By Jonathan Whittle and Michel Zaidler
At Quona we believe a key to expanding access to credit for underserved consumers and small businesses is to enable fintech lenders to raise debt capital and manage debt facilities more efficiently and with lower costs. We’ve invested in many leading fintech lenders in Brazil and we’ve witnessed firsthand the challenges these companies face, particularly for lenders focused on small ticket, high volume loans, for which existing service providers are woefully unprepared. To address these issues, we’re proud to partner with the team at Kanastra, a tech-enabled capital markets infrastructure provider in Brazil.
Capital markets in Brazil are surprisingly sophisticated and deep, so much so that the vast majority of Brazil’s public debt is in local currency. As a result, distinct from most emerging markets where Quona invests, Brazilian fintech lenders and embedded finance players are able to tap into flexible off balance sheet financing structures to fund their operations, with funding coming largely from local investors. Fixed income funds and securitizations backed by pools of different types of assets — such as invoices or agricultural and real estate receivables (locally known as FIDCs, CRAs, and CRIs) — have become a huge business, with assets under custody surpassing US$320 billion, up an impressive 12x over the past decade.
However, back-office infrastructure has failed to keep pace with innovation, leaving originators with no option except managing a myriad of disintegrated service providers with error-prone manual processes, limited technology, and poor customer service. On average, asset originators have to deal with 14 different providers. With limited and unreliable data and high operating costs, the status quo hampers access to capital to address the low credit availability in Brazil.
Having experienced the pain firsthand while building their own asset management firm, the co-founders of Kanastra — Gustavo Mapeli and Manual Netto — aim to address these issues. Kanastra is a capital markets infrastructure company providing an end-to-end back-office operating system for originators and investors. By aggregating numerous licenses into an integrated purpose-built tech platform, Kanastra enables originators to seamlessly raise capital on a platform that includes world-class asset management, administration, securitization, custody, loan-as-a-service, and bookkeeping services. The platform is empowered by automation and backed by an interface with rich data that allows originators and investors to properly manage their operations, lowering costs and time to market. In a short period, Kanastra has amassed more than US$400 million in assets under management from 35 clients, including some of the leading fintech originators in Brazil, such as Creditas and Solfácil.
Given our experience as an investor in Brazil, we understand the problem that Kanastra is tackling and the powerful catalytic impact that a tech-forward integrated platform can bring to the market. We strongly believe in the role of capital markets as a key building block for advancing financial inclusion. But to truly unlock access to capital for MSMEs and low-income consumers at scale, we need better technological infrastructure that effectively handles the complexity of asset-backed funds and securitizations, particularly for the high volume, low ticket transactions focused on underserved consumers and small businesses.
We are excited to announce that Quona has co-led a $13 million seed financing round for Kanastra. We believe Brazil’s fintech ecosystem can benefit greatly from Kanastra’s solution, and we look forward to a future where capital markets infrastructure is no longer a hindrance to innovation.
Disclaimer: Quona portfolio companies were selected for profiles based on objective, non-performance-based criteria for the purpose of illustrating the types of investments made by Quona funds and their impacts. These profiles are being provided for illustrative purposes only, in order to provide examples of the idea generation, research, and thought process of Quona investment teams. No representation is made as to whether or if the investment ideas represented in these profiles have been or will be profitable. It should not be assumed that Quona will be able to identify similar investment opportunities in the future, or that any such opportunities will be profitable. The above statements include the opinions of the Firm and are for illustrative purposes only. There is no assurance that any trends depicted or objectives described in Quona profiles will continue or become successful.