This piece appears in Crunchbase News and covers the growth of digitalization in SMBs around Latin America and how fintechs have become catalysts in that process. Once again, the term SMB has a number of different interpretations, and that would hold true in LATAM. The author points to several studies of SMBs but there is no exact definition, so most readers will tend to think small business only; however, SMB includes medium-sized enterprises, which in the U.S. is generally accepted to mean firms with up to $1 billion in annual sales turnover. That is a far cry from a truly small business. Nonetheless, the point of the article likely holds across some level of medium-sized business in addition to the small business segment.
‘At QED Investors, we have witnessed tremendous growth in the LatAm fintech market since our first investment in Nubank more than seven years ago. The market continues to introduce interesting solutions across verticals, but one subset that should expect continued focus is small businesses. Startups are innovating for the more than 10 million SMBs in Latin America…
Fintechs have established themselves at the forefront of providing the more than 10 million SMBs in Latin America with implementation of digital strategies and processes that accelerate growth. Given the importance of SMBs to the region, this previously unexperienced efficiency in this helps uplift hyper-local and nationwide economies.’
So the well-known story of SMBs running on analog solutions remains true in LATAM as well, and the ensuing turn of events with ongoing VC investments in fintechs that support B2B models and the tailwinds created by the pandemic have combined to result in what the author (an investor) describes as robust growth. This is not really too different from other regions and something we have been tracking for quite awhile, as developers have adjusted their efforts to the more complicated and lucrative B2B space over time.
‘With VC support for fintechs that are paving the way for how small businesses operate effectively and strategically, startups can make lasting impressions on local economies, which serve as the basis of the LatAm economy…
It is why the VC community is hyper-focused on this sector and continues to recognize the role fintech plays in creating more systematic approaches to everyday processes for SMBs in the region. I expect the next wave of fintech to enable more and more SMBs to thrive in the coming years.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group