Five years ago, two countryside lawyers created the “ugly duckling” of startups. That was how Vórtx was seen, the tech-enabled corporate and trust service provider for fund managers and corporate issuers in Brazil. Quietly, the company structured a team of 160 people, primarily engineers, mathematicians, and physicists, and it was gaining scale. It had a 40-fold increase in revenue until last year (when it has already surpassed the BRL 100 billion mark). On Tuesday, Vórtx announced it secured a $35 million (BRL 190 million) in Series B funding, led by the US private equity fund FTV Capital, which now has a minority stake in the firm.
The funding will be used in technology and acquisitions, as explained by Juliano Cornacchia, CEO and co-founder of the startup, in an interview with LABS. Today, Vórtx works in the B2B model as a one-stop-shop for fund managers and corporations alike through its core offering for fund administration and corporate services. The fintech’s acquisitions are moving towards the startup becoming the Amazon Web Services of the financial market, in which with a click, the investor can start a fund. So, instead of the customer hiring software, cloud, accounting, everything will be built-in on the Vórtx platform. For this reason, the company is integrating management software.
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The company recently announced an investment in the global fintech Parfin, expanding its presence in the crypto asset market. In 2019, it acquired software developer Vorasys/BCInf.
What is Vórtx?
Vortx’s offering includes services in areas such as corporate trust, focusing on fiduciary agents, asset custody, and transfer agent services; funds trust, concentrating on fund administration and qualified services; and clearing agent, bookkeeping, and legal representation and custody for non-resident investors.
In the Funds Trust area, the main clients are Brazil’s XP and Pátria Investimentos; in the Corporate Trust area, in debt management, large banks such as Itaú BBA, Bradesco BBI, and BTG Pactual structure their operations with Vórtx, which has approximately BRL 130 billion in assets under its custody.
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Capital markets expert Cornacchia used to work in a law firm with his partner, Alexandre Assolini, preparing all contracts, prospectuses, and documents that the investor signed during a transaction. “We chose to understand a lot about the clients’ business; we discussed the economics of transactions. More spreadsheet and PowerPoint came out of my computer than a contract. Tax, accounting calculations, I did all of them. The contract is just output, and it is not the more complex part; it only reflects the parties’ interest,” he explains.
The strategy worked. The office grew and became top tier in the transactions that they worked with. That was when they decided to have their startup. “We knew a lot about our clients, and I didn’t feel in a position to set up an asset to have a strategy like them because I knew how they worked. I thought about creating a business that was not a rival to them, which was complementary with the relationship that we already had with the office’s clients. Then we thought that there was a business that nobody was paying attention to, the back office.”
In a large investment operation, Itaú BBA, for example, structures the transaction with an international agency that gives the rating, besides two prominent law firms. At the end of the operation, Cornacchia would hand it over to a trustee or a fund manager who would take care of everything he planned, with a list of analog tools. When the Brazilian market opened up to fintechs, he saw that his thesis was correct: banks did not control the whole operation.
It is not as if Vórtx had reinvented the wheel. The service already exists in the industry, within large conglomerates. Itaú has its fiduciary part, as does Bradesco, which works to meet their internal demand.
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The back office is a mandatory service for any operation, besides being a scalable business, according to Cornacchia. “Whatever you contract for revenue for one year you accumulate for the next and so on.”
The company was created with governance: board of directors, independent board, an organized business. The startup got authorization from Brazil’s Central Bank in 2013 and 2015 to make the first transaction, but the operation accelerated in 2016. “When we started, it was 15 years since a competitor entered this sector. So, we reached 70% market share in some papers. “
Paddling against the tide of unemployment
The COVID-19 pandemic was cruel to many businesses. But it was during the crisis that Vórtx accelerated the hiring of 80 people. With the interest rate down (2%), the Brazilian banking market migrated to the capital market, and the startup absorbed demand, growing almost 70% about 2019.
Vórtx wants more than to double its turnover in 2021 and enter the liquid funds market. “As this market is more associated with retail and individuals, it demands a more robust capital structure, which is why we decided to have a partner and have the round with FTV Capital.”
The executive does not rule out internationalization in strategic locations for non-resident investors in Brazil, such as the Cayman Islands, which have tax incentives.
Before the announcement of the round, Vórtx had 100 job openings, which should increase from now on, according to Cornacchia. One-third of the vacancies are for technology positions. The company does not disclose the valuation after the investment, because according to the CEO, there are still other conversations with investors taking place.
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Vórtx wants to be listed on Nasdaq in up to four years, and the choice of FTV Capital as an investor is related to the demand to get closer to Silicon Valley. “FTV is an American fund and has already provided exit abroad, besides investing in our business model worldwide.”