PE Tech Report


Like this article?

Sign up to our free newsletter

Konfío completes USD235m capital raise at a USD1.3bn valuation

Konfío, a technology company aimed at boosting the growth and productivity of companies in Mexico, has closed a USD110 million extension of its series ‘E’ capital raising round at a USD1.3 billion valuation. 

This completes Konfío’s Series E round for a total of USD235 million.
Konfío, founded and led by David Arana, will use the funds to primarily expand its platform offer in Mexico, and to boost the market reach of Konfío’s payments solutions and business tools. Konfío’s use of capital has become increasingly efficient as the number of funding options has continued to increase, and funding terms improve on the back of Konfío’s track record. Additionally, Konfío will continue to be on the look-out for acquisition and integration opportunities that will help consolidate Konfío’s offer as the operating system of choice for SMEs in Mexico.
The round extension was co-led by Tarsadia Capital and QED Investors, and was joined by existing Konfío shareholders Softbank, VEF, Kaszek Ventures, IFC, and Lightrock. The investors’ support reflects strong belief in Konfío’s team, Konfío’s achievements so far and the immense potential and unique opportunity the Mexican SME sector offers to be served better. 

“Small and medium sized businesses are the economic engine of Mexico, accounting for 88 per cent of private sector employment,” says Ravi Bellur, Portfolio Manager at Tarsadia Capital. “Konfío’s platform of merchant solutions helps its clients improve profitability and productivity and, over time, will be a meaningful driver of GDP growth, increased economic formality, and financial inclusion. We are inspired by management’s mission to empower these owner-operators and their employees.”
Konfío acquired by the end of 2020 a cloud-native business intelligence, accounting and tax solution (“cloud-ERP”), Gestionix, that caters intently to the needs of both SMEs and accountants.
“David’s vision for building a holistic, end-to-end suite of financial services products and business management tools for SME customers in Mexico continues to crystalise,” says QED Partner and Head of International Bill Cilluffo. “Konfío is enabling benefits in orders of magnitude greater than those of any one single business offering alone. We believe in both David’s vision and the execution of that vision, and we’re confident this growth capital will allow him to rapidly execute on his plan.”
Mexico offers extraordinary conditions to deploy and scale Konfío’s strategy. With a population of nearly 130 million, Mexico is the second-largest economy in Latin America and the 15th in the world. Around 45 per cent of its population is under 25, and the average age is 29. Mexico also stands out as a US-linked economy, being the US second largest trading partner overall and its largest goods trading partner. In spite of this scale and activity level, SMEs productivity significantly lags that of comparable markets. Low SME access to credit at under 4 per cent of GDP, lower than the 6 per cent-8 per cent reported for Colombia, Peru and Brazil, is known to be supply driven, thus prone to be improved by new models such as Konfío’s. On the payments front, card payment and digital payment terminal penetrations are estimated to be half that of Brazil. Finally, SMEs lack digital business management tools, and their book-keeping is still performed mostly manually or through accountants who continue to use one of a handful of traditional off-cloud accounting systems.
This opportunity, in terms of total addressable market for Konfío, represents USD100 billion of potential SME loans in Mexico (from current USD 43 billion), over USD4.3 billion in revenues from digital payment services, and over USD1 billion in revenues from accounting services to SMEs.
“The SMEs in Mexico are vastly underserved, and we are obsessed with solving their needs by maximising the use of data and technology. We are convinced that a long term strategy for servicing SMEs is favoured by an integrated multi-product approach, where credit is an important lever, and by which customer interactions are optimised,” says David Arana, Konfío’s Founder and CEO. “The market response to our strategy has been encouraging. Konfío’s risk and collection models allowed us to successfully weather the peak of the pandemic, and are now backing a healthy 10 per cent and 40 per cent month-over-month growth in Konfío’s working capital loan book and in the number of users of our innovative business credit card product. In 2021, Konfío’s product adoption leapt to 1.4 services per customer from 1.0 in the beginning of the year. Now imagine the value that can be added to growing companies by leveraging the data from an integrated multi-service platform”.
“Konfío is the rare combination of attractive unit economics with an accelerating growth profile as they scale. We are excited to partner with this talented team as they democratise access to expense management and financial solutions across the region,” says Scott Polley, Principal at Tarsadia Capital.
“David has assembled a world-class team and he has been an unbelievable partner to QED as he has grown the business. The past 18 months have been difficult for many small businesses in Mexico, but he has handled the impacts of the pandemic in a thoughtful and deliberate way. As SMEs in the region begin to rebuild and as the importance of access to credit increases, we’re confident Konfío will remain one of the best-in-class solutions for SME owners,” says Bill Cilluffo, from QED Investors.

Like this article? Sign up to our free newsletter