Target Information

We are pleased to announce our latest investment in Marco, a cross-border fintech that enables micro, small, and medium enterprises (MSMEs) to expand their exports by accessing new markets. Marco streamlines the exportation process, providing rapid access while reducing bureaucracy, thereby assisting SMEs in increasing their export revenues. This investment aligns with our Greentech thesis, intersecting two key verticals: Agriculture and Logistics. Notably, 40% of Marco's client base is linked to food products, directly addressing issues of food stability while facilitating international logistics for businesses operating in Latin America.

There are three primary factors driving innovation and creating investment opportunities in the cross-border trade sector: (i) the post-Covid disruption of supply chains, (ii) the effects of nearshoring in the Americas, and (iii) the increasing representation of Latin Americans in the export market. These dynamics are laying the groundwork for significant transformation within the commercial sector. After three years of in-depth studies on the cross-border trade sector, encompassing logistics operators, freight markets, sector-specific ERPs, and data providers, we are excited to announce our inaugural investment in this thematic area, in partnership with Marco.

Industry Overview

The Latin American cross-border trade market is vast but predominantly dominated by large industry players. Currently, the cross-border payment market is largely controlled by correspondent banks connected via SWIFT. These institutions typically impose high costs, charging substantial fees and operating at a slow pace. SMEs, in particular, face difficulties negotiating favorable rates or even being considered for transactions with these banks. The current process is lengthy and bureaucratic, with most B2B currency negotiations conducted over the phone, lacking transparency. Regarding international goods delivery, shipping times can range from 30 to 90 days from port to port, creating considerable challenges for working capital.

Importers often struggle to bridge the gap between the time they purchase inventory and the time they can sell it. Conversely, exporters find it challenging to manage the gap between advance payments for purchase orders and final balances due upon delivery. Although banks are willing to engage in these transactions, the costs associated with risk management and underwriting individual shipments render it particularly difficult to serve SMEs. Typically, banks provide letters of credit tailored for large traders who do not require collateral for underwriting. Consequently, small and medium-sized traders remain underserved, despite contributing to 30-40% of cross-border trade volume.

The global trade financing market presents a $5.2 trillion opportunity, with a $1.7 trillion gap in trade finance that Marco aims to address. Latin America stands out as a significant market, ranking as the fourth largest global exporter, with exports totaling $1.8 trillion in goods and services in 2022 and exhibiting a compound annual growth rate (CAGR) of 24% over the past two years. Brazil and Mexico alone accounted for 18% of total U.S. goods imports in 2022.

Currently, Mexico is the second-largest exporter of goods globally, trailing only China, a dynamic that has evolved in recent years and has been further emphasized by the nearshoring trend following the tightening of relations between the U.S. and China. This shift was notably highlighted when, in September 2023, Mexico surpassed China in U.S. imports for the first time since 2003. Meanwhile, Brazilian exports to the U.S. have witnessed robust growth, averaging 7% annually since 2018, with sectors like iron, coffee, wood materials, and mineral oils seeing significant increases. The Brazilian government has identified numerous market opportunities to expand Brazil’s export share in the U.S. market.

Rationale Behind the Deal

Our decision to partner with Marco is primarily based on three key factors: the immense size of the Latin American cross-border trade market, the comprehensive range of products offered by Marco, and the collective experience and complementary skills of Marco's team. The integration of data-driven decision-making, open finance insights, and specialized trade documentation forms a robust platform that enhances the underwriting process and expedites working capital provision for SMEs.

Marco's primary product, invoice factoring, seamlessly connects exporters with creditors, providing improved payment terms and streamlined processes. Access to financing is a critical requirement for SMEs engaged in international trade, and addressing this need is just the beginning for Marco.

Information about the Investor

Our investment firm specializes in identifying and supporting innovative solutions within the fintech sector, particularly in regions ripe for growth like Latin America. With extensive experience in verticals aligned with sustainability and technological advancements, we aim to empower enterprises that contribute to economic development while also aligning with our values. Marco's mission resonates with our investment thesis, fostering inclusive economic growth through enhanced access to export opportunities.

Our team has conducted comprehensive research and analysis over the past several years, enabling us to recognize the impactful changes occurring within the cross-border trade sector. We are committed to leveraging our resources and networks to support Marco's strategic initiatives and further their market expansion.

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This investment in Marco represents a significant opportunity in a growing market where traditional financial institutions have often underserved SMEs. With the increasing importance of cross-border trade, especially in the context of the evolving geopolitical landscape, Marco is well-positioned to capitalize on this momentum. The robust infrastructure and innovative financing solutions Marco provides address critical pain points for exporters, ultimately enhancing their operational efficiency and profitability.

Furthermore, the historical performance of factoring as an asset class contributes an attractive narrative for investors seeking consistent revenue streams with relatively low risk. Marco's current partnerships with reputable retailers like Walmart and Costco underscore their market credibility and potential for substantial growth. The company's track record of 0% losses since its foundation demonstrates an effective risk management framework, which further enhances investor confidence.

In conclusion, this investment in Marco is not just an entry into a growing sector; it represents a strategic partnership with a company poised to reshape cross-border trade dynamics in Latin America. Given the identified market needs and Marco’s robust solutions, this could yield not only financial returns but also contribute positively to the broader economic landscape.

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