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.
This week we hear from Gustavo Mapeli, co-founder of Kanastra, the lending firm. The company recently announced its $13million seed investment led by Valor Capital and Quona Capital. As a result, we wanted to find out what was driving the need for tech-driven debt facility solutions.
Can you tell me more about the company and your role within it?
Kanastra was founded in 2022 by myself and Manuel Netto. We were partners at Kardinal, an asset manager in Brazil. There, we personally faced hardship in finding suitable service providers and infrastructure for our private credit facilities. At the time, we ran into many different problems, such as low-quality service and non-existent technology. These resulted in daily errors.
This was not a unique experience. In Brazil, the infrastructure through which that debt finance is arranged is really fragmented and fintechs have to work with many different service providers, often depending on spreadsheets and legacy systems. The process is really cumbersome and time-consuming.
So we did an MVP and realised we could offer a solution to the market’s many problems. That’s when we founded Kanastra. Our platform streamlines and provides all services needed to set up, run and invest in debt facilities in a truly digital and automated way, taking care of everything –from fund administration to debt issuance
What are some debt facility trends we’re seeing in Brazil?
Overall, sophistication is rapidly increasing. Multitranched structures with multiple mezzanine layers, investor appetite for very niched/unusual asset-backed facilities and other signs of financial deepening are clearly evolving.
Also, besides the usual fintech users, we are seeing a ‘democratisation’ of debt facilities. There are an increasing number of players who were not necessarily your typical debt facility user coming to debt capital markets to access funding.
What is Kanastra doing to improve the debt facility sector in Brazil and LatAm?
Kanastra addresses the industry’s biggest pain points: a lack of technology and the need to hire multiple different providers in order to run a facility. We take care of everything from fund administration to debt issuance so originators and investors don’t have to spend time and energy with:
- Complicated documents and legacy systems
- Enabling critical automation
- Data availability
- Modern integrations
- A host of features to empower lending
How does the Brazilian debt facilities sector compare to that of the rest of the world?
Surprisingly, we are unusually sophisticated versus the rest of the world, even compared to developed markets. As a consequence of the super robust, sophisticated regulation that both the local central bank and capital markets authorities have put in place over the last 20 years, and also the very strong pool of national, institutional capital available to be deployed, debt facilities have become commonplace from a range of players.
From nascent credit fintechs looking to raise their first lending facility to large corporations taking receivables out from their balance sheet. It’s safe, it’s efficient.
What are some unique challenges associated with the region/country in the debt facilities space?
The debt facilities space in Brazil is ok to navigate if you are a Brazil-based investor or originator. However, it can be complex to understand at first if you are a foreign player, both looking to invest or raise capital. As a consequence, local investors occupy a disproportionately large space in the capital base of these facilities. We would certainly benefit from having a large base of foreign investors.
Plans for the future
For us, we’ll continue to add to the breath of services around debt facilities. Materialising the vision of truly becoming a one-stop shop is a multi-year mission. Luckily we are in a country large enough to allow us to focus on a single geographical market for years to come.