Rodrigo Marques and Bernardo Fabiani, co-founders of Brazilian agfintech TerraMagna
Rodrigo Marques and Bernardo Fabiani, co-founders of TerraMagna. Photo: Courtesy.

SoftBank signs its first check for an agriculture-related startup and it is for a Brazilian 'agfintech'

TerraMagna, which offers credit to producers and their suppliers, has raised a $40 million round co-led by Shift Capital – part equity, part debt financing

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TerraMagna, which provides financing for producers and connects them to various input distributors, industries, and other agents in the agro chain, announced this Wednesday a contribution today raised US$ 40 million (about R$ 220 million) – US$ 10 million as equity, and US$ 30 million as debt financing.

The investment was led by SoftBank Latin America Fund – it’s the Japanese group’s first check to an agriculture-related startup – and Shift Capital, and also had the participation of Milenio Capital, in addition to previous investors.

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Previously, the company had raised $2.2 million from ONEVC, MAYA Capital, Accion Venture Lab, The Yield Lab, and Canary.

With a portfolio of more than US$ 120 million in 2021 – ten times more than it had in 2020 – TerraMagna positions itself as “the largest agricultural fintech in terms of asset volume” in Latin America.

To LABS, the co-founder and CEO of TerraMagna, Bernardo Fabiani, said that although the company intends to explore other markets, for now, it focuses only on Brazil. With the new investment, the company intends to expand its regional presence in Brazil and diversify its product offering.

TerraMagna offers a financing platform integrated into the agribusiness value chain, connecting producers and distributors of inputs and industries and facilitating the generation and granting of credit to farmers, mainly working capital, since most Brazilian farmers normally do not have the liquidity needed to obtain this type of funding from traditional financial institutions.

What usually happens is that the rural producer ends up buying part of the inputs he needs paying for it partly with his future production. What TerraMagna does is to contact his preferred distributor and make the purchase for him.

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At the distributor’s end, the startup ends up working as an alternative to anticipating revenue, not only through the sale scheme described above but through the anticipation of duplicates or CPRs (certificates or rural production notes in the acronym in Brazilian Portuguese, which is usually what the producer offers as part of the payment).

By connecting these farmers to the chain in this way, TerraMagna has valuable information at hand for assessing the credit of these producers, which makes the process easier and cheaper. According to Fabiani, the remuneration of the agtech takes place through the credit operation itself – implying that the startup keeps part of the interest and fees incurred.

“Agriculture is a big market in Brazil, but small and medium farmers still lack working capital financing to buy seeds, fertilizers, and pesticides. TerraMagna’s team developed innovative technology and a business model that allowed them to efficiently serve this segment. Over time, we believe that more data will continue to improve TerraMagna’s underwriting models to consistently reduce the cost of financing for small and medium-sized farmers,” said Felipe Fujiwara, Investment leader at SoftBank Latin America Fund, in a statement.

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“TerraMagna is the most technologically prepared [startup we’ve talked to], capable of effectively implementing and monitoring multiple credit operations simultaneously. In addition, the company’s go-to-market [strategy] is extremely effective – leveraging channels that farmers are familiar with, it makes the best use of the agricultural value chain and drives incredible portfolio growth in a market historically opposed to innovation. We had known the company for some time and decided to invest after it had consistently delivered exceptional performance and credit growth,” said Bernardo Garcia, general partner at Shift Capital, also via a statement.

TerraMagna currently has 110 employees. Part of the funds raised will reinforce the hiring of more technology and sales professionals. In addition to the financing operation, TerraMagna also monitors warranties – properties given as collateral in credit operations between producers and cooperatives or financial institutions.