Hof Capital Leads $4.3M Seed Round in Brazil’s FX Fintech Trace Finance

The new fintech challenger has also attracted investment from electronic duo Chainsmokers and partners from late-stage funds and unicorn entrepreneurs in the region

Trace Finance's co-founders: Rafael Luz (COO), Bernardo Brites (CEO) and Leone Parise (CTO).
February 15, 2022 | 08:10 AM
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Brazil’s FX for startups Trace Finance raised $4.3 million from HOF Capital, a fund that invests from Seed to IPO. HOF Capital has already invested in Stripe, Klarna, SpaceX, Uber, Alibaba and has more than 25 unicorns in its portfolio.

The Seed was four times oversubscribed, with more than 30 funds and investors. The round also brought names like Circle Ventures and the electronic duo The Chainsmokers through the Mantis Ventures fund, as well as 2TM, holding of Brazil’s pre-IPO exchange Mercado Bitcoin, Blockfi Ventures and its CEO Zac Prince, Marcelo Sampaio of Hashdex, Miguel Fernandez of Capchase, and founders of Rappi, Coinmarketcap, and Quantstamp.

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Proceeds will be applied to hiring and expanding the banking solution for startups in Brazil and the US. “For early-stage companies, talent is the most important asset. The first 10 you bring in will bring in the next 20 employees, and so on. This network effect is important, if you hire 10 wrong people at the beginning you can end up breaking your business. It is something that we paid a lot of attention to, so we have people who have experience working with Apple, Spotify, Creditas, Gympass, Caju”, explains the CEO and co-founder of Trace Finance, Bernardo Brites. Today, the company has 10 people on the team and intends to end the year with 25 employees.

Another part of the resource will be applied in local licenses, such as the request to become an SCD (Direct Credit Society) for the Brazilian Central Bank, as well as user acquisition.

Brites has a background in finance and cryptocurrencies. It all started in 2017 when he wanted to buy a cryptocurrency that no longer accepted sign-ups. He went after Decred asking what the plan was for the coin to be available on exchanges like Binance and Coinbase. Decred responded that the exchanges charged too much. But Brites wanted to buy the coin so badly that he went to talk to the exchanges and within two weeks got three new exchanges to trade the coin. The company then hired him, when he was not yet 18 years old, as Head of Partnerships.

Brites put off college to travel the world introducing the currency and met cryptocurrency founders and people in the market. He then started working as Head of Partnerships at Transfero, of financial services using Blockchain, where he met Rafael Luz, who would become his partner and COO of Trace Finance. In 2019, he met his second partner in Berlin, Leone Parise, who used to work at Binance and would later become Trace’s CTO.

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Founded in 2021, the company’s first client was the Brazilian startup The Coffee. Trace’s business began by focusing on export and import when the company operated the import of matcha from Japan for The Coffee. “That’s when they said they needed to do a fundraising and asked if we would do it. We did it in two days. We studied more, did others, and thought it made sense to focus on foreign exchange for startups,” Brites explains.

Trace promises to make exchange transactions for startups in a faster way (in up to two days instead of months) and cheaper than Silicon Valley Bank, an option currently used by Brazilian startups, which, to receive a contribution from an international fund, have to have a legal structure in the Cayman Islands, the United States, and Brazil. The startup promises to reduce the commission on exchange transactions from 4% to 0.2%.

The ecosystem for Latin American entrepreneurs Latitud recently launched the Latitud Go platform, which replaces hiring lawyers to create this international structure for the startup to receive global contributions. Besides the process of opening and regulating the business, Latitud Go intends to guarantee startups tools and services such as bank accounts and management software. “I think everything you have for startups today if the end is not fintech, you’re doing it wrong,” Brites says. Today, Trace already has clients such as The Coffee, Zippi, Pomelo, Condoconta, Cobli, and Big Bets. In less than three months of operation, the company had already transacted more than R$ 150 million.

Trace expects to launch international banking products and a credit card for startups in the second quarter. “We will have all this part of the account abroad and the account in Brazil, which will allow us to make several products that do not exist for startups in Brazil. Eventually, we may even do an expansion to Mexico, Argentina, Colombia, because we see this pain of the startup that is operating in Brazil and taking three months to be able to open a bank account in Mexico,” says the CEO.

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