Startup Snapshot:
Startup Name: R2
Industry:Â Fintech
Business Model: CaaS
Founders: Roger Larach and Roger Teran
HQ Location: Mexico City
Founded: 2020
Stage: Series A
Investors: Femsa Ventures, Gradient Ventures, General Catalyst, YCombinator, 166 2nd, Soma Capital, Magma Partners, and PayU.
Website: https://r2.co/
What does R2 do?
R2 provides a Capital-as-a-Service (CaaS) solution designed specifically for platforms like Point of Sale (PoS) systems, payment processors, and online marketplaces, under a white-label arrangement. Their unique technology integration offers revenue-based financing to the sellers and merchants on these platforms, thereby improving their revenue, unit economics, and take rates. This approach also aids in better working capital management, revenue enhancement, and growth for the merchants.
The lending landscape for MSMBs is fraught with challenges due to their often-limited financial history, lack of credit information, and informal business structures, which are prerequisites for conventional lenders. This difficulty is amplified by the business diversity and the high incidence of fraud in certain regions, making it difficult to assess creditworthiness accurately. R2 recognizes that establishing a successful lending operation goes beyond mere technology; it necessitates a profound comprehension of finance and data analytics.
A staggering 87% of MSMBs' credit requirements go unfulfilled due to the traditional financial system's tendency to overlook these businesses.
By focusing on creating customized risk assessment models for MSMBs, R2 confronts the obstacles that traditional lenders, such as banks, encounter in this process. R2 aims to bridge the gap between the financial requirements of these businesses and the intricate nature of risk evaluation by developing a sophisticated lending infrastructure equipped with AI-powered credit models.
Why now?
Latin America is facing a significant challenge when it comes to financing Micro, Small, and Medium-sized Businesses (MSMBs). A staggering 87% of MSMBs' credit requirements go unfulfilled due to the traditional financial system's tendency to overlook these businesses. Banks are often hesitant to offer financing to MSMBs, due to perceived risks. This financing gap hinders MSMBs' growth, market expansion, and economic progress, leaving them vulnerable to liquidity issues, delayed payments, and even bankruptcy.
What sets R2 apart?
R2’s unique white-labeled CaaS (Credit as a Service) solution enables platforms to provide loans to their merchants seamlessly under their own brand. By collaborating with R2, platforms can concentrate on their core competencies, such as customer acquisition, onboarding, and retention, while R2 takes care of the complexities of lending.
This B2B2B approach eliminates the need for platforms to approach individual MSMBs, navigate their digitization challenges, handle incomplete financial statements, train AI-based credit models, raise debt capital, and create an entire lending infrastructure in-house. This empowers platforms to become large-scale distribution channels for R2's lending services, and all payments are automatically deducted from merchant platform revenues, minimizing risk and ensuring they are banked and have a financial footprint.
The Team:
Roger Larach previously Co-Founded Mentors4u Honduras and held roles at major financial institutions like BNP Paribas and Neobank Ualá.
Roger Teran has experience as a Senior Analyst at Mesoamerica, Founder and Helper at Techstars, data scientist at WeWork, and VP of Analysts at REEF.
R2 by the Numbers:
4 countries where R2 operates: Mexico, Colombia, Chile, and Ecuador.
2020, the year R2 was founded.
87%, credit demanded by small business that goes unmet.
6,000+ SMBs served in Mexico, Colombia, Chile, and Ecuador.
$20+ million USD in Revenue-Based Financing and B2B BNPL originated.
$120+ million USD raised to date.
$1.2+ trillion credit gap in Latin America.
VC Headlines
Metalab goes from quietly building the internet to investing in it - Tech Crunch
Where Amazon Web Services is still hiring after cutting hundreds of jobs this week - GeekWire
Beeper Took On Apple’s iMessage Dominance. Now It’s Been Acquired - Wired
Axelerate Talent Network:
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Special thanks to our sponsor:
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Renowned for its expertise and commitment to excellence, Axented provides innovative solutions to help businesses thrive in a digital world.
