São Paulo — Stark Bank, a Brazilian fintech that aims to be the go-to bank for medium-sized and large companies, has received $45 million in a Series B round led by Ribbit Capital and with the participation of Amazon founder Jeff Bezos’s fund, Bezos Expeditions.
This is Bezos Expeditions’ first investment in Brazil, although the fund has already disbursed into Latin America in an investment in Chilean unicorn NotCo.
SEA Capital and current investors Lachy Groom and K5 Global, as well as the founders of Airbnb and Kavak, and executives from DST, Visa and Coinbase, also participated in the round.
Stark Bank’s CEO Rafael Stark is an engineering graduate who began his career developing Android applications. He studied in the United States and returned to Brazil in 2014 to open his first company, Hummingbird, creating digital products for companies such as Nextel and Banco Paulista.
That startup grew 300% a year, according to Stark.
“As a developer, I was used to doing integrations with Google Maps API, Twitter API. So I thought about connecting to a bank through API, and to my surprise no bank had that. Now the central bank is forcing banks to integrate,” Stark said in an interview with Bloomberg Línea.
Stark Bank launched in started in August 2018, using the money Stark raised from Hummingbird, and who invested nearly $1 million in the platform. The company then raised $500,000 with angel investors and closed a $2 million seed round.
In December last year the company raised a $13 million Series A led by Lachy Groom (ex-Stripe) with participation from the founders of Coinbase, Dropbox, Flexport, Figma, Rappi, dLocal, Wildlife and Slack.
Now, with its Series B, the company has $58 million in cash to spend.
‘Archaic’ Payments System
“I found that it was archaic how payments were carried out. I started with this pilot, an API system to make transfers,” Stark says.
Buser was Stark Bank’s fourth customer, using the platform to make refunds.
“We would go into the app, put in the account data, and do this reversal of payroll payments, vendor payments, helping with paperwork, and then paying taxes. In 2019, we were doing pretty much everything that banks do in the transactional part via API. And we thought about how we could improve this,” Stark says.
Other products were added, such as internet banking and connection to Excel and Google Sheets, as many customers were making payroll payments through these spreadsheets.
“Companies kept asking us for things, and over time we realized that these companies had problems with accounts payable and accounts receivable. Our vision today is very clear: we are building a bank focused on medium-sized and large companies.”
According to Stark, the dynamics of a bank for individuals are different from a bank for companies. He says that while people value practicality, doing anything with a few clicks, for companies the value of the business is in controlling it.
“They want to know who raised the payment, who approved it, and have the attachment of the spend,” he explains.
The difference with this fintech, according to Stark, is that it is not a control panel, but rather creates mechanisms so that an employee can only spend in certain countries within specific categories, with a maximum amount, for expenses such as food and transportation. U.S. companies such as Marqeta, Ramp, and Brex work with these features.
For accounts payable, Stark Bank has customized rules for any payment, and payments over such an amount have to be approved by an executive. The startup has also developed resources within Pix, in which the company can block duplicate payments and make reversals, among other features.
“We want to be the bank of the future,” Stark says.
“We have had a relationship with Ribbit for a year and a half,” he says. “Since March 2020 they have been following our work. Our numbers have been growing; since the Series A we have tripled the volume transacted on the platform, and our revenue in three months. It is one thing to have nothing and multiply it to a high number, [but we went] to a billion, processing millions”, he said.
Credit, the Next Step
Now, the startup intends to expand its offering with credit, originating the credit from its $58 million in cash and eventually raise more or use receivables investment funds (FIDCs).
Stark Bank serves more than 300 clients in the ‘new economy’, such as Loft, Buser, Flash Benefits, Daki, Cora and Bitso. “These companies are very well capitalized, they don’t need working capital. The credit they need is to pay for cloud services, or for Google Ads campaigns. The credit is going to be in this direction, of very high limits for them to consume on the card, but eventually other needs”, according to Stark.
Since October 2020, Stark Bank has been licensed to operate as a direct credit corporation.
“We were the first regulated fintech at the seed stage,” he says.
The fintech has already broken even and the latest financing round will be used for hiring and product expansion.
In late 2021, the company started issuing corporate debit cards, and the next step is the launch of a corporate credit card, as well as acquisitions and investments.
Stark Bank is already engaged in foreign exchange, but wants to scale the service.
“Companies don’t want to have multiple banks or fintechs. They want one player that does everything well. Today only the big banks do everything,” Stark says.
Stark Bank also plans to split into two companies, opening another business unit for financial structuring.
The company will provide APIs for companies to be participants in Pix, either directly or indirectly. Brazil’s central bank has created the figure of the indirect participant, in which, when a user uses Pix, the name of the bank and the beneficiary’s data appear. “Our idea is that any company that wants to be a participant in the direct or indirect Pix can make this connection with the central bank within a week”, Stark says.
Stark Bank also plans to offer a “white label” card so that the client company can issue a card with its brand.
And another of its plans is to offer the banking of credit institutions. “Today companies that are not financial institutions that set up an FIDC to make loans buy bank credit notes (CCBs) from a financial company in order to be able to lend. Since we are a financial company, we are able to release this product”, Stark says.
Referring to the latest fundraising round, Stark says: “This contribution shows how many good people there are in Brazil. Founders of companies such as Airbnb and Kavak are looking at Brazil. There are several funds that had not looked at Brazil, but are now looking, and this opens doors for other companies to see Brazil as a country of entrepreneurship”.
Stark Bank intends to grow 10-fold this year, he adds.