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Newsletter #3 - September 2022
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On behalf of the entire H20 family, we welcome you to our September 2022 monthly newsletter where we will share market insights and relevant updates. In this month's edition, we will update you on our insights regarding disruptors or enablers, updates from some of our portfolio companies, an official introduction to our newest onboarded advisors and finally a snapshot of main events we've been hosting and attending across Latin America. We hope you enjoy!
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Disruptors or Enablers
It´s no secret that the LatAm startup ecosystem is all about creating disruption and has started motion in the form of a huge wave of extraordinary founders solving the main challenges most industries face in our day-to-day. What we want to touch upon in this small space, is how these new venture backed software/tech companies have become growth enablers for one of the main backbones in our society, SMBs (small and midsize businesses).
According to the Cepal, SMBs in LatAm represent 99% of the total number of companies, and they employ 67% of the region’s workforce. However, their contribution to the overall GDP is relatively small, which in most cases reflects the low productivity levels of these types of companies.
We believe these low levels of productivity are explained somehow due to the lack of technology tools implemented in their everyday operations and processes. Due to this, we at H20 are convinced that this new wave of B2B startups can be game changers for a big part of the LatAm SMBs. Specifically, these enablers permit SMBs to substantially improve their productivity, unlock a faster and more agile growth, improve their business margins, reduce their transactions and payments times and costs, have better control of their accounts payables, accounts receivables and cash flow, among a bunch of other possible solutions that are starting to be offered by startups in the B2B space.
Nevertheless, the better news for the LatAm SMBs is that most of these solutions come at affordable initial costs and prices, and with minimum or even do-it-yourself implementation processes, which was one of the big barriers in the past for these types of companies to implement tech solutions in their everyday operations.
Another great thing that we foresee in the medium term is that once SMBs start to digitalize their processes and obtain real time and high-quality data of their financial performance, banks and other credit providers such as fintechs, could begin to provide more adjusted financial products at better interest rates for this segment, solving one of the biggest growth barriers for these types of companies: access to capital from formal financial institutions at a reasonable cost.
Disruption, which we can’t deny will happen in a lot of industries as we have already started to witness, is not necessarily where the discussion must be centered. The solutions that these new B2B startups are providing can have a huge positive impact in LatAm’s SMBs, but for this to become a massive reality, it is critical that all the actors involved, especially governments and regulators, start to act as a driving force in this transformation. These players have to take the correct route in creating the right incentives and proper regulation for founders to create more startups that provide more solutions. Not only that, but also for SMB owners to have incentives to adopt these new technologies and, last but not least, create the right educational framework to produce not only the talent needed for software solutions to be created, but also to transform the actual working talent to adapt their skills to embrace, adapt and use the superpowers provided by these tech solutions to their companies.
We at H20 believe we are still at the tip of the iceberg in terms of how transformational, impactful and powerful startups can be for LatAm’s SMBs and the region’s economies overall. Huge tech-based companies that can solve structural problems that have been faced for decades by the SMB owners in LatAm are still to be founded and funded, and in the latest we at H20 are ready to back the super talented founders that LatAm has so far proven to have.
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H20 PORTFOLIO UPDATES & MARKET NEWS
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Influur's CEO & Co-Founder Alessandra Angelini featured on LatamList's most recent podcast on "Breaking the internet with influencer marketing". Check it out here!
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Congratulations to Felix Pago on nearly closing their round extension and reaching a new high of total transactions, with a 60% monthly growth!
The Telemundo Houston team also interviewed Manuel Godoy (CEO) on the remittances market and the best way to send money to Mexico. Check it out here!
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Morado's founder Angela Acosta was recently starred and interviewed by Contxto on "How Beauty Startups Are Breaking Through in LatAm". Read more here.
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~ Market News That We Are Reading:
Investment In Infrastructure Is Critical For Crypto Startups, not a 'nice to have' - Despite seeing negative price pressure mostly in line with the broader market, infrastructure companies have continued to generate sustainable revenue by servicing emerging but clear, durable use cases.
In A Tepid Market, Extension Rounds Are On The Uptick - In 2021 parts of the venture landscape were more signal-oriented than business fundamentals oriented, which can happen in hot markets.
What Does The Future Look Like For E-Commerce Aggregators? - If aggregators act fast, they can position themselves well for their next phase of growth.
VCs Have Reasons To Be Optimistic Amid Valuation Declines - While traditional VC firm dry powder available to startups grew in 2022 at a faster clip than any other year in the last decade and a half, the demand for that capital from startups grew even more quickly
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At H20 we are proud to announce Julian Mayorca and Nicolas Ordoñez as our newest onboarded advisors, which will be a key pillar of our operational support platform for our portfolio companies in the monetization and tech verticals.
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EVENTS / H20 PRESS RELEASES
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Farmu & Morado visit in Colombia
Our team had the privilege of visiting Farmu's distribution center and Morado's warehouse in Colombia, where we continue to believe both teams are excelling and both industries are ripe for disruption.
Key Takeaway: Whilst both companies are B2B marketplaces, the singularity of each of their verticals makes some business and operational aspects differ, which is why H20's marketplace playbook continues to evolve.
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"H20 Get Together in Bogota"
We hosted a small Get Together with portfolio companies, investors and friends of the ecosystem in Colombia. Some of the attendants were: Francisco Jassir (Founder @ Farmu), Fabian Gomez (Founder @ Frubana), TuL Founders, Felipe Racines (Co-Founder @ Seeri), Paulina Sanchez (CM @ Influur), Julian Nuñez (Co-Founder @ Yuno), Joaquin Serrano & Yerson Cacua (Co-Founders @ Sumer), and one of our amazing advisors, Alejandro Correa (Chief AI @ Rappi), among other amazing members of our ecosystem. We're excited to have boots on the ground in one of the most active tech hubs in Latin America, Bogota. We were thrilled to have their presence and we are looking forward to continue building the ecosystem together in LatAm!
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Key Takeaway: We continue to believe that Colombia will be key in the venture ecosystem in LatAm, not only because of the opportunities and size of the market, but because Colombia continues to prove to be a cradle of impressive talent.
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"Andres Bilbao x Lightspeed"
Our Investment Principal in Colombia, Renzo Sesana, was invited to attend the event in Colombia co-hosted by Andres Bilbao (Co-Founder at Rappi) and Lightspeed Venture Partners, where multiple of our portfolio companies were also part of this amazing event.
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Key Takeaway: Colombia continues to be a very interesting destination to fund startups and for VC in general. The phenomenon created by Rappi and other recent companies continues to create an amazing talent pool for current and future opportunities.
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