Santander invests in Brazilian alternative lender a55
Santander InnoVentures, the Spanish banking group’s $200 million corporate venture fund, has invested an undisclosed sum in Latin American alternative small and medium-sized enterprise (SME) lender a55.
Though the exact value of Santander’s latest investment in a55 has not been disclosed, the bank did say it was leading the fintech’s $3 million seed round, which is exceeding $5 million made up of various investors.
The latest fintech start-up to receive capital from the venture fund, which has invested in more than 30 fintechs over the last six years, provides liquidity solutions for recurring revenue companies based in Brazil and Mexico.
Marking the bank’s fourth investment in a Latin American fintech to date, a55 builds on the bank’s wider lenders portfolio, which includes direct lenders such as US-based Kabbage and Mexico-based Klar, as well digital lending platforms such as UK-based MarketFinance and US-based Roostify.
Last month, Santander also finalised its majority 50.1% stake in international payments and foreign exchange (FX) firm Ebury, £70 million of which will count as new primary equity to support Ebury’s plans to expand into the Latin American and Asian markets.
The bank’s investment in a55, which was founded in 2018, sees it edge into the revenue-backed credit line space. a55, says it wants to become the financing platform for service-based companies in Latin America, starting with software-as-a-service (SaaS) businesses.
The firm has underwritten 50 companies, issuing around $7 million in Mexico and $19 million in Brazil. The fintech says it wants to double these numbers in the next 12 months.
For a55, this investment from Santander marks a huge milestone in its start-up journey. “We began our journey in a kitchen trying to lend our own money with pen and paper to companies with no real assets to lend against,” says co-founder and CEO Hugo Mathecowitsch.
“Two years after this first iteration, it is a great honour for us to partner with Santander InnoVentures to accelerate our growth in Latin America.”
Read more: Santander buys Spanish fintech Mercury TFS
Santander InnoVentures’ managing partner, Manuel Silva Martínez, who will join a55’s board of directors and explore possible partnership opportunities between the bank and the fintech, says the bank made the investment based on a55’s SaaS-focused business model.
“The current crisis will accelerate shifting consumer habits to digital and subscription models,” says Martínez.
“This will tremendously benefit SaaS companies which will need alternative financial services providers to support their growth and success.”
Santander’s investments in the Latin American market goes back a lot further than its six-year-old venture fund.
“When we started investing in Latin America, between 20 and 25 years ago, it was with the idea that the region would [at some point] have superior structural growth to Europe,” Santander Group’s CEO, José Antonio Alvarez told Euromoney in February.
Between 2015 and 2018, the bank’s Latin American businesses’ contributions to its underlying attributable profits grew from 35% to 41%, and over this time total attributable profits for the bank grew from €2.72 billion to €4.06 billion.
The bank sees more scalable growth in Latin America compared with Europe in terms of currency. “We expect to grow faster – much faster – with double-digit growth in local currency in Latin America,” Alvarez told Euromoney.
“In Europe we can grow 2% to 3%. And more than that means winning market share, which is difficult to get.”