Rappi Mafia: Sao Paulo-Based Colombian Woman Raises $6.7M Pre-seed Round in LatAm

Bloomberg Línea — Colombian Paola Neira, 29, is starting out as an entrepreneur and has received a pre-Seed that tastes like Series A. Monashees and CRV (Charles River Ventures) are handing one of Latin America’s largest check to a pre-seed startup: $6.7 million, beating out Kamino, which had raised $6.1 million in its pre-seed this year.

The money, which was also contributed by ONEVC, Latitud, and SVAngels, will help build Latú, a software for business insurance. Neira has also attracted investment from heavyweight founders of startups in the region.

Among the angel investors (individuals or companies that make investments with their capital in companies with high growth potential) are Rappi founders Simon Borrero, Sebastian Mejia, and Felipe Villamarin; Santiago Suarez and Daniel Vallejo of Addi; Enrique Villamarin of Tul; and the founders of insurtechs Pier (Igor Mascarenhas), Lula Technologies (Matthew & Miguel Vega-Sanz), as well as Alan Jaime of Draftea, Sachin Patel, former Y Combinator investor, as well as the Airbnb alumni fund.

Short for Latin American Tech Underwriters, Latú offers coverage up to $10 million against lawsuits, cyber-attacks, downtime, property damage, errors of the profession, compliance gaps, as well as coverage for liability, property, cyber, Errors, and Omissions (E&O) and Directors and Officers (D&O).

“Business insurance in Latin America is a giant opportunity. We are doing the technology and the algorithms to understand the risk of companies,” Neira told Bloomberg Línea in an interview.

Taking its first steps, the company is partnering with local insurers.

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Neira began her professional life working with investments. In Dubai, she was investing in technology for the Middle East and North Africa with The Abraaj Group in 2016. “It was my first contact with the world of startups and technology. I saw that I wanted to do something like that, but in my region, Latin America,” she said. Then, in New York, she had a stint at WeWork in 2019. In March of the same year, she became a product leader at Rappi.

For Rappi, she lived for a while in Colombia, then Brazil, then went to Mexico and returned to Brazil to help Rappi solve local problems. Last month she founded Latú.

“I manage a fund that makes loans for small and medium-sized businesses, I started the fund with friends from school,” she said. The fund, which is more than a decade old, guarantees working capital for these companies. But amid the pandemic, Neira says that with the uncertainty of the market, it became “almost impossible” for a small company to get a policy from an insurance company.

Hence came the idea of building a platform for insuring these companies. “The market needs our solution,” she said. Latú intends to replace policies with risk mitigation partnerships to solve the company’s needs.

“It is not something just to do the policy, we want to do a risk assessment on an ongoing basis and with that can help companies avoid problems,” she explained.

Latú receives the record contribution at a time when investment for startups in Latin America has become more restricted, with a 19% drop in the first half compared to last year, according to LAVCA (Association for Private Capital Investment in Latin America).

Even so, managers of VC companies continue to raise funds with US-based Limited Partners, family offices, or pension funds.

Assets under management for venture capital funds in Latin America reached $9.25 billion by September 2021, according to data from Preqin, an information provider on the alternative assets industry, reported by The Wall Street Journal. Assets in VC grew more than what was allocated in Private Equity (which generally invests in more consolidated companies).

But if assets under management in VC for the region grew 48% from 2020 to 2021, this year VCs are more cautious and are demanding founders have discipline with their spending. “They want to know when the payback on that money spend will be,” Neira said.

She considers that Latú's fundraising is even “small in relation to the market opportunity”.

For Fabiola Quinzaños, principal at Monashees, the investment has to do with the opportunity of a market with low penetration in Latin America, that of business insurance.

“Less than 20% of Latin American companies have at least one policy, compared to 70% in developed markets,” she said in a press release.

CRV general partner James Green adds that companies that secure insurance are freer to do business with large corporations, receive investment or start a new business vertical. “We at CRV believe that fundamental companies are created by empowering specific demographics and we are deeply excited that Paola can do this by providing access to insurance for Latin American businesses.”

Neira’s team now numbers eight people, four come from the insurance world, and another half of the team is from engineering and technology. Her idea is to maintain a lean but quality team. With the investment, she intends to hire engineers and cybersecurity professionals.

The startup will start operations with companies in São Paulo and then plans to expand nationally. The next step, according to Neira, is the Mexican and Colombian markets.

“We can offer policies to companies that have operations in Brazil, even if it is not based in Brazil. If you have a company that is based in Colombia but has operation in Brazil, we can do insurance for it,” she explained.

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