Klar makes history with US$57.5 million seed equity and debt round

Contxto – Yet another Latin American fintech has raised the bar with early-stage seed funding.

Earlier today, sources announced that Klar raised US$57.5 million in seed funding. According to Santander InnoVentures, that’s the largest seed round to ever hit the books in Mexico. Next to Grin’s US$20 million back in August 2018, that is. Klar’s round led by Quona Capital consisted of debt and equity funds.

Other investors included Santander InnoVentures from London, aCrew Capital, FJ Labs, Western Technology Investment and Arc Labs also participated.

Although last week we covered minu raising US$6.5 million in what was the second most valuable seed round in Mexico’s history, that has recently changed with Klar. 

We also talked about minu’s round in our weekly podcast!

Historic seed round

Klar is a digital banking system involving a credit card and an app. The startup aims to increase its market share within Mexico’s unbanked population by being transparent, simple and secure. 

In what looks like Mexico’s largest seed round, of the total US$57.5 million, US$7.5 were provided in equity by Quona Capital, Santander InnoVentures and aCrew Capital. Arc Labs provided the additional US$50 million in structured debt financing. 

“We have been impressed by Klar’s team, execution and, most importantly, the ability to imprint a truly customer-centric approach to an ambitious product vision,” shared Manuel Silva Martínez, head of investments at Santander InnoVentures. 

Today with 25 employees, Klar has headquarters in Mexico City as well as an engineering team operating from Berlin.

Chime of Mexico

Stefan Moller, Daniel Autrique and Gianluigi Davassi founded Klar about ten months ago. Moving forward, it reportedly aims to become the “Chime of Mexico,” as described by Crunchbase News. 

Already past the Series D funding stage, Chime is a U.S. fintech allowing users to avoid bank fees by setting up early direct deposits. For Moller, however, there’s more of a compelling need for alternative financial services in Mexico.

“I think our opportunity in Mexico is even greater than what Chime has done in the U.S. because if you think about it, about 50 percent of the population doesn’t have a bank account,” said Moller.

“Chime has done a phenomenal job in a market where people have access to bank accounts. Here in Mexico, we have that target market plus the 50 percent of people that don’t have a bank account.”

The founding team also brings unique skillsets to the table. CFO Autrique is a Standford University graduate and Mexican economist while CTO Davassi assisted in the creation of the N26 digital bank from Germany, today worth over US$4 billion.

Fintech competition

While sources say that Klar’s solution is useful in Mexico where many lack credit, it’s certainly going to face competition. Not only has Mexico enacted a historic fintech ruling, but it also has many active companies vying for the largest market share.

According to Martinez, the Mexican fintech sector is “booming.” That’s to say, it’s “reaching levels of quality and sophistication that, for those of us who have been following the market for nearly a decade, are very encouraging.”

Already established in Mexico are other neobanks such as Flink, albo, Fondeadora, not to mention Nubank and its recent move to Mexico. Despite the potential market saturation, Klar is confident in its ability to serve the Mexican market.

Also considering the sheer amount of the initial funding, perhaps Klar will be able to accelerate growth and catch up quickly with older market participants.

After all, only an estimated 15 percent of Mexican adults own credit cards. Other sources have said that the numbers were as low as 9.22 for Mexican adults 25 or older in 2017. Understandably, today’s population certainly wants to invest in the digital solution that fits their needs the most.

-CZ