Em Conversa looks to uncover the secrets in Latin America (LatAm) that have caused the fintech market to boom, from being worth less than $50million in 2016, to $2.1billion in 2022. Carmelo Gordian, a partner in the emerging growth practice at global law firm, Shearman & Sterling, explains how the LatAm market is catching up to more advanced fintech countries.
Carmelo Gordian has represented buyers and sellers in numerous transactions across sectors in North America (United States, Mexico and Canada), Latin America (Central and South America), Europe and Asia. He has acted as counsel in 56 public offering transactions with 28 transactions representing the company, 25 transactions representing underwriters and three transactions advising significant shareholders.
Additionally, he has also acted as company and investment counsel on several hundred private offerings principally venture financings over the past 30 years.
Gordian advises companies and boards of directors on corporate governance issues. This is in addition to serving as counsel to special committees formed by boards of directors. He has an active practice representing GPs and LPs of hedge funds, private equity funds, venture capital and real estate funds. These funds range from several tens of millions of dollars to multibillion-dollar funds.
The LatAm market is showing no signs of slowing down. In fact, Gordian predicts that within 25 years, it will catch up to global markets like that of the US. He draws parallels to its current state and that of the US market in the 1980s and 90s. The development is already in motion, it’s only a matter of time till it booms.
Can you tell me more about Shearman & Sterling and your role within it?
I am a partner in Shearman & Sterling’s Technology Group, and my work focuses on global venture capital related deals and transactions. Our activity in Latin America includes recent transactions in Brazil, Mexico, Chile, Colombia, Argentina, Peru, Bolivia and El Salvador. Our deep bench of bilingual lawyers have extensive experience advising emerging growth companies and financial institutions across the region.
Can you talk about fintech trends in the region? How do they compare to the rest of the region/world?
Fintech has been a hot sector globally for decades and remains the largest investment vertical in Latin America. Contrary to other more advanced economies, the opportunity within Latin America is focused on the underserved market. This is comprised of individuals and businesses that do not have access to banking, lending, credit, insurance and other financial products. Products that are often taken for granted in the US and other more advanced economies.
What is Shearman & Sterling doing to help improve fintech in the region?
As a firm, we act as a bridge between Latin American companies in need of financial support, and sources of capital in the US (and other markets). We also look for Latin America-based sources of capital whenever suitable. What makes us special is the fact that we provide the connectivity that results in critical financing of emerging growth companies.
What specific subsector of fintech is Shearman & Sterling looking to help with and how does this LatAm subsector compare to the rest of the world?
Our Shearman & Sterling Latin America group assists in transactions that indirectly support underserved markets. As a Latin American born in the United States of America, I understand how important it is to have access to capital. Capital that will allow people to obtain an education, own a car, buy a home or start a business. It’s extremely rewarding for our team of attorneys to be able to create an impact for a number of individuals. All throughout the LatAm region.
What are some of the region’s unique challenges in the specific subsector?
Demonstrating how a business plan can be successful to raise the initial seed capital that would allow the emerging company to come to fruition. In turn, raising additional growth capital is a unique challenge that must be addressed. The market opportunity is enormous, but achieving the first step is not easy.
From a broader perspective, we are seeing that inflation and strained economic growth are putting pressure on valuations. Notably, in the form of post-pandemic-era corrections. Globally, investors are questioning high valuations and pushing numbers downwards.
Latin America is not immune from these developments. Investors are likely to be more selective when deploying capital, as public markets affect private-market valuations. As a result, the nature of dealmaking is shifting towards small dollar, early-stage investments, and fewer late-stage, hundred million-dollar bets.
Future for Shearman & Sterling in LatAm
We have had an important role in Latin America for over a century. The growth in venture capital investing in Latin America has been a phenomenon over the past ten years at best. We are on the ground floor of this growth. As an organisation, we are committed to continue investing in the region, to strengthen and deepen our offering. In turn, creating an even stronger platform from which to service our clients. Now, we are seeing the tip of the iceberg.
The Latin America venture market is at a stage comparable to the US in the late 1980s and early 1990s. We all know the US story. We expect Latin America to replicate this success over the next 25 years.