Neither B2C nor B2B. What fintechs want is infrastructure. This is the bet of Kamino, which is launching a product to help LatAm startups to raise from global funds. The company’s thesis has received the endorsement of investors, with a Series A-alike pre-Seed: $6.1 million from Inspired Capital. Global Founders Capital, Fontes (QED Investors’ early-stage fund), Picus Capital, Flourish Ventures, Propel VC, Clocktower Technology Ventures, Norte Ventures, and Gilgamesh Ventures also participated in the funding.
Kamino’s idea is to provide a platform to help founders set up the startup’s international structure - with headquarters in Brazil, the Cayman Islands, and Delaware in the United States - which is traditionally a prerequisite for foreign funds to invest in Brazilian companies.
Added to the legal structure is a hub of financial services such as digital accounts and credit cards for the startup. The company does not create a new path for this, it only aggregates these suppliers and services, so that the founder does not need to go after each step alone. This is done with partnerships with law and accounting firms and with financial institutions like Silicon Valley Bank.
It’s the same idea as Latitud Go, a product of the Latitud network of entrepreneurs, with a Trace Finance twist, which handles the exchange of investments for these startups in the region (and which also received a “hefty” Seed).
“Show me the money”
Not for nothing, investors are on the lookout for this new business model for infrastructure. Julien Roeoes is the partner and Head of Americas at Picus Capital.
He says he invested in Kamino due to their long-term vision to build different end-to-end financial services for high-growth companies.
“If you think about financial services platforms for high growth companies, banking account, lending, reconciliation. It’s very big different players, [ranging from] expense management, some more like the software but everyone wants to build a financial services platform for high growth companies.”
While Brazilian startups can take up to three months to be able to open a Cayman-Delaware structure and banking account, the investor says Kamino adds a significant value for early-stage companies, since it helps them from their day one and position itself to offer services. According to Roeoes, it opens doors for the newcomer to offer lending, financial planning, and end-to-end financial services. “Kamino starts from day one of company formation, and uses that start point to build relationships.”
Founders and operators of successful fintechs have also put money into Kamino, such as Sergio Furio of Creditas, Sergio Fogel of dLocal, David Arana of Konfio, Suzy Ferreira of Dinie, and Ariel Patschiki of Ebanx.
It is not only the business model that attracted the investment. The names behind the startup are also of serial founders, such as American Benjamin Gleason.
In 2007 he moved to Brazil, where he met Guto Fragoso, at McKinsey. Fragoso is also one of Gleason’s partners today. Both worked at Groupon, along with Kamino’s third partner, Spanish Gonzalo Parejo. After the IPO, Gleason left to found the open banking-focused finance platform Guiabolso with his McKinsey colleague Thiago Alvarez. In July last year, PicPay bought Guiabolso, and Gleason decided to leave the operation to devote himself to Kamino’s project.
In October 2021, the entrepreneurs called Rodrigo Perenha, former CTO of Mercado Pago, to start the operation.
“When we decided to start, we quickly picked up oversubscribed commitments (with more demand than the investment could handle). We were in the same situation as our clients. We had a term-sheet, investors wanting to give money, but we didn’t have the corporate and financial ownership structure.”
So Kamino was a “guinea pig” of its own product, testing the solution it created to create a single point of contact to make an international structure, open a bank account and receive investment.
Financing the funding
Until they receive the money in Brazil, startups are stuck. The Kamino differential, according to the founders, is that while the fintech helps with the corporate, offshore, and foreign exchange aspects, the company grants a line of credit for the founders to start operating, hiring team, suppliers, and software services like AWS, anticipating the operation that would only begin when the external capital arrives.
Kamino did this with its own operations, took out credit to start work before the pre-Seed even arrived. With cash already in hand, the newcomer paid off the loan. Gleason says it’s a first-of-its-kind model, and that Kamino won’t rely solely on the flow of how much the startup has in revenue and spend in order to grant credit.
“The focus here is very much on the experience of the founder,” Gleason explains. “Typically the founder has to figure out who these suppliers are, close contracts with everyone, and everyone works a lot by email, which is very messy, there’s no clear roadmap. We put together the suppliers plugged into the platform.”
The process of opening an account also gets faster, as Kamino already has a seal of approval and does not need to convince the SVB to create the account for the startup.
“Startups born in the US have almost seven times more chance of making it to Series C. It’s not that you have better talent there. Today Latin America has a lot of good talent, a lot of capital, but it doesn’t have a financial infrastructure, a complete solution that brings these tools together to supply the operational part, growth, and scale,” Parejo said.
Even though the company has raised the equivalent of R$32 million with foreign investors, in Brazil, the bank has given Kamino a credit limit of R$1,000.
“It is a limiting factor for growth. Within that card, they deny recurring SaaS payments that any startup needs to contract like AWS, Slack. If card payments are denied by banks, the startup’s services go down, and the company spends a lot of time in the operation trying to keep the service up,” said Gleason, who recalls that even at a late-stage, his former company Guiabolso also had issues with credit and recurring payments.
According to the executive, Kamino guarantees a credit card “with an adequate limit to allow the growth” of these startups. Credit origination is done via partnerships, but the intelligence of how to consume credit and who the credit is directed to is a proprietary technology of Kamino, according to Parejo. “The key thing is not how you originate credit, but what conditions you give credit for, how you understand who needs the credit. And that is not being catered for startups and high-growth companies.”
Infrastructure for third-generation entrepreneurs
If the first generation of startups in Brazil was dedicated to consumer services, such as Nubank and Creditas, the second generation was born focused on B2B, such as Contabilizei. Now, the market space is for infrastructure players, according to Gleason. Kamino’s marketplace only exists because there is a lot more foreign investment coming in for Latin American startups.
According to Sling Hub, 64 startups from the region raised more than $1.1 billion last month alone. That’s double what was recorded in the same month in 2021.
“Now you have a lot more funding in the market, more qualified entrepreneurs, more talent to scale businesses, you have the ingredients to fill the infrastructure bottleneck,” he said.
Parejo adds that the third generation of founders does not want to miss the opportunity of a new early-stage startup for not having a financial structure. “If a Latin American startup has seven times less opportunity to generate a Series C, surely it loses a lot of time with a resource to get to the next round. Kamino can close that gap. That’s what we want to prove so that the founder focuses on the business and doesn’t waste time to get up and running.”
Kamino’s first 10 clients come from venture capital fund referrals, according to Gleason. “They know we do it following compliance, so there are no surprises, the company is born under the proper foundation rather than leaving it in the hands of suppliers.”
Kamino earns by opening the account and monetizing its products, such as the digital account (which is free). The company is remunerated by the card interchange fee and charges a fee for remittance.