Esteban Velasco, CEO and co-founder at Sempli. Photo: Sempli/Courtesy

The Colombia-based fintech that has been giving entrepreneurs some credit

Sempli is a data-oriented spinoff from Velum Ventures that provides loans for over 1,000 small and medium-sized companies in Colombia

In August, Colombia‘s central bank kept its benchmark interest rate at an all-time low of 1.75%, but it’s likely going to hike it due to inflationary pressures, as the economy rebounds from the COVID-19 pandemic. 

Meanwhile, INNPulsa (Colombia‘s government agency for entrepreneurship and innovation) data gathered by La República shows that Colombia has transacted nearly $1 billion in entrepreneurship over the last five years.

Entrepreneurs, and, in particular, the ones that have small and medium-sized businesses and need financing were the reason Esteban Velasco founded the fintech Sempli

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Born in Colombia in 2017, the company focuses on financing and lending for SMEs, a very much-needed service in times of crisis. 

Not only in Colombia, but in all Latin America, fintechs that have been providing lending for small companies are taking part in the financial market. Normally, the incumbent players – traditional banks – would take weeks or perhaps months to receive either an approval or a negative credit analysis process. So that’s where disruption starts. 

Velasco is a partner from the venture capital fund Velum Ventures, which invests in Seed startups in Colombia. At that time, the fund received calls from small businesses that were needing loans/credit to execute a working capital need or asset requirement. A VC fund usually invests in equity and high-risk profiles, but Velasco says nearly 100 small businesses came to the fund with the same demand: credit.

“We decided to analyze and understand why they were coming to us. So in the end it was a very easy matter in terms of creating a project where we could lend money, working capital, and growth money for small businesses, parallel to what we do in our VC fund,” he told LABS.  

The PowerPoint presented in the fund’s meeting turned out to build the VC’s spinoff in a lending project called Sempli. At the very beginning, Sempli’s first capital came from the GP (general partner/ the firm), with $100,000, and afterward from the LPs (limited partners), i.e. the investors from the VC fund. 

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“We were very fortunate to have the investment of the venture capital fund investors,” he added. Overall, the fintech fundraised over $30 million, $13 million coming from equity only. As a lender, the fintech takes the position on the loans in its balance sheet and leverages operations or receives that as equity. 

Sempli pledges to analyze credit within three days on its platform, counting the analysis and the final disbursement. “Small businesses used to have a very frustrating borrowing experience with a financial institution. With us, it’s very simple, we can have a very customer-oriented experience. For us, fintech is all about experience, and of course, we do have a lot of data, and information. We consider ourselves a data-oriented company that gathers information not only for the company but also entrepreneurs or managers of that particular business,” says Velasco. 

The company has over 1,000 customers in Colombia, and its credit ticket size goes from $5,000 to $50,000 approximately. “We consider Colombia the third-largest market in terms of small businesses [after Brazil and Mexico in LatAm]. There are about 2.5 million small businesses here.” 

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The fintech has originated over $50 million in loans. It’s not like venture debt, it works only with a loan that the company normally has six to 36 months to pay. Yet, the company is still a very small startup with 41 employees. “That gives you the type of operation that we have with automation of our product,” explains Velasco. 

The market path: from fintech to insurance and credit cards 

Following the market trend of fintechs offering insurance products (like Creditas is doing), Sempli developed three types of insurance for SMEs. One links life insurance with a credit product for the entrepreneur, others cover different assets of the company, potential liabilities or contingencies, and data protection, cyber risk, for instance. This one Sempli developed along with Sura, the largest insurance company in Colombia

“In Colombia, businesses usually can’t finance the insurance, so it normally takes 12 months, because you renew the insurance on an annual basis. But we want to finance the insurance,” he says. 

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Velasco also tells LABS that small businesses in Colombia usually use a personal credit card or a family credit card for the company’s expenses. “Normally the limit is very low when you talk about a personal approach, versus the requirement for a small business which could be 10 times or 20 times what the limit offers,” he explains. 

To fill that gap, Sempli recently launched its first Visa flagged credit card for SMEs and freelancers. The company also has a mid-term project of building deposit accounts and being a one-stop-shop financing challenger bank in Colombia

“Having also deposit accounts opens up a new type of payment product, it’s also about the collection for SMEs, being able to let SMEs have an ongoing basis of what they do, especially if they are a retail business or merchant.” It’s a similar concept that Brazil’s fintech Cora and BizCapital are following.

But to get that, Sempli needs a license from the Colombian regulator. “That is normally a process that would take from one year to two years, so we’re having some strategic questions inside Sempli about the right path to execute deposit accounts because we could also do a joint venture with an established bank,” he says.  

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While in Colombia mobility startups have struggled in terms of regulation, like Rappi issues in terms of employment, Uber, and Picap deals with transportation, the fintech side in the country was blessed. 

“I think because it’s a financial sector, it’s very solid, and you have to comply,” believes Velasco. “If you are in the open banking ecosystem, or if you are in the insurance landscape or if you are a lender, you have to comply with what the regulator establishes. We’re founding members of the Colombia Fintech (an association for fintechs), and it’s an easy conversation with the regulator, you see them opening new conversations in terms of the sandbox for fintech and the possibilities that all of the players have.”