The neobank Albo secured USD$40 million in a series C funding round, marking one of the latest investment rounds for startups in the Latin American region.
In a time of capital scarcity, financial technology companies in Latin America and Mexico continue to gain recognition from investors.
California-based venture capital firm Morpheus Ventures led the funding round. Also participating were Valar Ventures and Nazca Ventures, based in Mexico.
Their CEO and founder, Ángel Sahagún Fernández, stated that the goal was to reach break-even point starting from next year.
Risk aversion in the investment markets has prompted fintech companies to swiftly steer towards profitability.
“We are actively working to significantly expand our product portfolio,” Sahagún revealed.
According to Joseph Miller, a partner at Morpheus Ventures, investors highlighted Albo’s substantial increase in the number of customers over the past quarters. In a press release, the company stated it had reached 2 million customers.
Albo is somewhat different from other digital banking companies in Mexico as it primarily focuses on SMEs (small and medium-sized enterprises).
Many of the online startups that have gained attention in recent years have targeted individuals.
Conversely, the market for small and medium-sized enterprises is currently underserved. Other fintech companies in this domain include Konfio, backed by Softbank, and Kapital.
In Mexico, a significant portion of the workforce is engaged in informal economic activities. This translates to a limited amount of verifiable data for financial institutions to evaluate creditworthiness.
As a result, SMEs in Mexico and the region generally do not meet the criteria for credit assessment.
The digital banking sector in North America has witnessed increased competition. Regional digital banks like Nu Bank and Uala have expanded their presence, intensifying rivalry." data-medium-file="https://i0.wp.com/contxto.com/wp-content/uploads/2023/10/WhatsApp-Image-2023-10-18-at-10.51.10-AM-1.jpeg?fit=300%2C197&ssl=1" data-large-file="https://i0.wp.com/contxto.com/wp-content/uploads/2023/10/WhatsApp-Image-2023-10-18-at-10.51.10-AM-1.jpeg?fit=729%2C478&ssl=1" >
Additionally, national initiatives have emerged, further exacerbating the competitive landscape.
On the other hand, non-financial entities such as retail giant Walmart and Femsa, the Coca-Cola bottler in Latin America, have ventured into the realm of digital wallets, focusing on serving the underbanked population.
The news of the funding closely follows the company’s acquisition of the tech firm Delt.ai for USD$20 million earlier this year. The latter is a part of the Y Combinator program, focusing on business loans.
According to Albo, the acquisition enhanced their offering to SMEs, including accounts receivable, transfers, debit cards for employees, and financing.
Previously, the neobank had raised USD$45 million in late 2020 as part of their series B funding round. The company obtained a fintech license from the regulator in Mexico last year.
Albo’s update comes at a time when investment funding for Latin American startups is becoming increasingly scarce.
After several years of record investments in the sector, there has been a notable reduction in investment opportunities in recent quarters, although current levels remain considerably higher than those in the pre-Covid era.
However, the early part of this year saw the first signs of stabilization in investment flows.
While they haven’t fully rebounded yet, the third quarter witnessed significant investment rounds, such as the USD$61 million series B funding for Brazilian fintech Nomad, or the USD$70 million series F funding for Creditas.