A decade in the past, to say the Latin American fintech business was nascent would have been an overstatement. Whereas there have been a handful of enterprising startups, nobody had achieved a lot scale and there was little or no funding obtainable to assist. And but, these bootstrapping entrepreneurs have been on the forefront at what would quickly be a thriving business. At present, Latin American fintech is scorching, though like the remainder of the fintech world it has cooled down considerably in 2022. My subsequent visitor on the Fintech One-on-One podcast is Christine Kenna, a companion at IGNIA, a Mexican VC agency, the place she has spent greater than a decade. Throughout that point, she has witnessed and took part within the explosive development of the fintech business.On this podcast you’ll study:
- How Christine got here to Mexico and to IGNIA.
- What it was like being an investor in Mexico a decade in the past.
- After they first began being attentive to fintech.
- How IGNIA has responded to the altering investing atmosphere.
- What it means to entrepreneurs to have large identify American VCs within the area now.
- The totally different environments for early stage and later stage funding.
- Probably the most fascinating areas of fintech at the moment in Latin America.
- Why money remains to be so prevalent in Mexico at the moment.
- Why Christine is bullish on crypto long run.
- Why LatAm entrepreneurs are at all times trying cross border.
- The stage of firms IGNIA focuses on.
- The standard of the entrepreneurs approaching her at the moment.
- What Christine is most enthusiastic about for the way forward for LatAm fintech.
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FINTECH ONE-ON-ONE PODCAST 389-CHRISTINE KENNA
Welcome to the Fintech One-on-One Podcast, Episode No. 389. That is your host, Peter Renton, Chairman and Co-Founding father of Fintech Nexus.
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Earlier than we get began, I wish to let you know about Fintech Nexus LatAm taking place in Miami on December thirteenth and14th. Latin America continues to be the most popular fintech area on the planet and our 2022 occasion will function all of the main gamers. So, be a part of the LatAm fintech neighborhood this 12 months the place you’ll meet the individuals who matter, study from the specialists and get enterprise finished. Register at fintechnexus.com/latam and use the low cost code “podcast” for 15% off.
Peter Renton: At present on the present, I’m delighted to welcome Christine Kenna, she is a Companion at IGNIA. Now, IGNIA are a extremely fascinating firm, they’re a VC fund primarily based out of Mexico Metropolis, they spend money on early-stage tech startups with a heavy emphasis on fintech, startups that want to develop in Latin America. So, we discuss all in regards to the Latin American fintech scene on this episode, we undergo among the challenges in Mexico, how issues have sort of advanced over the previous couple of years.
She has been doing this since 2011 so has seen lots of modifications in Mexico and in Latin America in terms of capital formation. Now, we discuss among the firms in her portfolio, we discuss essentially the most fascinating areas in fintech at the moment, we discuss money, we discuss crypto and what she’s most enthusiastic about for the way forward for Latin American fintech. It was an interesting episode, hope you benefit from the present.
Welcome to the podcast, Christine!
Christine Kenna: Thanks, Peter, it’s nice to be with you.
Peter: Nice to be with you. So, why don’t you give the listeners a bit of little bit of background about your self and possibly in which you can form of describe the way you got here to be dwelling in Mexico.
Christine: You recognize, I believe it’s one thing which you can relate to very nicely, Peter. Although I’ve been dwelling in Mexico since 2006, I believe I’m at all times very tied to my roots. I think about myself a Chilanga Gringa as a result of I used to be born and raised in america and really a lot tied to Silicon Valley, I grew up round Palo Alto, and I constructed the primary a part of my profession in tech firms surrounded by enterprise capital, working in these very quick paced, excessive development industries and it wasn’t actually till I had my first publicity to Mexico that I spotted the large potential that’s in Latin America.
And so, in 2006 I took on a job main an training firm in Mexico Metropolis and I spotted that there was an unbelievable quantity of expertise, an infinite alternative right here, however zero entry to capital. So, I used to be capable of carry my earlier expertise working in tech firms like Google, having had an MBA and actually studying how you can develop and scale companies. After which in 2011, is after I first joined IGNIA which is the place I proceed to be at the moment.
Peter: I presume you could possibly communicate Spanish by the point you bought to Mexico in 2006?
Christine: (laughs) Sure. My mom is Cuban so I’m Cuban-American.
Peter: Okay.
Christine: However, you recognize, it wasn’t util I used to be working, and dwelling and respiration right here and actually not having the ability to communicate English that I used to be truly capable of decide it up fluently.
Peter: Proper, proper, okay. So then, you’ve been concerned then in enterprise capital in Mexico for greater than a decade so I’d like to get a way of what the early days have been like again in, you recognize, whenever you joined in 2011. What was the panorama like again then?
Christine: It’s very exhausting to even name it enterprise capital as a result of there wasn’t an ecosystem again then. IGNIA’s first fund was the primary affect investing fund in Latin America and I believe it’s essential to emphasise that and truly get an thought of what it was like as a result of the primary traders in IGNIA have been largely growth banks. We had backers corresponding to George Soros, JP Morgan, the Rockefeller Basis and the Omidyar Community and that was extremely instrumental to truly elevate a fund which was $100 Million and to truly deploy capital, however we have been investing in largely brick & mortar firms.
When IGNIA was first began, you recognize, the iPhone was simply popping out, it was so totally different what the patron conduct was like then. The market was not prepared I believe to have the ability to develop and scale know-how firms and there have been actually no different traders domestically and only a few traders internationally prepared to even have a look at the area and actually think about deploying capital in Latin America. On this first affect investing fund, I believe what was nice for us is that we have been capable of finding unbelievable entrepreneurs who later then have been capable of develop and change into repeat entrepreneurs. And at the moment, the world is simply so totally different due to each facet and every part in that area now, however the alternative out there continues to be the identical.
Peter: Proper, proper. So then, I imply, clearly, fintech wasn’t actually a factor in 2011, definitely not in Latin America.
Christine: No.
Peter: When did you first began being attentive to fintech, you recognize, when did you make your first funding?
Christine: At IGNIA, we raised our first enterprise capital fund in 2016 and this fund is now…..half of what we’ve invested is in fintech. And so, whereas with our first affect fund I believe we at all times sought the necessity for monetary options, you recognize, there was nonetheless vastly unbanked inhabitants, you recognize, all these issues nonetheless existed, there was no entry to credit score wherever. Once more, the instrument form of all that infrastructure that’s wanted to be in place to make fintechs work was not there, proper, so with our enterprise fund is once we first began investing, I believe you discuss form of the essential issues starting with funds.
And so, that was an enormous space we first began investing in, firms like Sr. Pago and we’ve invested in different firms like Atticus that was later offered to Mastercard after which firms like UnDosTres which are targeted on actually serving or offering the onramp for the unbanked inhabitants and really fundamental transactions of every part from top-ups to cellphone minutes to purchasing film tickets, for instance. However what actually makes them differentiated is the truth that they’ve constructed this strong platform and infrastructure that’s targeted on combating fraud which is one thing that’s exceptionally vital within the fintech sectors, significantly in Latin America and significantly in Mexico. And so, I believe as soon as the entrepreneurs have been figuring out what these alternatives have been they’ve been capable of then develop on these and develop in scale.
Peter: Proper, proper, okay. So then, 2016 there was loads of fintech firms round, they in all probability weren’t getting an entire lot of funding, however then we noticed this build-up and by like 2020 there was much more consideration. I imply, lots of American, big-name American VCs coming into the area so, now we’ve seen a bit extra of a pull-back, I imply, possibly you could possibly simply form of discuss a bit of little bit of the, how the occasions have modified ,and the way IGNIA has responded to the actually large ups after which a little bit of a pull-back. How have you ever guys responded to that?
Christine: I believe what’s vital on investing is being true to who you’re as an investor, be true to yourselves and actually specializing in enterprise fundamentals. So I’d say, in that regard, at IGNIA we have now not modified the way in which that we make investments, you recognize, the quantity of {dollars} coming into the area and to the co-investors that have been seeking to make investments have modified considerably. However, you recognize, we at all times look first on the entrepreneur, we’re trying on the enterprise fundamentals and the market and to actually see the answer we’re serving by means of that, and the truth that we are available in early, what we’ve seen is because the co-investors have change into much more subtle and clearly with quite a bit deeper pockets which is nice for the founders.
One nice fund that we’ve seen are available in is QED and I believe the truth that QED has had such a powerful deal with fintech after which been capable of present a lot of these classes realized, of their experiences and that community from among the world’s best fintech firms exterior of Latin America, you recognize, that has been enormously helpful for the Latin American fintechs rising right here, proper. So, whereas we are able to present the native form of boots on the bottom information and entry, and most significantly entry to serving to our founders with the regulation that’s continuously altering and shifting, proper, but additionally serving to them not solely attempt to affect among the regulation, but additionally to assist them perceive and adapt to the regulation. Having traders like QED on these cap tables is an unbelievable praise and we’re so grateful that they’re within the area.
Peter: Proper, proper. Are Mexican entrepreneurs, do they actually need that form of stamp of approval from a QED or an Andreessen? What’s it imply to them?
Christine: I believe it’s, at the beginning, vital as a result of it’s capital. So extra so than any model identify it’s as a result of the native funds are nonetheless very younger and comparatively small in measurement besides that I’d say for a number of funds like Monashees or Kaszek which have been capable of elevate a big quantity extra capital, we are able to solely go thus far. And so, having these worldwide funds are available in has allowed the native fintech entrepreneurs to truly obtain their visions.
Peter: Proper.
Christine: I believe there’s at all times been a debate about have Latin American entrepreneurs at all times simply thought small or they simply truly haven’t been capable of get funding to develop large, proper, and I believe they’ve at all times been rather more cautious about the place their money is coming from then you may evaluate to some Silicon Valley entrepreneurs. So, the doorway of like Andreessens and QED completely gained as larger tickets, however I additionally assume that they’ll present that information and community with different comparable firms that maybe have grown and so they can present that complimentary expertise.
You recognize, I want to assume that the native entrepreneurs are a lot much less targeted on that model identify by way of are these funds essentially going to make a giant distinction on their board room? Maybe not, however once they’re searching for the later stage and the extra worldwide traders, I believe that’s extraordinarily vital as a result of, you recognize, they won’t know the native traders, however they definitely would know these extra worldwide establishments.
Peter: Proper, proper. And so, you recognize, we’ve seen this 12 months, I discussed a few occasions already, however there’s definitely within the US huge pull-back. I keep in mind trying on the totally different funding rounds final 12 months and in case you didn’t have, you recognize, have a $100 Million spherical, you didn’t make it within the prime ten largest rounds of the week, normally, whereas now, a $100 Million spherical is fairly uncommon. Has that very same factor occurred in Latin America and what’s the, has this been a constructive or a unfavourable?
Christine: Properly, I believe what we’ve seen globally is going on in Latin America, it’s simply considerably delayed and it’s additionally, it’s primarily targeted on later stage checks, so the expansion traders. I imply, we see all the pull-out of Delicate Financial institution, and Tiger has simply completely disappeared from the area, however these later stage funds, that I believe have been extremely insensitive to valuations, we’ve seen that disappear. Now, what are we seeing within the earlier phases is that we nonetheless have an unbelievable pipeline of firms and alternatives and I don’t assume that has modified. I believe what the traders are searching for, you recognize, the vital questions is totally different as a result of we can’t count on these large checks to come back alongside.
Peter: Proper.
Christine: So, for the primary time I’d say….. the opening line of these founders is, you recognize, we have now an amazing enterprise mannequin and a path to interrupt even, proper. That wasn’t even something that was mentioned earlier than, proper, in order that’s actually fascinating. I truly assume it’s extraordinarily wholesome of what we’re seeing, proper, as a result of I’ve by no means been a fan of throwing cash at an entrepreneur earlier than they’re prepared. Proper, I believe having to boost subsequent rounds, it brings an infinite quantity of self-discipline not just for the founder however for all the workforce the place you really want to iterate and, you recognize, hold iterating till you discover that proper product market match. Till you get simply sufficient money to get to your subsequent stage, proper, and I believe it’s wholesome to even have…each rent is admittedly firing on all cylinders. Once you get a windfall of money, I believe that turns into quite a bit much less disciplined. I believe, general, will probably be constructive for our ecosystem.
Peter: Proper. So then, when you may look throughout the fintech panorama at the moment, what are essentially the most fascinating areas out of your perspective?
Christine: Properly, I believe on one hand, that fintech is so huge and so broad, proper, and so I believe a few of them are apparent areas the place it’s coping with what was actually stylish for some time, the neobanks. These chips have been performed, I believe we have now among the bigger gamers, I believe there’s going to be lots of consolidation and so after I look to see is what are the underlying pains which are simply going to be snowballing on prime within the midst of all of those fintechs.
A type of areas is say cyber-security, whereas this not, you could possibly say, it’s not essentially fintech per se, however there are such a lot of layers inside this that have to be addressed. We’re seeing lots of actually fascinating firms that are actually popping out of Latin America, not simply Israeli firms or what not, however they’re popping out of the area as a result of they’re targeted on addressing, you recognize, the idiosyncratic behaviors of the SMEs in Latin America that can’t simply take their one-size-fits-all resolution from different areas and so I believe that’s an fascinating house that we’ve been .
I additionally assume, what’s fascinating to say, like what about broader fintechs, every part in e-commerce and form of the digital commerce house, every part now has a part of fintech in it. It’s form of change into…..you’ve seen so a lot of our portfolio firms maybe that began in very area of interest options, however then they’ve all added on fintech elements as they’ve grown in scale as a result of I actually don’t assume you may transact in at the moment’s world with out having a number of, robust fintech options embedded into these different platforms.
Peter: Proper, proper. However let’s discuss money for a second as a result of, you recognize, you reside in Mexico, I used to be simply there pretty just lately and there was lots of discuss money remains to be so vital. But, on the final day of the month, individuals are lining up on the ATMs to withdraw their pay that they’ve simply gotten so inform me a bit of bit about like what’s it going to do to have money be much less sort of central within the economic system there.
Christine: It’s loopy how prevalent money continues to be, and significantly in Mexico. What I believe we simply want to acknowledge is the truth that that is the way in which the vast majority of the inhabitants nonetheless transacts. And so, for instance, we’ve invested in an organization referred to as Rapyd that’s primarily based in Israel recognizing the truth that we have to have a strategy to have money in and money out and nonetheless facilitate these transactions, and never simply think about it’s going to go away. We want to see a leapfrog, like we’ve seen in another geographies, however that’s simply not taking place in Mexico at the moment and so we’re attempting to grasp this actuality.
One of the crucial vital components is knowing the way in which folks stay and I believe it basically comes right down to the truth that the vast majority of the inhabitants, they stay paycheck-to-paycheck on many occasions and we’re seeing some unbelievable alternatives which are advancing the pay, what’s earned on that very same day, proper, so you may money out your every day wage, proper, so that you’re not ready each 15 days, proper. What’s taking place and the difficulty was to me the financial institution accounts, is that even when the paycheck is deposited to a checking account, instantly that particular person will take out the money as a result of what’s she or he do with that the second he will get it. He turns round and he divides up that money and pays each different person who he has to pay, you recognize, it’s his household, or, you recognize, his children and they also’re not in that conduct but of financial savings. And so, I believe so long as the vast majority of the inhabitants doesn’t have entry to that digital pockets to simply make these transfers amongst one another, money goes to proceed to be the foreign money of the on a regular basis employee in Mexico.
Peter: Like there’s a fairly massive penetration of sensible telephones, proper, in Mexico so that they do have entry, proper. It looks as if to me they’re nonetheless selecting to be on this money society so the advantages of the fintech sort of improvements aren’t robust sufficient for them to maneuver, is that truthful to say?
Christine: I believe that’s truthful to say and the truth that there’s not a common platform that has been adopted efficiently, like what we’ve seen is just like the in a single day radical success of Pix that has been largely pushed by the precise customers recommending it and ensuring everybody else has that. That didn’t occur with CoDi in Mexico, you could possibly form of dig into why this occurred, however, you recognize, CoDi was an initiative from the Central Financial institution. You recognize, it was not inclusive with all the key industrial banks, proper, and has not change into common. I nonetheless assume the vast majority of all the inhabitants, even those that are investing within the house, by no means makes use of CoDi so it was extra of a push product than the patron loving it and pulling it to get to that mainstream entry in transaction.
Peter: Proper, proper, okay. So, let’s discuss crypto, you recognize, Latin America had fairly first rate crypto take up, would like to get your sense on that entire house, whether or not you’re, are you bullish or bearish on the crypto house?
Christine: I’m extremely bullish long run.
Peter: Proper, okay.
Christine: That’s the vital caveat right here, proper, as a result of I believe, you recognize, all of us have our eyes open to what’s been taking place out there. It’s prolonged past what folks would simply say is just a bit blip, you recognize, I believe it’s truly change into a really critical…subject for these, I even wish to nonetheless name them early adopters, these people that have been placing their cash into crypto as a result of there’s been such a large lack of worth.
That being mentioned, Latin America is such a singular geography for the success of crypto and blockchain for fixing such distinctive issues like Venezuela, like Argentina the place on a regular basis people are attempting to get their cash exterior of native foreign money as shortly as doable. All of, I believe, the options that we’re seeing which are being constructed up proper now in lots of cases like crypto wallets which you can have, present an unbelievable useful resource for these people and that’s not going to go away. I imply, I do assume long run it’s going to vary the way in which that Latin Individuals work together and transact and save and make investments their cash.
Peter: So, I wish to discuss form of geographic enlargement as a result of clearly you’ve acquired Mexico and Brazil, the 2 largest economies in Latin America, and is a typical entrepreneur in Mexico, are they constructing their firm at all times with the concept of increasing? I imply, clearly Brazil you’ve acquired the little bit of a language barrier, however you’ve acquired clearly the entire remainder of Latin America just about that speaks Spanish, are you investing in entrepreneurs which are at all times trying past Mexico?
Christine: Completely. So, I believe one thing that’s distinctive about the way in which IGNIA invests is that we spend money on world firms and world entrepreneurs that want to broaden into the Latin American market, we’re not simply restricted to Mexican entrepreneurs or to Argentines. Our focus is unquestionably in Spanish-speaking Latin America, however we’ll go the place the expertise is, and the place these firms are going to handle the biggest alternatives. Now, with Spanish-speaking Latin America I believe we’ll an infinite quantity of expertise popping out of nations like Argentina, Chile and Colombia.
Now, the pure step for these firms is that after they form of have a proof of idea or the place they’ve form of gotten began then they may come into Mexico due to simply the scale of the chance and in some instances, you recognize, I’d say, proximity to america in the event that they plan to broaden. It’s vital to say that there are a selection of alternatives, distinctive alternatives, for firms to change into huge simply serving the Mexican market, proper. Now as an investor, I’m constructing a portfolio, you recognize, as I handle a fund, I handle a portfolio, and I believe considered one of our best dangers is to have simply publicity in a single nation and one foreign money.
Peter: Proper.
Christine: So, that’s the reason I’d say as an investor I’m at all times searching for alternatives that can praise that so I cannot simply spend money on Mexican firms, however one can find them form of throughout the area. We’ve checked out a variety of startups which are popping out of Central America which isn’t essentially the most, I’d say, apparent place as a result of, once more, you could possibly discover nice expertise. Many of those entrepreneurs who maybe have been educated in america, who’ve labored in different firms, however the measurement of these markets nonetheless will not be massive sufficient so they may ultimately find yourself in Mexico or the remainder of Spanish-speaking LatAm.
Peter: Proper, proper, acquired it. So then, are you primarily an early-stage investor, are you additionally seeking to spend money on later phases, what stage are you working in for essentially the most half?
Christine: So completely early-stage. You recognize, we aren’t pre-seed within the sense that we might want to see among the product already launched and constructed, and we have now come into some Sequence B firms on and off, however very opportunistically. And I believe that is the state of affairs you say when an entrepreneur has an unbelievable product and so they want entry, they want an area companion and oftentimes, and in IGNIA’s case, we’re the one Latin American fund on the cap desk for these sort of firms, proper. And so, we’ll have a look at that, we’re not strictly tied simply to the early stage.
Peter: Proper, acquired you, okay. So then, would you say, in terms of fintech, are the standard of entrepreneurs and the concepts which are coming throughout your desk at the moment, is that also as robust because it ever has been?
Christine: As robust and even stronger, and the rationale I say it’s because the entrepreneurs which are constructing their companies in Latin America at the moment, their backgrounds have modified. So, one, we’re seeing much more worldwide entrepreneurs which are coming into the area as a result of they’ve seen it taking place, they’ve seen the market and they also’re coming which is the case, as I discussed, the corporate UnDosTres. These have been three Indian entrepreneurs who had expertise with Paytm and so they realized that nothing comparable was being finished in Mexico. And so, they determined to maneuver right here, you recognize, and actually construct this firm primarily based in Mexico earlier than the chance hit that market, you recognize, one thing that was simply…I used to be LAFCA printed info within the first half of this 12 months, it was over 42% of the founders that we’ve seen VC funding have been repeat founders within the area and in order that can also be distinctive.
And so, that makes a greater founder, you recognize, it doesn’t matter I believe in case your earlier firm was wildly profitable otherwise you failed. However you’ve tried it, you recognize what to do proper and what to not do and what you wish to enhance on your subsequent startup and in order that’s unbelievable. You recognize, when IGNIA acquired began there was nobody who had began an organization earlier than, proper, it was form of repeat founders, it was form of extraordinary completely. The opposite facet is that these founders are bringing now their finest expertise with them from different startups, you recognize, we’ve had some nice successes which we name the “Rapyd-mafias”, you recognize, many several types of mafias which have come out of the area, the expertise is simply getting higher and higher.
Peter: Proper, proper, okay. So then, last query then for you, as you form of look to the longer term and also you have a look at Latin American fintech, what are you most enthusiastic about?
Christine: There are such a lot of points of fintech which are going to be completely revolutionized, and alter the way in which that the on a regular basis shopper interacts. So, what’s most fun about this future is that you just see it’s taking out an infinite quantity of friction within the lives of on a regular basis Latin Individuals. You recognize, our thesis at IGNIA has at all times been targeted on serving the rising center class and why is that the case is that as a result of that is the phase of the inhabitants that we see has the worst providers for the best costs.
Fintech instantly addresses that and offers them significantly better providers with a lot much less friction and significantly better costs in order that’s one thing that’s very thrilling to consider and it’s what will get me thrilled to be doing this job on a regular basis fascinated with the longer term that we’re constructing for Mexico and throughout Latin America as a greater place to stay and transact.
Peter: Okay. We’ll have to go away it there, Christine, it’s an thrilling place, I really like going to go to and studying extra about it and speaking to people who find themselves keen about it was nicely. So, thanks a lot for approaching the present.
Christine: Thanks, Peter.
Peter: You recognize, a part of the rationale I’m so bullish myself about Latin America is as a result of there are nonetheless so many individuals utilizing money, so many individuals not benefiting from the know-how and the extra environment friendly strategy to run a monetary life and so there’s a lot room for enchancment. And even when, I imply, money might be not going to go away on this area anytime quickly, however even when we simply get a 3rd of the inhabitants shifting away from money into extra fintech merchandise, it’s going to have an enormous affect on GDP, it’s going to have huge affect on jobs and we’re going to see some actually large firms get developed and make an actual affect on this planet. I’ll proceed to be excited and clearly we have now a presence right here with our Latin American occasion, however it’s one thing that I believe the extra I find out about Latin America, the extra excited I change into for its future.
Anyway on that observe, I’ll log out. I very a lot respect you listening and I’ll catch you subsequent time. Bye.
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