Credix, a new fintech challenger on the Blockchain space, announced on Tuesday that it has raised a $2.5 million Seed round from DRW Cumberland and ParaFi Capital. Solana Ventures, Transfero Swiss BRZ Solana Ecosystem Fund, Petrock Capital, Fuse Capital, MGNR, Mercurial, Parrot Finance, and several angel investors, also participated in Credix’s fundraising. The fintech‘s strategic advisors include amongst others Chike Ukaegbu, head of the crypto strategy emerging markets at VISA, and Joao Bezerra, former managing partner of LatAm’s largest bank, Itau.
Set to go live in January 2022, Belgium-based Credix has a strong focus on Latin America, where it already has four credit fintechs as clients, and another 15 committed to using Credix’s debt funding platform across the region.
Chaim Finizola is the Chief Growth Officer at Credix. He has been working with Blockchain since he finished his master’s degree thesis around the Blockchain space in 2016. Half Brazilian, Finizola told LABS that giving his understanding of the LatAm’s largest market and the network he has built for years in Brazil, he has learned that it’s extremely expensive to get credit in Brazil, compared to western countries like Belgium. So, that’s when he and his partners decided to provide decentralized capital globally to be able to offer cheaper and uncollateralized loans for emerging markets.
“I’ve started talking to a lot of people in Brazil, Chile, Nigeria Singapore, and we saw that it was not really the end-user that we wanted to reach because there are different regulations,” he explains.
So going for a marketplace focusing on Brazil‘s great fintech world leveraged the firm to its B2B model. “In Brazil, there are very niched lines of credit. As these fintechs providing credit are competing with local incumbents and do not yet have mass scale, it’s difficult for them to get access to debt financing today. There’s the need for to bridge this liquidity gap with emerging markets using a global platform.”
Credix focuses on providing financing for these credit fintechs. As these credit fintechs already do the risk scoring and already have the client, Credix wants to be “the missing piece” of a decentralized marketplace.
It works like this: a fintech comes to Credix’s marketplace and says that it needs 1 million dollars or reals in two weeks, for instance. Investors (funds, banks, high net worth individuals) can come to the platform and be the underwriters to invest in the specific credit line.
“We’re democratizing not only the borrowing side for the end-users to get cheaper access to credit but also from the investment side we are democratizing investment,” he says. It’s like Brazil‘s FIDC (acronym in Brazilian Portuguese for investment funds in credit rights, a widely popular type of investment in Brazil‘s credit market). The difference is that in Brazil each company needs to create its own FIDC, which may take time and be more expensive, according to Finizola.
The company is HQ in Belgium, but has boots on the ground in Brazil. It plans to grow its operations to other LatAm countries including Mexico and Colombia but is looking to expand to South East Asia as well.
The startup has six people working today, but it should double the team in the next months, according to Finizola, even though he says he doesn’t want such a big team. “We think it’s important to have a very good and professional team, but a small one.”
At first, Credix will work with tickets of about $1 million, but it also focuses on raising that to $10 to $20 million.”It’s an entirely decentralized finance platform. We are really trying to bridge DeFi and traditional finance for these fintechs to connect their loans with real-world assets, excluding volatility,” adds Finizola.
Credix uses USDC stablecoins (cryptocurrencies pegged to the dollar) in its decentralized global financing platform to eliminate any crypto volatility and converts the USDC into local currencies through fiat on and off ramps to be able to provide these resources in Brazil‘s reais for its Brazilian fintechs. It means that borrowers, credit fintechs, and non-bank loan originators in emerging markets can borrow in USDC using their off-chain loan book as collateral, which they can in return lend to their clients in their local currency.
“We are working in the legal structure because in the future we want to tokenize the receivables,” says Finizola.
Underwriters, institutional and qualified investors can invest in the fintech credit deals’ junior tranche on a case-by-case basis. Liquidity providers, institutional and retail investors on the other hand, stake in the liquidity pool, which acts as a fund allocated over the different deals’ senior tranches, diversifying the risk. For the investor, yield returns can be about 10 to 20%, according to Finizola.
The startup is planning to open up the liquidity pool during the first half of 2022.