Fintech Investment Surge in Latin America

The financial technology (fintech) sector and venture capital activity within Latin America are currently experiencing substantial growth. Consequently, a growing number of international investors are directing capital towards fintech startups located throughout Latin America.

Clocktower Technology Ventures' New Focus

Clocktower Technology Ventures (CTV), the investment arm of Clocktower Group, a macro investment firm based in Santa Monica, California, is the latest entrant. Since its inception in 2015, CTV has made investments in 96 fintech companies across North America, Europe, and Latin America, with eight of those investments specifically within the LatAm region.

These investments encompass companies like Flink, a neobank and commission-free trading platform that recently secured $12 million in Series A funding; Habi, a platform for property purchases and listings; Kushki, a provider of digital payment processing solutions; and ontop, a service automating taxes, payroll, and employee onboarding.

Launch of a Dedicated Latin American Fintech Fund

CTV is now introducing its inaugural fund specifically designed for investments in Latin American fintech companies at the seed and Series A stages. The fund aims to raise $25 million, with a significant portion already committed by existing investors and strategic partners.

The firm intends to make approximately 40 investments from this new fund “in the years ahead.”

A Unique Investment Approach

Ben Savage, a Partner at CTV, explained that the firm’s Latin American strategy aligns with its established investment philosophy. “We have consistently avoided leading investment rounds and taking board seats across our investments,” Savage stated. “We plan to replicate this approach in Latin America, believing we can deliver greater value through alternative means.”

This alternative approach centers on leveraging CTV’s network to connect founders and startups with key figures in the financial services industry, including CIOs of major investment firms, hedge fund managers, and academic thought leaders. The firm believes this connectivity can be more impactful than direct leadership or board representation.

Broad Investment Scope

CTV will consider both consumer-facing and enterprise-level companies in Latin America, spanning the full range of financial services. This includes areas such as insurance, payments, personal finance, lending and credit, asset management, real estate finance, and traditional banking.

“Unlike some fintech VCs who specialize, we adopt a broader perspective,” Savage clarified. “We strive to evaluate as many early-stage fintech opportunities as possible.”

Early Regional Investment and Strategic Rationale

CTV’s initial investment in the region occurred approximately one year ago, with an investment in Kushki. Prior to this, the firm dedicated time to understanding the Latin American landscape.

“Around six months ago, we recognized the significant potential within Latin America and decided to establish a dedicated financial innovation strategy for the region,” Savage shared with TechCrunch.

Addressing Underbanked Populations and Market Inefficiencies

CTV believes that financial innovation in Latin America is poised for rapid expansion, given the substantial portion of the population that remains unbanked or underbanked. The COVID-19 pandemic is anticipated to further accelerate the shift away from traditional, brick-and-mortar financial services.

The firm also operates on the premise that existing financial institutions have historically failed to provide adequate and reliable services to their customers. This is attributed to a combination of regulatory constraints and market dynamics, according to Savage.

A Thriving Entrepreneurial Ecosystem

“Similar to how the modern technology infrastructure spurred a wave of tech startups, we anticipate that new fintech companies will reshape the competitive landscape within the financial services industry, particularly in Latin America,” he added.

Furthermore, the quality of entrepreneurial talent in the region has been steadily increasing, fueled by the success of established tech companies like Rappi, Nubank, and Loft, which have cultivated the next generation of innovators.

“These successful tech companies are generating a pool of highly skilled engineers and operators – a trend we’ve observed in Silicon Valley, New York, and Los Angeles. This has created an ecosystem of fintech professionals who go on to launch their own ventures,” Savage explained. “We are also seeing entrepreneurs who have achieved success in the U.S. returning to Latin America to establish new companies. We expect a significant number of the next wave of technology companies to emerge from this cohort.”

Fund Investors

Limited partners (LPs) in the new fund include institutions such as Hirtle Callaghan, an outsourced investment office managing approximately $18 billion, as well as hedge fund CIOs including Alan Howard, Philippe Jabre, Glen Kacher, and John Burbank’s Passport Foundation.