Santander Innoventures in April 2018.
Grow Mobility (Mexico/Brazil)
Grow Mobility was born out of the merger between Mexico’s Grin and Brazil’s Yellow, e-scooter companies that expanded quickly in their home markets. The fusion came with $150M in fresh capital to help the Grow Mobility expand across Latin America, and turned the company into the world’s third-largest scooter company after Bird and Lime. The two companies now have over 100,000 scooters and 35,000 bikes combined and will use the investment to fend off China’s Didi Chuxing, who plans to enter the Latin American scooter market in 2019.
In 2018, Grin raised the region’s largest ever Seed round at $20M immediately after finishing Y Combinator. They quickly raised a $45M Series A to expand into the Brazilian market through an initial fusion with Rio de Janeiro’s Ride. Yellow, founded by 99 co-founders Ariel Lambrecht and Eduardo Musa, raised Latin America’s biggest Series A at $63M in 2018, showing keen investor interest in alternative mobility for the Latin American market. The merger, as well as a partnership with Colombian unicorn Rappi, may put Grow Mobility in a position to become a unicorn in 2019 or 2020.
MadeiraMadeira is Brazil’s leading home goods store, using drop shipping and technology to optimize its marketplace for home products. The startup, founded in 2009 by Daniel and Marcelo Scandian, has raised almost $40M from investors like Flybridge Capital Partners, Kaszek, and Monashees throughout its lifetime.
Despite raising a relatively small amount of capital, MadeiraMadeira registers consistently strong sales and month-over-month growth that puts the platform in a position to hit a $1B valuation if it raises more capital in the near future.
2. Startups that are next in line
While some of the “almost unicorns” have been growing in Latin America for 8-10+ years, the majority of the companies that are a little closer to unicorn status were founded post-2015.
These startups received significant international investment and attention within the past twelve months, putting them on the path toward the $1B mark.
Clip, founded by Adolfo Babatz, is a small device that turns any smartphone into a point-of-sale (PoS) system so that any merchant can process credit or debit card payments. The fintech startup recently drew international attention with a $100M Series C investment, placing Clip’s valuation around $400M, post-money. Softbank contributed $20M to the round from its $5B Innovation Fund, alongside General Atlantic. While Clip may still have a significant growth path ahead before joining the other unicorns, its recent round puts the startup on the radar for $1B potential.
Latin America entered a neobank frenzy in 2018. Brazil’s largest neobank, Nubank, raised $150M in March 2018, becoming Brazil’s third unicorn of the year, then raised another $180M from Tencent in October 2018 at a $4B valuation, followed by another round at $10B, making it the world’s most valuable neobank.
Meanwhile, Argentina’s neobank, Ualá, founded by Pierpaolo Barbieri in 2016, appears to be following in Nubank’s footsteps. After a $10M Series A from Ribbit Capital, Jefferies Group, Point72 Ventures, Ualá went on to raise a $34M Series B round led by Goldman Sachs in 2018. The startup also raised an undisclosed round from China’s Tencent in April 2019, putting it on the path to follow in Nubank’s steps and become Latin America’s second neobank unicorn. Argentina’s economic struggles may slow growth, as Uala expands to other Latin American markets.
Quinto Andar (Brazil)
Quinto Andar, founded by Andre Penha and Gabriel Braga, aims to help Brazilians rent apartments more quickly and efficiently. Having already raised significant funding from General Atlantic, QED and more, Quinto Andar is well on its way to becoming a LatAm Unicorn.
Cornershop (Chile, Mexico)
The Chilean grocery deliver startup had its $225M acquisition by Walmart torpedoed by the Mexican anti-monopoly commission. Rumors are they grew extremely fast during the potential acquisition, and could be on their way to being a unicorn.
3. Startups with unicorn potential
The following startups are still too young to tell where they might go; however, their founding teams, growth patterns, and market strategies put these companies in a strong position to become unicorns in the next five years. Loft, Frubana, Kushki Pagos and more could all be potential unicorns in the mid term.
OmniBnk provides invoice-backed lending to SMEs across Latin America, using the data from e-invoices to analyze risk and provide loans to underbanked businesses across the region.
Founded in 2016 by Diego Caicedo, Andres Abumohor, and Charles Cliff, OmniBnk has raised over $200M in debt and equity to date from Magma Partners and international asset managers. They are currently undertaking an aggressive expansion plan in Colombia and Mexico for 2019. Greensill, which manages billions in SME loans in Europe and recently received $1B from Softbank and General Atlantic in 2019.
Last-mile delivery and logistics platforms exploded in Latin America in 2018 with record-breaking investments in Colombia’s Rappi and the acquisition of Mexico’s Cornershop.
Lifted with the tide was Colombia’s Liftit, a platform that connects truck drivers with companies that require delivery, raising a $12M Series A round in July 2018. Founded by Brian York, Angel Celis Botto, and Felipe Betancourt Celis in 2017, Liftit is quickly becoming Colombia’s logistics leader. Liftit is currently opening offices in Santiago, Lima, Quito, and Mexico City in preparation to enter the highly-competitive Brazilian market.
Liftit’s direct competitor in the Brazilian market is CargoX, Brazil’s “Uber for Trucks,” founded in 2013 by Federico Vega. To date, CargoX has raised over $95M, including a $60M round in September 2018 from Blackstone Group and Hudson Structured Capital Management.
In 2018, CargoX also made headlines in Forbes by reaching $200M ARR. The startup is now one of Brazil’s largest freight companies, despite not owning a fleet of vehicles.
The Latin American unicorn club
This list is not all inclusive, and there are many more startups that could reach $1B valuations that were not mentioned. Over the past two years, Latin America has almost doubled its “unicorn club” of startups valued over $1B. With the rapid increase of investment across the region, Latin America will likely see more unicorns, in new countries, appear alongside recent members like Rappi and Nubank within the next year. Who do you think should be added to this list?