Homebrew Leads Z1's Digital Banking Expansion in Latin America

Z1 Secures $2.5 Million to Expand Digital Banking for Latin American Gen Z

Z1, a digital banking platform headquartered in São Paulo, has successfully completed a funding round of $2.5 million. This investment was spearheaded by U.S.-based venture capital firm, Homebrew.

Investment Details and Key Participants

Several other investors contributed to this financing round. These include Clocktower Ventures, Mantis – the venture firm associated with The Chainsmokers, Goodwater, Gaingels, Soma Capital, and Rebel Fund.

Interestingly, Mantis previously invested in Step, a fintech company focused on teenagers in the United States. Similarly, Goodwater has also provided funding to Greenlight, which offers a comparable service to Z1.

Early Funding and Acceleration

Z1 initially participated in Y Combinator’s Winter ‘21 program, receiving $125,000 in seed funding from the accelerator. Prior to this, Maya Capital led a $700,000 seed round in March 2020.

Focus on Financial Independence for Young Adults

Essentially, Z1 provides a digital banking application designed specifically for teenagers and young adults. The company’s core principle is empowering Brazilian and Latin American youth to achieve greater financial autonomy through its app and associated prepaid card.

Founding and Expansion Plans

João Pedro Thompson and Thiago Achatz founded the company in late 2019. They were later joined by co-founders Mateus Craveiro and Sophie Secaf. Currently, Z1’s primary focus is Brazil, but the startup intends to extend its services to other nations within Latin America in the future.

Vision for the Future

“Our aim is for Z1 to become the preferred banking choice for the next generation, extending beyond simply being a digital bank for teens,” stated Achatz in an interview with TechCrunch. “We envision growing alongside our users and ultimately becoming the largest bank in Brazil and Latin America.”

Thompson echoed this sentiment, adding, “We are focused on acquiring users at a young age and fostering brand loyalty with the goal of serving as their lifelong bank. We will continue to adapt to their evolving needs as they transition into adulthood.”

Adapting to the Latin American Market

While Z1’s services share similarities with Greenlight in the U.S., the founders emphasize that their products have been tailored to the unique cultural and market conditions of Brazil.

Cash-Based Economy and Prepaid Solutions

Thompson highlighted that a significant portion of Brazilian teenagers primarily use cash due to limited access to traditional or digital financial services.

“We provide an account that allows them to deposit and withdraw funds, utilizing Brazil’s instant payment system, and spend through a prepaid card,” he explained. “The acceptance of debit cards is limited, making this a substantial improvement over their current options.”

Capital Allocation and Product Development

The newly acquired capital will be used to enhance the product’s capabilities, enabling features such as saving for significant purchases like smartphones and earning interest on account balances.

Addressing Financial Literacy Gaps

The company recognizes a key difference between Brazil and the U.S.: many parents in Latin America may lack comprehensive financial education to impart to their children.

“Unlike Greenlight’s top-down approach, ours is more suitable for Latin America,” Achatz explained. “Many young people here are independent from an early age, earning income through microbusinesses, side jobs, or online sales. They are largely self-taught, and their earnings often remain outside of parental control.”

Rapid Growth and Marketing Strategy

Since its launch, Z1 has experienced a weekly growth rate of 30% and a monthly growth rate of 200%, with minimal marketing expenditure, relying heavily on word-of-mouth referrals. The company is also leveraging platforms like TikTok to increase brand awareness.

“Step has approximately 200,000 TikTok followers, and we currently have close to half that number,” the company stated. “We are well-positioned in terms of brand recognition.”

Homebrew’s Perspective on the Latin American Market

According to Satya Patel, a partner at Homebrew, the opportunity to educate and provide financial services to Gen Z in Latin America is even more compelling than in the U.S.

He noted that over one-third of Gen Z individuals in Latin America engage in “side hustles,” generating independent income.

“While millennials experienced economic prosperity, Gen Z has grown up amidst recessions – three in Brazil alone over the past decade – and prioritizes financial independence,” Patel added. “They are becoming financially literate and active at a younger age than previous generations.”

Patel also believes the increasing demand for online transactions, particularly for gaming and entertainment, will drive demand for credit card and digital payment solutions among Brazilian Gen Z consumers.