dLocal and Creditas: 5 pieces of experience from Sergio Fogel and Sergio Furio to build a great fintech

‍

You already know that fintechs are all the rage these days, especially in Latin America. The region has over a thousand startups focused on financial products and services. They not only show up in the daily lives of millions of latinos, but are also beacons for global investors to come and invest in the whole Latin American startup ecosystem: fintechs in the region have raised over US$ 9 billion in 2021, and US$ 3.7 billion so far in this difficult 2022.

But don't let these numbers push you to dive in unprepared: creating a fintech is no easy task. You'll be facing new regulations, taxations, and cultural and social behaviors in every new country your company arrives at. In this fierce competition, the fintechs that flourish are the ones offering powerful solutions to huge pain points.

Sergio Fogel and Sergio Furio know these challenges and opportunities like the palm of their hands. By enabling cross-border payments, Fogel's dLocal became the first unicorn from Uruguay and went public. And by attacking high-interest loans, Furio's Creditas became another Brazilian fintech unicorn.

At Vamos Latam Summit, Fogel and Furio talked with Miguel Armaza, from the fintech-focused VC firm Gilgamesh Ventures, and listed five pieces of experience they'd share with other founders building great fintechs in Latin America.

‍

‍

1. See the beauty in the crisis

"There's always a crisis in Latin America, and that's probably the beauty of it", says Furio.

Now you might be asking yourself: how can a crisis be beautiful? In each country of Latin America, all crises have their own characteristics and they open up space for local solutions. Being global yet localized is not enough. "Difficulty is our friend. Amazon would dominate the market if it wasn't because of it."

Difficulty can be your friend, but it is the harshest one. When Creditas began offering loans with clients' vehicles as a guarantee a decade ago, it was no easy sell. It was a new thing for Brazilians. The fear of losing their vehicle was a dealbreaker for a lot of them. Others accepted auto equity as an opportunity to get loans at a better rate.

Creditas invested in education on this novel form of lending to convince more people. And also had to be very, very patient until this strategy showed results.

"The customer is never going to tell you, 'Take my car as collateral to lower the cost of my loan'. But contrarians are the ones who end up winning the game", says Furio.

2. Know your customer‍

When it comes to building a product, Fogel was adamant about the different approaches entrepreneurs should have if they're selling to end users (B2C) or to other companies (B2B).

B2C fintechs have the hard work of discovering a new way to do things and then "selling" that new idea to their public. Think of Creditas' story on auto equity loans.

On the other hand, B2B fintechs will be hard-pressed to find a big company that might not exactly know what it needs. If you build a product the right way, though, selling it should be way easier than all the convincing that goes into the B2C model. "The B2B client probably knows the industry better than you do, but they have issues executing a product", he says.

Having a customer board to help you define the product can also help you later on when scaling and deciding between hundreds of possible variations. "The input is super valuable. The product team will then decide to do this and not that."

3. Have the right investor by your side

There's a lot of competition in the fintech scene. Having not only the money but also the best knowledge and network by your side could make all the difference.

Fogel recommends looking for an investor who will "roll up their sleeves and help you throughout the whole thing" as soon as you start fundraising. In DLocal's case, that was General Atlantic.

"I see many companies that have 10 different investors. But you have to have at least one who has skin in the game. Find the right investors from early on."

4. Enjoy the flexibility of being private

Going public is a dream for many, but it's a long, difficult, and expensive process that demands all leaders be involved. That's Fogel's experience with dLocal, which went public at Nasdaq in June of 2021.

"You cannot hire a bunch of MBAs and tell them to prepare the IPO", he laughs. It also sets up a new phase for the fintech in terms of duties. "There are things you can no longer do. You have less flexibility than before due to specific rules. It's not for everyone."

Creditas, currently private, is still enjoying the flexibility. "If you need to do a lot of experimentation, do it today", Furio says, referencing a pre-IPO period. ‍

5. Make use of what has already been built

In the end, LatAm fintechs should zoom in on finding innovative ways of providing affordability to its population. That's both the challenge and the opportunity.

The good news is that fintechs are now an established movement in Latin America, so the next few years are looking even brighter. The pioneers have created the building blocks for newer and bolder fintechs to emerge.

"Now we have the infrastructure and companies that help entrepreneurs", says Furio. "We're planting the seed of something unique in the world. Ten years from now, it's going to be amazing."

‍