If you haven’t heard of Creditas before, you’re in for a wild ride. This is an inspiring story of market disruption and a good example of why startup unicorns are called what they are in the first place. Creditas is a secured lending fintech created in 2012 and Brazil’s latest unicorn, valued at $1.75 billion as of December 2020.
The disruption in the Latin American lending business was long overdue, and it was very much welcomed by customers and investors alike. In a region with such a large percentage of homeownership and huge interest rates in personal lines of credit, something was bound to change. That’s where Creditas came in.
Creditas is a fintech focused on secured lending using three collateral types: real estate (Creditas home equity), vehicles, and salary. They offer multiple credit products. But there is much more to the history of this startup than that.
How Creditas was born?
Sergio Furio is a Spanish bank investor. Born and raised in Valencia, he graduated in 2000 from Business Administration. He then went on to spend five years working at Deutsche Bank doing investment banking in his home country. In 2005, he moved from banking to consulting, working for the Boston Consulting Group, and specialized in retail banks, eventually relocating to New York. That’s where he was based up until 2012, working in growth strategies, operational excellence, and technology transformations.
At one point in 2010, he was helping a big bank in the U.S. to digitally transform. At the peak of the project, over 1,000 were involved in it. That’s when he started thinking seriously about software development. He wanted it to be matched cheaper, and realized that the customer interface should be more user-friendly rather than focused on the product.
In that same year he was also dating his girlfriend, who would eventually become his wife. Silvia is Brazilian, and one night, casually over dinner, she mentioned that people were paying up to 200% interest rates on consumer loans in her country. A spiked interest and some digging got him hooked. According to Furio himself, he bought a ticket to São Paulo “after doing a very short research”. He spent a day there, talking to three or four people, and decided he wanted to move there.
The fintech’s business model: from Creditas home equity to a complete secured portfolio
Firstly, Furio identified a problem: customers in Brazil own real state properties. Furthermore, Brazilians have a 75% rate of homeownership, against 65% of Americans. They own cars and apartments, and most of them have no debt. He also learned that the market for financing is very much concentrated, with five banks owning up to 95% of the total assets in the economy.
His focus was on refinancing expensive debts by using all the properties those individuals have as collateral. The goal was to be a vertical platform that delivered end-to-end financing, going through all the motions. From generating the lead and understanding the problem, and also getting the loan approved, processing it, looking for funding. An end-to-end, verticalized platform.
Creditas started focused on home equitya type of credit so common and broad in other countries, but so rarely offered and used in the country at that time. With time, the fintech extended its secured loans to more collateral: car and even salary (a pretty popular type of loan in Brazil, which ais repaid through payroll deductions over a short period of time, offering employees lower interest rates.)
How Creditas became a case of success
Furio recalls that, at that time, investing in Brazil didn’t seem as attractive. He did a couple of seeding rounds, raising money from investors in Brazil and the Czech Republic, which accounted for 25% of the initial funding. The company was called BankFacil back then. The next 50% came from a group of 8 to 10 financial services executives. The remaining 25% came from friends, who wanted to get into a company and support him. This gave him 18 months until a Series A round, which happened in June of 2016.
The startup managed to catch the eye of some international and renowned VCs, such as Argentina-based Kaszek Ventures, Redpoint, in Menlo Park, QED Investors, and Accion Global Investments. This allowed another successful 18 months until the next round, and the startup never stopped growing.
While the first three years were dedicated to partnering with mid-sized banks and acting as a distribution channel for them, a huge milestone was achieved after completing the platform.
In April 2016, the company issued its first asset-backed investment fund. In 2018, Creditas issued their first residential mortgage-backed security. The $55 million Series C, led by Vostok Emerging Finance in December of 2017 was a milestone for BankFacil – which by then had rebranded to Creditas.
This funding round allowed a 5x growth in revenues in the year of 2018. In January 2019, Creditas was granted a financial institution licensed by the Brazilian Central Bank, which meant full independence to originate loans and increan both economics and innovation. In July 2019, Creditas received a massive round led by Softbank: $231 million.
On their impressive $255 million Series E round, which took place in December of 2020, Creditas became Brazil’s 10th unicorn, a select club of startups valued at $1 billion and above. The fastest-ever round by the company happened during lockdown. In a weird twist of events, because the process had to be done remotely, it was possible to meet investors, based in five different countries, all in one day. According to Furio, that helped them move faster and meant that the discussions went straight to the point.
Creditas’ International Expansion
Creditas chose Mexico as home to its first international foray. In an office equipped with a staff of 60 people, the fintech readily started to offer its entire loan and financing portfolio in July of 2020. In an interview for NeoFeed, Furio said there are no plans of expanding to other countries on the horizon and that Mexico will be a challenge itself. He added that “Mexico is a much less regulated market than Brazil, but we are learning.”