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Behind the Term Sheet: How Xepelin is Helping LatAm’s SMEs Flourish

Cathay Innovation & Seaya Ventures’ First Joint Investment in Latin America

By: Alexandre Lazarow, Pablo Pedrejón, Costanza Carissimo

Small and Medium Enterprises (SMEs) are the bedrock of most economies, representing about 90% of businesses and more than 50% of employment worldwide. However, the sector is incredibly underserved with access to finance being the “second most cited obstacle” stunting SME growth in emerging markets.

According to the International Finance Corporation (IFC), 65 million SMEs in developing countries have an unmet financing need of $5.2 trillion every year — with Latin America (LatAm) being among one of the regions with the highest proportion of the finance gap. Adding to the challenge, about half of formal SMEs don’t have access to formal credit.

Addressing this issue has become a crucial need — that’s why we invested in Xepelin, the Chilean fintech looking to give LatAm’s SMEs better access to financial services. Co-led by Kaszek Ventures and DST Global, Xepelin’s $30M financing (plus $200M in credit facilities) is among the largest Series A rounds ever raised in LatAm.

It also marks the first joint investment in the region between Cathay Innovation and Seaya Ventures following our official partnership in April. By combining Cathay’s global ecosystem of investors, startups and Fortune 500 corporations with Seaya’s unmatched expertise in Southern Europe and LatAm, our goal is to create a stronger and more expansive investment platform that grants more startups access to worldwide resources and the capital they need to scale.

B2B Fintech in LatAm: A Booming Market & Cross Pollination of Ideas

Source: CBInsights

Xepelin is a great example of a differentiated model that would not be able to exist in the West. Specifically, Xepelin is leveraging on two major trends materializing today: a massive and underserved market with tech (digitalization) and regulatory tailwinds.

On one side, LatAm’s underserved financial services market is fueling a booming fintech sector. Informal lending solutions are highly expensive, and the private debt market is growing rapidly — 30 to 70 times faster than in the US and Europe.

At the same time, LatAm is instituting a unique data ecosystem with centralized government electronic invoicing being compulsory in 70% of countries (to ensure tax collection). These records are public and offer insights into the web of relationships throughout the economy. Chile has led the enforcement, requiring all companies to issue standard invoices through the central system controlled by tax revenue institutions. And this is all within the context of a supportive regulatory ecosystem for fintech and lending.

Source: Xepelin

This leaves a major opportunity for tech companies to gather data about the financial ecosystem of SMEs and provide it to financial institutions so they can deliver more informed services. That’s what makes Xepelin so interesting — the company is truly what Alex in his recent book Out-Innovate calls a “Creator”, offering LatAm’s underbanked businesses not only access to credit, but full digital visibility into their financial situation for the first time.

And new business models like Xepelin’s aren’t just relevant in LatAm — it has the potential to heavily influence other regions such as Europe, Southeast Asia and China.

Here’s how it works.

Xepelin: the financial and data platform powering LatAms SMEs

Xepelin is a financial services platform for SMEs in LatAm that provides visibility into cash flow and metrics. It acts as an all-in-one platform to manage working capital for B2B SMEs and solves key problems starting with liquidity, through accounts receivable and payable (AR/PR) loans.

Xepelin was founded by Nicolás de Camino and Sebastian Kreis in 2019, two fintech veterans who have led the digital transformation of the region’s top banks and pioneered private debt vehicles. The two started the company driven by the fact that “only 5% of companies have access to recurring financial services” and wanting to democratize access to capital for SMEs in the region.

Today, Xepelin’s core product is a SaaS tool — a free AR workflow automation software that helps companies organize all their financial information (cash flow, revenue, sales, tax, bureau info) all in one place. Embedded in this tool is AI-driven underwriting and lending with risk-adjusted pricing. By managing the SMB AR workflow and leveraging government invoice databases, Xepelin’s proprietary algorithm automatically scores SMEs and allows companies to apply for short-term working capital loans with real-time approval decisions in a seamless, efficient digital experience.

Importantly, Xepelin works with mid-market corporations (with 105 partnerships and growing) to onboard a greater network of SME suppliers. This creates a virtuous circle — SMEs use Xepelin to improve their financial habits, obtaining efficient financing, collaborating with clients and suppliers, and thus, generating significant impact in their respective industries. It has also built a valuable database for financial institutions to build profiles of the businesses they serve — selling its portfolio of non-recourse loans to help credit risk exposure, enhance its data play and strengthen its platform.

Xepelin is on the fast track, with more than 5,000 clients in Chile and Mexico and loaning more than $500M to SMEs in the last 22 months. Overall, the company has been seeing a growth rate of 30% per month. And this is just the beginning — the company’s long-term vision is to become the go-to digital bank for SMEs in LatAm. By building a virtual wallet in a contained payments ecosystem, Xepelin can enable businesses to “move money” between each other’s wallets and cash out at the edges to their banks when needed, creating an all-in-one financial platform.

Parting thoughts: Building a more inclusive, equitable Latin America

At Cathay and Seaya, we are big believers in both the global SME market and the burgeoning startup ecosystem in Latin America. At Cathay, we’ve backed key SME enablers in the US such as Fundbox (B2B payments and credit), ZenBusiness (the operating system for small businesses) and Peek (small travel and hospitality businesses). At Seaya, we have backed Toqio (fintech platform enabler for SMEs) and The Hotels Network (predictive personalization technology for hotels.

In LatAm, Cathay has backed innovators such as Mexico’s online lender Kueski, Brazil’s social commerce company Facily, and Lana, a financial service marketplace for gig workers. Whereas Seaya has invested in Colombian foodtech platform Robinfood as well as in Fracttal, Latam’s leading maintenance software solution.

As the first official Cathay-Seaya joint investment in the region, we are proud to work with the Xepelin team not only because they are creators — but because their business stands to create a significant positive impact on LatAm’s vastly underbanked businesses and economy as a whole. With rapid digitization, the ability to harness data, and a favorable regulatory environment, Xepelin is well positioned to create a robust and mutually beneficial ecosystem for SMEs and corporates alike.

This is something that deeply resonates. We built our global ecosystem, integrating some of the world’s leading corporations, around the idea that both startups and corporates are key to a more sustainable economy. Thus, we look forward to leveraging our platform to help Xepelin scale as well as supporting the innovators and creators who are building a more inclusive, equitable and flourishing economy in Latin America.

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