Argentina‘s fintech Lemon announced on Tuesday that it secured a $16.3 million Series A round led by Kingsway Capital, a UK investment fund. Global investors such as Draper Associates, Valor Capital, Cadenza Ventures, Draper Cygnus, Trampoline Venture Partners (Amagis Capital), Coinbase Ventures, Borderless Capital, Reserve, Draper University Ventures, Celo, Supervielle, and Andrés Bilbao, co-founder of Rappi, also joined the round.
The startup is one of several cryptocurrency bets in Latin America. In its homeland, Lemon has Ripio as one of its rivals, a company born eight years ago as the first bitcoin payment processor in Latin America. Today, Ripio offers a digital wallet, in addition to foreign exchange and credit services.
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On its behalf, Lemon offers a virtual wallet to buy and sell cryptocurrencies, send and receive money, and crypto profits every week, and it enables the operation in pesos.
“There are other cryptocurrencies in Argentina and Latin America, but we are the youngest one, and we’re aiming to be the number one in the next few years,” said Marcelo Cavazzoli, CEO and co-founder of Lemon, in an interview with LABS.
The economic tension caused by the novel coronavirus crisis has aggravated Argentina‘s fragile fiscal situation, leading to a further drop in the peso against the dollar. After years of crisis, high inflation, and high foreign debt, the dollar is the only currency that counts for Argentines when making an important transaction, such as buying or selling a property. Or at least, it was.
Surprisingly, Cavazzoli says that even though common sense says Argentines just want to have dollars to protect themselves from the volatility of the peso currency, that’s not quite true. The stablecoins are a type of cryptocurrency that maintains a stable market price because they are pegged to a traditional asset, like the dollar. But dollar-linked stablecoins are the asset that Argentines have the least amount of, according to the CEO.
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“Argentines are buying crypto, they are buying Bitcoin, Ethereum, and other cryptocurrencies, it’s not about having digital dollars, it is about investing in the future, and being a part of what the future will look like,” he added.
Unsurprisingly, crypto walks side to side with LatAm’s hottest sector for venture capital: fintechs. Earlier this month, when SoftBank led a $200 million round in the Brazilian crypto exchange Mercado Bitcoin, making it LatAm’s second crypto unicorn, Marcelo Claure, CEO of the conglomerate, stated that cryptocurrencies have a huge potential in Latin America.
Cavazzoli also says that there’s something very special about Latin America and crypto because the main crypto investors in Europe are institutions, family funds, banks, which it’s not very interesting for the crypto world.
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“It happens exactly the contrary in LatAm, where the main investor is retail, and where the big institutions are far away from investing in crypto. We have in Latin America a real demand from the retail sector for cryptocurrencies, especially where the local currencies and the local economies have depreciated, like Argentina. The population is investing in finding another value, it’s a different culture of investing, taking risks, there’s a lot of demand for this type of products for the cryptocurrency industry in general,” says the CEO.
“This drives a lot of interest for investors because they see the potential market and the fast adoption in Latin America. Not only in Argentina but also in other countries including Brazil, which is a very big market, everyday crypto adoption is growing, so much greater than other regions like Europe.”
Spreading the word of usability and financial inclusion with crypto
Lemon will use the money to expand in Latin America and also develop and launch a prepaid Visa card that can be loaded with pesos as well as crypto. For such an expansion, Lemon’s workforce will likely double in size to 70 people. “Probably by half of next year, we will double that again. We need top talent right now and we’re hiring all over the region,” says Cavazzoli.
The fintech has 60,000 people on its wallet’s waiting list in Argentina. Yet, the CEO says Lemon wants to be in the millions of users in the next 12 months, as it is consolidating its international expansion with commercial agreements starting in El Salvador, Peru and, soon, in Ecuador, Colombia, Chile, and Uruguay. Thanks to Valor Capital’s investment, Brazil is also in Lemon’s plans by next year, alongside Mexico.
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When talking to LABS, the executive was in El Salvador, where in June President Nayib Bukele made bitcoin as legal tender in the country. Bukele has touted the cryptocurrency’s potential as a remittance currency for Salvadorans overseas.
“In El Salvador it will be mandatory to accept cryptocurrencies, starting in September. Especially institutions and big companies will be required to accept, and we’re here working with some companies to help them, and working for us to start in this country,” said Cavazzoli. Lemon is not the only one who is eyeing El Salvador now. Athena Bitcoin plans to invest over $1 million to install cryptocurrency ATMs in the country.
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“We plan to start in these small countries, where we can have the organization to have an international team, an international product, and with that experience, we will go to Brazil, which we think is our main market,” added Cavazzoli.
One year after entrepreneurs Marcelo Cavazzoli and Borja Martel Seward founded the startup, Lemon managed to raise a $1 million Seed round led by the U.S. fund Draper University and Argentine fund Draper Cygnus, together with its peers Silent Unicorn and Amagis Capital, both from the United Kingdom.
“We wanted to experience and participate in the entire evolution of crypto, and we could identify many pain points, especially trying to make our friends and family join crypto. It was very hard to get our friends and family to join, to buy crypto, to use crypto, and to understand it, so we decided to focus on making crypto accessible and usable to anyone,” he said.
Making crypto mainstream for the younger generation
Focused on simplifying crypto and making it easy to buy and sell, Lemon uses the existing banking infrastructure in Argentina, since it has the so-called CVU, which is like a bank account license for wallets in Argentina.
“You can use your money in the traditional system, but you can also use the crypto world. We’re building that on top of the system infrastructure, making it interoperable, but with accessibility to the new set of financial products that are coming and that include many crypto products, like lending, borrowing, trading,” said the exec.
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The main differential the startup preaches to have is that users don’t need to know about liquidity to buy crypto. The app also allows trading, but Cavazolli states that the fintech‘s target is the audience that is not a trader. “This is an app that everyone can use for the mainstream and it’s not focused on traders who are looking to do daily trading. This is for the common people so they can join this future.”
Like Nubank disrupted online banking in Brazil, Lemon wants to pave the way for people that are not tech-savvy could access crypto in three clicks and automatically have the crypto earning yields.
“We’re focusing on younger audiences, between 18 to 29 mainly, our peak of users being 21 years old. And that is because we want to be a generational product, adopted by an entire generation, and we’re focusing on the youngest because they are the ones that are going to be the main users of this technology.”