The Rise of Nuvemshop in Latin American E-commerce

The COVID-19 pandemic spurred a significant increase in online shopping globally, and Latin America experienced this trend prominently.

Nuvemshop, a São Paulo-based company, has created an e-commerce platform designed to facilitate direct connections between small and medium-sized businesses (SMBs) and their customers.

Growing Demand for Independent Online Stores

Prior to the pandemic, demand for Nuvemshop’s services was already increasing. However, the last year witnessed a substantial surge as merchants sought greater control over their branding.

According to Nuvemshop co-founder and CEO Santiago Sosa, many merchants are now choosing to establish and expand their own online businesses instead of relying solely on existing marketplaces.

He explained that newer generations of merchants and SMBs are increasingly resistant to intermediation, desiring a more direct relationship with consumers to effectively communicate their brand identity.

Impressive Growth Statistics

The evidence of this shift is clear in Nuvemshop’s growth. The number of merchants utilizing the platform has risen to approximately 80,000 across Brazil, Argentina, and Mexico, a significant increase from the 20,000 recorded at the beginning of 2020.

These businesses encompass both direct-to-consumer startups and established brands like PlayMobil, Billabong, and Luigi Bosca.

Virtually all key performance indicators (KPIs) tripled in 2020, coinciding with the global transition to online commerce. The platform processed 14 million transactions last year, as reported by Sosa.

A Comprehensive E-commerce Ecosystem

Nuvemshop provides businesses with a complete ecosystem encompassing payments, logistics, shipping, and catalogue/inventory management.

Accel’s Investment and Confidence

Nuvemshop’s rapid expansion attracted the attention of Accel, a Silicon Valley venture capital firm.

Despite recently raising $30 million in a Series C funding round and achieving profitability in 2020, the Nuvemshop team wasn’t actively seeking additional capital.

Ethan Choi, a partner at Accel, stated that his firm recognized Nuvemshop’s potential to become the leading e-commerce platform in Latin America and proactively offered to invest.

Series D Funding and Future Plans

Today, Nuvemshop announced the successful closure of a $90 million Series D funding round led by Accel. ThornTree Capital and existing investors, including Kaszek and Qualcomm Ventures, also participated.

This brings Nuvemshop’s total funding since its founding in 2011 to nearly $130 million. While the company didn’t disclose the valuation of this latest round, it is significantly larger than the Series C raised just six months prior.

Sosa indicated a “substantial increase” in valuation since the Series C round.

Latin America’s E-commerce Potential

Nuvemshop is capitalizing on the high density of SMBs in Latin America, which is generally greater than in the U.S.

Furthermore, the $85 billion e-commerce market in Latin America is experiencing rapid growth, with projections estimating it will reach $116.2 billion in 2023.

Sosa noted that Brazil’s e-commerce market grew by 40% last year but remains underpenetrated, accounting for less than 10% of total retail sales. Across Latin America, penetration rates range between 5 and 10%.

An Open Platform for Growth

Last year, Nuvemshop transitioned to an open platform, allowing third-party developers, agencies, and SaaS vendors to integrate their applications through APIs.

“Our platform becomes more powerful, vendors generate more revenue, and merchants have more options,” Sosa explained to TechCrunch. “So everyone benefits.”

Currently, approximately 150 applications are available on Nuvemshop’s ecosystem, with projections indicating this number will more than triple within the next 12 to 18 months.

Comparisons to Shopify

Sosa acknowledges the comparisons to Shopify as “fair,” although the company doesn’t actively focus on them.

Ethan Choi of Accel sees significant parallels between the two companies.

He highlighted Amazon’s growth in the U.S. and the subsequent emergence of Shopify, which now boasts a market capitalization of $160 billion. Both companies experienced quadrupled market caps during the pandemic.

Choi believes similar dynamics are unfolding in Latin America, positioning Nuvemshop for substantial success.

First-Mover Advantage and Future Investments

Andrew Braccia, another Accel partner, emphasizes Nuvemshop’s first-mover advantage.

He stated that direct-to-consumer commerce has become a key driver of entrepreneurship globally, and Latin America is no exception.

Braccia believes Nuvemshop possesses the sophistication and understanding to fuel the ongoing transformation of commerce from offline to online.

Looking forward, Sosa anticipates utilizing the new capital to invest heavily in expanding APIs, enhancing payments processing and financial services, improving logistics and management, and attracting larger merchants.

The company also plans to expand into new markets, including Colombia, Chile, and Peru, over the next 18 to 24 months.

Sosa emphasized that each country presents unique market dynamics, requiring localized knowledge for successful implementation. He believes this complexity will ultimately create a long-term competitive advantage.