The third funding round of the Brazilian receivables-as-payment fintech Marvin comes a year after its inception and at a difficult time for the VC market, with investors cautious in the face of higher-than-expected inflation and interest rates and founders cutting side projects, spending, and even laying off. The $15 million check is the first led by Canaan Partners in Latin America. “They answer for nearly all the investment. Two of our previous investors, Canary and Mauá Capital, also followed [the round], doubling their bet on Marvin, and the most interesting thing: we brought in a series of angel investors who, I’m sure, will be transformational for the company, just like Eduardo Gouveia [the former CEO of Brazilian acquirer Cielo who participated in Marvin’s seed round] was,” says Bernardo Vale, CEO, and co-founder of Marvin alongside Henrique Echenique.
Among Marvin’s new angel investors are Carlos Selonke (CIO of Revolut), Juan Pablo Ortega (co-founder of Rappi), Israel Salmén (co-creator of Méliuz), Lucas Amoroso (founder of Lupa Capital), and Doug Scherrer (former CFO of Nubank).
Before signing the round’s term sheet in April, they talked to more than 120 funds. “This adjustment in the market came at a good time for us to show that our growth has taken place on solid foundations. We have not changed our valuation or the amount we would like to raise,” points out Vale.
Marvin was launched in May last year with an eye on a specific part of the Central Bank’s new regulation, from 2019, which “liberated” the balance of the POS terminals so that shopkeepers could use it to pay their suppliers without the need to anticipate receivables in the form of credit. In June 2021, with some delay, new rules on the registration of these receivables and their negotiation with financiers complemented the sector’s long-awaited regulatory changes.
The new rules established that every card invoice had to be registered, by the acquirers and free of charge, within registrars. These registrars, in turn, would have to make their technological structures “talk” to each other.
With all invoices registered, merchants could begin sharing this information with more than one financial or fintech institution interested in providing them with credit or other services based on future payments. In practice, all these changes unlocked a new source of working capital. Before that, shopkeepers could only ask for anticipation of receivables from the banks with whom they worked or with the acquirers of their POS terminals, which to a large extent are also controlled by the same banks.
This whole picture changed when shopkeepers were able to share their receivables “agenda” with more than one financier at the same time, negotiating better conditions. This is possible because lenders can only retain as collateral the volume of receivables equivalent to the amount borrowed or traded instead of retaining the entire flow of receivables from the merchant, even if the amount borrowed was lower, as was the case before regulation.
The final goal of the Central Bank with the new regulation was to increase competition and reduce interest rates and spreads, especially for micro and small companies.
To unlock this capitalization potential for tenants, Marvin has worked first with the industries that supply them. There are 26 large Brazilian manufacturers from different segments, such as Grupo Boticário (cosmetics and wellness), Ale (fuels), and Alpargastas (footwear).
Marvin is only able to bridge the gap between suppliers and shopkeepers because it is connected to all receivables registrars enabled by the Central Bank: CERC (the first card receivables registrar authorized by the Bank Central in 2018, which concentrates practically 80% of operations), CIP (founded in 2001 and controlled by large banks, which also means that it concentrates the overwhelming majority of receivables from the country’s biggest acquirers such as SafraPay, Cielo, Rede, GetNet), TAG, created by Stone, and B3. Brazil’s stock exchange was the last one to enter the “receivable party” in the country.
Despite being foreseen in the new regulation, the interoperability of the receivables system is not yet a reality in Brazil. That’s why Marvin operates at what it calls the “edge” of the industry, connecting to TAG when it needs access to Stone’s receivables, CIP when it needs to operate with balances coming from Rede, and so on.
“The difficulty is still, mainly, in the acquirers to accept the information from the registrars. The acquirers did not really change their systems. They improvised to agglutinate commercial transactions into receivables units to meet the rules, which had their entry into force postponed more than three times, not for nothing. Having managed to implement what we call ‘intermarvin’ [in reference to the interoperability that the system should have], we can capture these transactions and mitigate the problem. If we manage to do this, it is clear that the problem is not exactly with the registrars,” explains Echenique.
For him, it is to some extent expected that this would happen since the more interoperability and financiers operating in the sector, the less anticipation of receivables the acquirers will make. “But eventually, everything falls into place.”
“Marvin’s team understands the new regulation better than anyone, which is why this investment is our biggest in Latin America to date. As Brazil moves from being a cash-centric society to one of the world’s most dynamic digital payments markets, we are excited to see Marvin play a leading role and build new financial opportunities for retailers across the country,” said Brendan Dickinson, general partner at Canaan, in a press release.
Marvin’s long-term goal is to have 1 million POS (points of sale) using its solution someday. In the short term, however, the startup wants to be present in at least 25,000 POSs by the end of 2022.
To this end, the new resources will be used mainly to attract top talent and executives. “It’s customary for us. Whenever we bring big names, these people bring other people, and growth happens. So our investment now will be in people and promoting our brand with the shopkeepers,” explains Vale.