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 had been on the forefront at what would quickly be a thriving business. At present, Latin American fintech is sizzling, 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 associate 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 progress of the fintech business.On this podcast you’ll be taught:
- How Christine got here to Mexico and to IGNIA.
- What it was like being an investor in Mexico a decade in the past.
- Once they first began listening to fintech.
- How IGNIA has responded to the altering investing atmosphere.
- What it means to entrepreneurs to have large title American VCs within the area now.
- The completely different environments for early stage and later stage funding.
- Probably the most fascinating areas of fintech right now in Latin America.
- Why money continues to be so prevalent in Mexico right now.
- Why Christine is bullish on crypto long run.
- Why LatAm entrepreneurs are all the time wanting cross border.
- The stage of corporations IGNIA focuses on.
- The standard of the entrepreneurs approaching her right now.
- 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 need to inform you about Fintech Nexus LatAm occurring 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, be taught from the consultants and get enterprise executed. 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 Associate at IGNIA. Now, IGNIA are a very fascinating firm, they’re a VC fund primarily based out of Mexico Metropolis, they put money into 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 form of advanced over the previous couple of years.
She has been doing this since 2011 so has seen lots of adjustments in Mexico and in Latin America in the case of capital formation. Now, we discuss among the corporations in her portfolio, we discuss probably the most fascinating areas in fintech right now, we discuss money, we discuss crypto and what she’s most enthusiastic about for the way forward for Latin American fintech. It was a captivating 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 just a little little bit of background about your self and perhaps in that you would be able to kind of describe the way you got here to be dwelling in Mexico.
Christine: You understand, I believe it’s one thing that you would be able to relate to very nicely, Peter. Even if I’ve been dwelling in Mexico since 2006, I believe I’m all the time very tied to my roots. I contemplate 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 corporations surrounded by enterprise capital, working in these very quick paced, excessive progress industries and it wasn’t actually till I had my first publicity to Mexico that I spotted the big potential that’s in Latin America.
And so, in 2006 I took on a job main an schooling firm in Mexico Metropolis and I spotted that there was an unbelievable quantity of expertise, an unlimited alternative right here, however zero entry to capital. So, I used to be in a position to convey my earlier expertise working in tech corporations like Google, having had an MBA and actually studying the right way to develop and scale companies. After which in 2011, is after I first joined IGNIA which is the place I proceed to be right now.
Peter: I presume you may 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 realize, it wasn’t util I used to be working, and dwelling and respiration right here and actually not with the ability to communicate English that I used to be truly in a position to 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 had been like again in, you realize, once you joined in 2011. What was the panorama like again then?
Christine: It’s very laborious to even name it enterprise capital as a result of there wasn’t an ecosystem again then. IGNIA’s first fund was the primary influence investing fund in Latin America and I believe it’s crucial to emphasise that and really get an thought of what it was like as a result of the primary traders in IGNIA had been largely growth banks. We had backers akin to George Soros, JP Morgan, the Rockefeller Basis and the Omidyar Community and that was extremely instrumental to truly increase a fund which was $100 Million and to truly deploy capital, however we had been investing in largely brick & mortar corporations.
When IGNIA was first began, you realize, the iPhone was simply popping out, it was so completely different what the buyer habits was like then. The market was not prepared I believe to have the ability to develop and scale expertise corporations and there have been actually no different traders domestically and only a few traders internationally keen to even take a look at the area and actually contemplate deploying capital in Latin America. On this first influence investing fund, I believe what was nice for us is that we had been capable of finding unbelievable entrepreneurs who later then had been in a position to develop and grow to be repeat entrepreneurs. And right now, the world is simply so completely different due to each facet and the whole lot 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 listening to fintech, you realize, 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 influence fund I believe we all the time sought the necessity for monetary options, you realize, there was nonetheless vastly unbanked inhabitants, you realize, all these issues nonetheless existed, there was no entry to credit score anyplace. Once more, the instrument kind 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 kind of the fundamental issues starting with funds.
And so, that was an enormous space we first began investing in, corporations like Sr. Pago and we’ve invested in different corporations like Atticus that was later offered to Mastercard after which corporations like UnDosTres which can be targeted on actually serving or offering the onramp for the unbanked inhabitants and really primary transactions of the whole lot 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 necessary within the fintech sectors, significantly in Latin America and significantly in Mexico. And so, I believe as soon as the entrepreneurs had been figuring out what these alternatives had been they’ve been in a position to then develop on these and develop in scale.
Peter: Proper, proper, okay. So then, 2016 there was loads of fintech corporations round, they most likely 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, perhaps you may simply kind of discuss just a little little bit of the, how the occasions have modified ,and the way IGNIA has responded to the actually enormous ups after which a little bit of a pull-back. How have you ever guys responded to that?
Christine: I believe what’s necessary 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 now we have not modified the best way that we make investments, you realize, the quantity of {dollars} coming into the area and to the co-investors that had been seeking to make investments have modified considerably. However, you realize, we all the time look first on the entrepreneur, we’re wanting on the enterprise fundamentals and the market and to essentially see the answer we’re serving by that, and the truth that we are available early, what we’ve seen is because the co-investors have grow to be 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 is QED and I believe the truth that QED has had such a powerful give attention to fintech after which been in a position to present a lot of these classes discovered, of their experiences and that community from among the world’s biggest fintech corporations exterior of Latin America, you realize, that has been enormously useful for the Latin American fintechs rising right here, proper. So, whereas we will present the native kind of boots on the bottom information and entry, and most significantly entry to serving to our founders with the regulation that’s always altering and shifting, proper, but in addition serving to them not solely attempt to affect among the regulation, but in addition 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 really need that kind of stamp of approval from a QED or an Andreessen? What’s it imply to them?
Christine: I believe it’s, firstly, necessary as a result of it’s capital. So extra so than any model title it’s as a result of the native funds are nonetheless very younger and comparatively small in measurement besides that I might say for a number of funds like Monashees or Kaszek which have been in a position to increase a major quantity extra capital, we will solely go thus far. And so, having these worldwide funds are available has allowed the native fintech entrepreneurs to truly obtain their visions.
Peter: Proper.
Christine: I believe there’s all the time been a debate about have Latin American entrepreneurs all the time simply thought small or they simply truly haven’t been in a position to get funding to develop large, proper, and I believe they’ve all the time been way more cautious about the place their money is coming from then you may examine to some Silicon Valley entrepreneurs. So, the doorway of like Andreessens and QED completely gained as greater tickets, however I additionally suppose that they’ll present that information and community with different comparable corporations that maybe have grown they usually can present that complimentary expertise.
You understand, I wish to suppose that the native entrepreneurs are a lot much less targeted on that model title by way of are these funds essentially going to make an enormous distinction on their board room? Maybe not, however after they’re on the lookout for the later stage and the extra worldwide traders, I believe that’s extraordinarily necessary as a result of, you realize, they may not know the native traders, however they definitely would know these extra worldwide establishments.
Peter: Proper, proper. And so, you realize, we’ve seen this 12 months, I discussed a few occasions already, however there’s definitely within the US huge pull-back. I bear in mind wanting on the completely different funding rounds final 12 months and when you didn’t have, you realize, 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 unfavorable?
Christine: Nicely, I believe what we’ve seen globally is occurring 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 the complete pull-out of Mushy Financial institution, and Tiger has simply solely disappeared from the area, however these later stage funds, that I believe had 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 corporations and alternatives and I don’t suppose that has modified. I believe what the traders are on the lookout for, you realize, the necessary questions is completely different as a result of we can not count on these large checks to return alongside.
Peter: Proper.
Christine: So, for the primary time I might say….. the opening line of these founders is, you realize, now we have an awesome 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 suppose 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 unlimited quantity of self-discipline not just for the founder however for the complete staff the place you actually need to iterate and, you realize, preserve 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 absolutely firing on all cylinders. Once you get a windfall of money, I believe that turns into quite a bit much less disciplined. I believe, total, will probably be constructive for our ecosystem.
Peter: Proper. So then, when you may look throughout the fintech panorama right now, what are probably the most fascinating areas out of your perspective?
Christine: Nicely, 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 now we have 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 can be 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 may 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 corporations that at the moment are popping out of Latin America, not simply Israeli corporations or what not, however they’re popping out of the area as a result of they’re targeted on addressing, you realize, the idiosyncratic behaviors of the SMEs in Latin America that can’t simply take their one-size-fits-all answer from different areas and so I believe that’s an fascinating area that we’ve been .
I additionally suppose, what’s fascinating to say, like what about broader fintechs, the whole lot in e-commerce and kind of the digital commerce area, the whole lot now has a part of fintech in it. It’s kind of grow to be…..you’ve seen so a lot of our portfolio corporations 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 suppose you may transact in right now’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 realize, you reside in Mexico, I used to be simply there pretty just lately and there was lots of discuss money continues to be so necessary. 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 just a little bit about like what’s it going to do to have money be much less form 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 best way nearly all of the inhabitants nonetheless transacts. And so, for instance, we’ve invested in an organization known 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 wish to see a leapfrog, like we’ve seen in another geographies, however that’s simply not occurring in Mexico right now and so we’re making an attempt to know this actuality.
One of the necessary elements is knowing the best way individuals reside and I believe it basically comes all the way down to the truth that nearly all of the inhabitants, they reside paycheck-to-paycheck on many occasions and we’re seeing some unbelievable alternatives which can be advancing the pay, what’s earned on that very same day, proper, so you may money out your day by day wage, proper, so that you’re not ready each 15 days, proper. What’s occurring 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 realize, it’s his household, or, you realize, his children and they also’re not in that habits but of financial savings. And so, I believe so long as nearly all 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 forex of the on a regular basis employee in Mexico.
Peter: Like there’s a fairly giant penetration of good telephones, proper, in Mexico so that they do have entry, proper. It looks like to me they’re nonetheless selecting to be on this money society so the advantages of the fintech form 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 may kind of dig into why this occurred, however, you realize, CoDi was an initiative from the Central Financial institution. You understand, it was not inclusive with all the most important business banks, proper, and has not grow to be common. I nonetheless suppose nearly all of the complete inhabitants, even those that are investing within the area, by no means makes use of CoDi so it was extra of a push product than the buyer loving it and pulling it to get to that mainstream entry in transaction.
Peter: Proper, proper, okay. So, let’s discuss crypto, you realize, Latin America had fairly respectable crypto take up, would like to get your sense on that complete area, whether or not you’re, are you bullish or bearish on the crypto area?
Christine: I’m extremely bullish long run.
Peter: Proper, okay.
Christine: That’s the necessary caveat right here, proper, as a result of I believe, you realize, all of us have our eyes open to what’s been occurring out there. It’s prolonged past what individuals would simply say is just a bit blip, you realize, I believe it’s truly grow to be a really critical…subject for these, I even need to nonetheless name them early adopters, these people that had been placing their cash into crypto as a result of there’s been such a massive 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 forex as shortly as potential. All of, I believe, the options that we’re seeing which can be being constructed up proper now in lots of situations like crypto wallets that you would be able to have, present an unbelievable useful resource for these people and that’s not going to go away. I imply, I do suppose long run it’s going to vary the best way that Latin Individuals work together and transact and save and make investments their cash.
Peter: So, I need to discuss kind of geographic enlargement as a result of clearly you’ve received Mexico and Brazil, the 2 largest economies in Latin America, and is a typical entrepreneur in Mexico, are they constructing their firm all the time with the thought of increasing? I imply, clearly Brazil you’ve received the little bit of a language barrier, however you’ve received clearly the entire remainder of Latin America just about that speaks Spanish, are you investing in entrepreneurs which can be all the time wanting past Mexico?
Christine: Completely. So, I believe one thing that’s distinctive about the best way IGNIA invests is that we put money into world corporations 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 corporations are going to deal with the most important alternatives. Now, with Spanish-speaking Latin America I believe we are going to an unlimited quantity of expertise popping out of nations like Argentina, Chile and Colombia.
Now, the pure step for these corporations is that after they kind of have a proof of idea or the place they’ve kind of gotten began then they are going to come into Mexico due to simply the dimensions of the chance and in some instances, you realize, I might say, proximity to america in the event that they plan to broaden. It’s necessary to say that there are a selection of alternatives, distinctive alternatives, for corporations to grow to be huge simply serving the Mexican market, proper. Now as an investor, I’m constructing a portfolio, you realize, as I handle a fund, I handle a portfolio, and I believe one among our biggest dangers is to have simply publicity in a single nation and one forex.
Peter: Proper.
Christine: So, that’s the reason I might say as an investor I’m all the time on the lookout for alternatives that can praise that so I can’t simply put money into Mexican corporations, however one can find them kind of throughout the area. We’ve checked out numerous startups which can be popping out of Central America which isn’t probably the most, I might say, apparent place as a result of, once more, you may discover nice expertise. Many of those entrepreneurs who maybe have been educated in america, who’ve labored in different corporations, however the measurement of these markets nonetheless isn’t giant sufficient so they are going to finally find yourself in Mexico or the remainder of Spanish-speaking LatAm.
Peter: Proper, proper, received it. So then, are you primarily an early-stage investor, are you additionally seeking to put money into later phases, what stage are you working in for probably the most half?
Christine: So completely early-stage. You understand, we aren’t pre-seed within the sense that we might want to see among the product already launched and constructed, and now we have come into some Sequence B corporations on and off, however very opportunistically. And I believe that is the state of affairs you say when an entrepreneur has an unbelievable product they usually want entry, they want an area associate and oftentimes, and in IGNIA’s case, we’re the one Latin American fund on the cap desk for these sort of corporations, proper. And so, we are going to take a look at that, we’re not strictly tied simply to the early stage.
Peter: Proper, received you, okay. So then, would you say, in the case of fintech, are the standard of entrepreneurs and the concepts which can be coming throughout your desk right now, 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 can be constructing their companies in Latin America right now, their backgrounds have modified. So, one, we’re seeing much more worldwide entrepreneurs which can be coming into the area as a result of they’ve seen it occurring, they’ve seen the market and they also’re coming which is the case, as I discussed, the corporate UnDosTres. These had been three Indian entrepreneurs who had expertise with Paytm they usually realized that nothing comparable was being executed in Mexico. And so, they determined to maneuver right here, you realize, and actually construct this firm primarily based in Mexico earlier than the chance hit that market, you realize, one thing that was simply…I used to be LAFCA revealed data within the first half of this 12 months, it was over 42% of the founders that we’ve seen VC funding had been repeat founders within the area and in order that can be distinctive.
And so, that makes a greater founder, you realize, it doesn’t matter I believe in case your earlier firm was wildly profitable otherwise you failed. However you’ve tried it, you realize what to do proper and what to not do and what you need to enhance to your subsequent startup and in order that’s unbelievable. You understand, when IGNIA received began there was nobody who had began an organization earlier than, proper, it was kind of repeat founders, it was kind of extraordinary solely. The opposite facet is that these founders are bringing now their greatest expertise with them from different startups, you realize, we’ve had some nice successes which we name the “Rapyd-mafias”, you realize, many various kinds 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 kind of look to the long run and also you take a look at Latin American fintech, what are you most enthusiastic about?
Christine: There are such a lot of features of fintech which can be going to be solely revolutionized, and alter the best way that the on a regular basis client interacts. So, what’s most fun about this future is that you just see it’s taking out an unlimited quantity of friction within the lives of on a regular basis Latin Individuals. You understand, our thesis at IGNIA has all the time been targeted on serving the rising center class and why is that the case is that as a result of that is the section of the inhabitants that we see has the worst providers for the very best costs.
Fintech instantly addresses that and provides them a lot better providers with a lot much less friction and a lot 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 about the long run that we’re constructing for Mexico and throughout Latin America as a greater place to reside and transact.
Peter: Okay. We’ll have to depart 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 obsessed with it was nicely. So, thanks a lot for approaching the present.
Christine: Thanks, Peter.
Peter: You understand, 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 expertise 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 influence on GDP, it’s going to have huge influence on jobs and we’re going to see some actually large corporations get developed and make an actual influence on this planet. I’ll proceed to be excited and clearly now we have 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 grow to be for its future.
Anyway on that observe, I’ll log off. I very a lot respect you listening and I’ll catch you subsequent time. Bye.
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