Matthieu Albrieux is a former Senior Investment Officer with Accion Venture Lab, Accion’s seed-stage impact investment initiative in fintech for the underserved, where he led the team’s deal activity and portfolio engagement in Latin America.
Before joining Venture Lab, Matthieu was an associate in charge of fintech and energy investments at Antoni &amp; Lelo de Larrea Venture Partners (ALLVP), a leading Mexican early-stage venture capital fund. Prior to ALLVP, Matthieu worked at Société Générale CIB in Mexico focusing on media, telco, and infrastructure sectors. He previously held operational and marketing responsibilities in industrial groups ArcelorMittal and Air Liquide.
Matthieu has a B.A. in management and economics with a major in marketing and strategy from Paris-Dauphine University, and a master&#8217;s degree in international business and economics from Paris-Dauphine University and La Sorbonne University.

Former Senior Investment Officer, Latin America

Matthieu Albrieux

Accion Venture Lab Partners with fintech company to serve small businesses

Article

Can running a small business be as simple as running a Facebook profile? <a class="markup--anchor markup--p-anchor" href="https://www.accion.org/venturelab" target="_blank" rel="noopener noreferrer">Accion Venture Lab</a>’s newest portfolio company, <a class="markup--anchor markup--p-anchor" href="https://www.smartmei.com.br/" target="_blank" rel="noopener noreferrer">SmartMEI</a>, says yes. SmartMEI launched in January in Sao Paulo, the heart of the Brazilian economy and home to 40% of the country’s registered individual microentrepreneurs. The platform provides Brazil’s small business owners with an intuitive, simple, and easy-to-use mobile app that hosts a large range of banking, management, and financial services.
Brazil’s Microentrepreneurs Don’t Have the Financial Tools They Need
Brazil is now home to more than 7.5 million micro and small businesses, which employ over 16 million people. Within the growing micro-business sector, three out of five businesses are individual microentrepreneurs, such as owners of mom &amp; pop shops, small manufacturing businesses, or are sole proprietors like electricians, delivery drivers, or street vendors.
Unfortunately, these microentrepreneurs are largely unserved by established financial institutions, even though they account for a fifth of the country’s GDP and <a class="markup--anchor markup--p-anchor" href="http://www.as-coa.org/blogs/s%C3%A3o-paulo-2014-blog-six-facts-about-smes-brazil" target="_blank" rel="noopener noreferrer">over half of all private employment</a>. This isn’t a problem that’s unique to Brazil — we keep seeing these problems pop up across markets. Three common barriers to financial services for small businesses are:

<ul class="postList">
 	<li class="graf graf--li">Informality of the businesses: Owners often don’t declare their entrepreneurial activity separately from their personal activity. Despite recently adopted laws that promote formalization through favorable tax and benefit schemes for entrepreneurs, the formalization process is tedious and time-consuming. Many people feel it’s not worth the effort to take that plunge.</li>
 	<li class="graf graf--li">Lack of consistent and quality information: Microentrepreneurs usually lack access to traditional resource planning and accounting solutions, which are expensive and not suited to their simplified needs. This makes it very hard to accurately and reliably report on their business, which is required to work with traditional banks.</li>
 	<li class="graf graf--li">Cost to serve: Traditional banks don’t have the ability or the interest to service such small accounts. They’re time-consuming and not profitable for the big established players.</li>
</ul>
SmartMEI Offers Small Business Owners a Solution
<img class="graf-image alignnone" src="https://cdn-images-1.medium.com/max/1440/1*Xxfnn7hYhUTejD1uB0k7tg.gif" alt="SmartMEI mobile platform" width="500" height="356" />
<a class="markup--anchor markup--p-anchor" href="https://www.smartmei.com.br/" target="_blank" rel="noopener noreferrer">SmartMEI</a> sees this gap in services designed for the microentrepreneur segment as an opportunity. Even though Brazil’s microentrepreneurs typically lack formal management training, most are comfortable using mobile platforms. With their experience in the digital world, co-founders <a class="markup--anchor markup--p-anchor" href="https://www.linkedin.com/in/carlosdejavite/" target="_blank" rel="noopener noreferrer">Carlos Dejavite</a> and <a class="markup--anchor markup--p-anchor" href="https://www.linkedin.com/in/marcellopicchi/" target="_blank" rel="noopener noreferrer">Marcello Picchi</a> decided to develop new technology to make running a small business as accessible as using a mobile app.
Carlos and Marcello started working on the platform while studying at the Stanford Graduate School of Business. They eventually developed a neobank mobile platform that provides banking services specifically designed for microentrepreneurs and their business needs. SmartMEI provides accounting and tax management tools, a formalization channel, a mobile payment system, a bank account, and a debit card. The platform is accessible for free, with a paid version that gives access to the more extensive range of products.
Venture Lab is very excited to be partnering with this great team. We invested in the company — our second in Brazil — for a number of reasons:
Impact potential, a gateway to banking services: Through the app, small business owners can easily initiate and maintain processes to formalize their business. Executing the formalization process allows them to get the tax benefits from declaring revenues as a business rather than as personal income. SmartMEI also provides entrepreneurs with various management tools that allow them to digitally gather and organize their business and financial data. This provides access — often for the first time — to a complete view of their business activities. Using this data, SmartMEI provides a whole suite of financial products that would have otherwise been unavailable.
Innovative approach to a neobank: Digital banking models that offer a credit card and an enhanced mobile interface for consumers have been operating for some time in developed markets. More recently these neobanks have sprung up in developing markets, including NuBank in Brazil. However, just like traditional financial institutions, neobanks have often struggled to make economics work when targeting underserved segments who spend less and have lower account balances. We have been exploring alternative fintech models, including our recent <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/invested-in-now-money/" target="_blank" rel="noopener noreferrer">investment in NOW Money</a>, and we believe that by targeting small entrepreneurs and developing a platform to attend their specific business-related problems, SmartMEI can offer a strong initial value proposition, and allow for diversified use cases and revenue streams that will drive profitable unit economics.
Scalable operating model: SmartMEI’s focus is on the user experience and interface. It operates by integrating with a set of large partners that provide the backend infrastructure required for the platform to run smoothly. This strategy, common for neobanks, allows SmartMEI to avoid the large initial investment required to build similar infrastructure and navigate complex regulations and allows them instead to focus on building value for the user.
<a class="markup--anchor markup--p-anchor" href="http://www.accion.org/smartmei-secures-funding-from-accion-venture-lab-to-reach-underserved-micro-entrepreneurs-in-brazil/" target="_blank" rel="noopener noreferrer">Venture Lab is proud to support SmartMEI</a> on their journey to expand access to relevant, high quality, and affordable financial products for the microentrepreneurs that are the lifeblood of Brazil’s economy.

Why we invested in SmartMEI in Brazil

Colombian educational financing company becomes Accion Venture Lab’s latest investment

In Colombia, only 50 percent of the population between 17 and 24 years of age have an education beyond high school level, compared to more than 80 percent in the U.S. There are several reasons for this low rate. Some students feel that higher education isn’t for them, while others avoid it because they don’t see the value in tertiary education.
One of the most prominent barriers to higher education is the lack of access to education financing. For instance, 50 percent of Colombian college students end up dropping out, and 70 percent of these drop-outs are due to financial reasons.
However, driven by the country’s economic recovery and progress and its booming service sector, the economy is increasingly demanding a more highly educated and skillful labor force. A higher level of education is also a key driver of upward mobility in Colombia — a professional with a bachelor’s degree earns about 3.5 times more than one with only a high school degree.
Most students turn to Colombian public universities, which are high quality, tuition-free institutions. However, getting into these universities can be very challenging because they don’t have the capacity to keep up with a growing demand for education. This leaves a majority of students to enroll in private institutions where cost and quality vary greatly.
<a class="markup--anchor markup--p-anchor" href="http://www.escalaeducacion.com/" target="_blank" rel="noopener noreferrer">ESCALA Educacion</a>, Accion Venture Lab’s latest investment, aims to help address the issue of access to education financing. ESCALA Educacion was co-founded 2012 at the Harvard Innovation Lab by Jonathan Duarte, Andrea Echavarria, and Juliana Uribe. After benefiting from their own education at elite universities in the US, they were driven to help provide high-quality education to Colombians.
ESCALA Educacion offers automated saving plans to cover higher education cost for lower- and middle-income families. ESCALA Educacion partners with small, medium and large businesses to provide plans to their employees. Participating employees’ monthly contributions are automatically deducted from their payroll and transferred to a low-risk, interest-generating investment account. Employers can support the employees by matching up to 100 percent of their contributions. The savings can be used to finance the education of employees or their children.
ESCALA Educacion also provides enrolled employees and beneficiaries access to tuition discounts ranging from 10 percent to 60 percent at over 40 higher education institutions, with more than 800 programs ranging from technical degrees to master degrees, and even short-term courses, such as a coding boot camp and English.
In addition, ESCALA Educacion provides free mentoring sessions to enrolled employees. These sessions help guide the students, and their parents, as they navigate through their higher education and professional career plans. ESCALA’s customers also have access to a large range of free education-related services through their affiliation with non-profit organizations that work to remove other barriers to accessing education by offering coaching, grant programs, affordable textbooks, and many other services.
ESCALA also benefits employers. It works as a powerful retention tool that enables businesses to provide their employees with a strong incentive to stay long-term, reducing turnover rates while helping enhance the educational opportunities of the employees and their families.
Venture Lab is excited to work closely with the ESCALA team. We invested in the company — our first in Colombia — for a number of reasons:

<ul class="postList">
 	<li class="graf graf--li">Leveraging the employer-employee relationship to promote savings among lower- and middle-income workers: The employer matching of the employees’ contributions creates a strong incentive for employees to continue saving until the end of the plan. It also helps build new and long-term saving and commitment behaviors. Matching funds from the employer create the incentives to complete the saving program and fulfill the original savings goal. Automatic discounting from the payroll is key to secure the allocation of the funds to the program and avoid short-sighted spending. Low- and middle-income segments in Colombia have a strong distrust of financial institutions following a series of financial crises in the past decades, and ESCALA is leveraging the trust in the employers to create confidence in the structure.</li>
 	<li class="graf graf--li">Clear impact potential, even beyond savings: By directing the savings toward educational programs, ESCALA is promoting the upward mobility of low- and middle-income employees. ESCALA’s solution combats the main cause of dropout in higher education in Colombia. While ESCALA has been focusing so far on educational programs, there is a great potential to expand use to other categories, including housing, healthcare, retirement, and financial products such as credit scoring and loans.</li>
 	<li class="graf graf--li">Opportunity to learn from a powerful acquisition channel: We have seen a growing number of opportunities leveraging the employer channel to reach underserved segment. We think such a channel could be very powerful in terms of acquisition and engagement, and we are excited to learn more about it.</li>
</ul>
We are excited to support ESCALA as they continue to grow and scale and provide greater access to quality education to Colombians.

Why we invested in ESCALA Educación

We met Maria, a corner shop owner in Chorillos, a popular neighborhood in south Lima, as she was opening her shop and starting off her business day. We were surprised that within 15 minutes of chatting with her, three salesmen from different distributors visited to check the status of her inventory or deliver more stock. Small shop owners don’t have the cash liquidity to make large inventory purchases all at once, so distributors need to visit frequently – sometimes multiple times a day – to deliver small batches of orders. For example, one salesman brought only five cans of cat food per visit. However, things are changing since Maria started borrowing from <a href="http://www.tiendapago.com/">Tienda Pago</a>. Maria has grown her store substantially from a simple window to an entire floor. She plans to convert it to a full self-service store in a few weeks.

Tienda Pago’s loans enable small shop owners like Maria to make larger purchases and keep their shelves fully stocked while carefully and gradually grow their businesses. Through a mobile-based platform and by collaborating with fast-moving consumer goods distributors such as Cola-Cola and Backus, Tienda Pago provides short-term working capital for small mom-and-pop shops to purchase inventory from those distributors. These shops represent more than 70 percent of consumer goods sold in emerging markets, and in Peru, there are more than 200,000 of them. For the fast-moving consumer goods distributors, these local shops are a key part of their strategy to maintain margins and negotiation power against large retailers.

Venture Lab, Accion’s seed-stage investment vehicle, partnered with Tienda Pago in December 2015 to provide capital and strategic support to the company as they build and scale operations in Peru and beyond. We were excited by their innovative approach that enables micro and small businesses to access working capital by leveraging technology and relationships with distributors. Small businesses typically lack a credit history which often prevents them from accessing low-cost financial products from traditional players such as commercial banks. The average loan provided by Tienda Pago is less than $400, which banks and other lending institutions would find too costly to serve. By harnessing distributors’ and small shop owners’ longstanding transactional relationship, Tienda Pago is able to leverage the strong intangible collateral that incentivizes borrowers to make timely repayment of loans, therefore enabling Tienda Pago to maintain a very low default rate.

We later spoke with Carlos, a logistics manager working with Coca-Cola, one of Tienda Pago’s partner distributors. After delivering two crates of Coke to a local shop, Carlos shared how distributors’ employees also benefit from their company’s relationship with Tienda Pago. Logistics teams like Carlos’s usually have to collect the cash payments from the shops where they deliver inventory. This poses significant security risks. Carlos’s driver, Miguel, took a moment to step out of his truck and speak with us; however, he quickly returned to keep an eye on the cashbox containing that day’s sales from other stores that are not yet Tienda Pago’s clients.

Tienda Pago helps relieve distributors’ burden of cash collection and reconciliation of invoices as it facilitates payments from shop owners to the distributors. This helps reduces the number of shops paying by cash and thus reduces the risk of carrying cash for the distributors.

We hope to see more innovations like Tienda Pago’s emerging from Peru. Similar to the rest of Latin America, Peru is still largely underbanked: of a population of 30 million, only 8.5 million have credit products. Financial institutions struggle with default rates, which are as high as 30 percent on average. We believe there is a big opportunity for financial technology to transform the sector into becoming more inclusive and more robust.

The Peruvian fintech ecosystem is nascent, yet dynamic. With just a couple of active venture capital funds and only a handful of accelerators, a primary bottleneck for startup growth is the lack of funding. We’re looking forward to collaborating with partners to develop a greater capacity to help nurture and grow innovative ideas and spur entrepreneurship in Peru that would help catalyze financial inclusion in the country.

Learn more about Tienda Pago in the fifth episode of <a href="http://www.accion.org/tienda-pago-driving-financial-access/">VentureKast, Venture Lab's podcast</a>.

This post originally appeared on <a href="http://partners.wsj.com/metlife/multipliers/articles/embracing-technology-transforming-small-business-peru/">the Wall Street Journal's Multipliers of Prosperity</a>, in partnership with the MetLife Foundation.

Expanding access to capital for small businesses in Peru through fintech

<div class="byline"><a href="http://www.destacame.cl/">Destácame</a>, launched in Chile in 2015, is an alternative credit scoring platform that uses alternative data to assess an individual’s payment behavior and creditworthiness. Destácame currently has more than 170,000 users and has processed more than 10,000 credit applications.</div>
Yesterday, Accion Venture Lab, Accion’s early-stage investment initiative, <a href="http://www.accion.org/fintech-start-up-destacame-closes-seed-funding-round-to-expand-access-to-credit-in-latin-america/">invested in Destácame</a>’s innovative approach to credit scoring.
<h2>Credit Scoring</h2>
In Chile and throughout many countries in Latin America, there are no formal credit bureaus that record an individual’s payment behavior or track record in utilizing credit products, such as those in markets like the U.S. or the U.K (e.g., TransUnion, Experian). In many cases, the available databases only record negative credit information or behaviors, such as delays and payment defaults. This becomes a problem as financial service providers have insufficient information when assessing a potential borrower’s application. The situation is more challenging for middle and lower socioeconomic customer segments as they generally have less interaction with formal financial services providers.

Destácame solves this problem by aggregating and analyzing data from multiple existing sources of data, principally utilities payment transactions that can serve as a proxy for their payment and credit behavior. It synthesizes the information and generates a score that an individual can use at their disposal. With users’ consent, Destácame can share these scores with financial institutions, who are looking for better, faster, and cheaper ways to extend credit and other financial products to the largely credit-invisible population. Destácame also acts as a marketplace and offers its users financial products that match their credit capacity and behavior, helping users demonstrate financial institutions that they are good payers. Destácame aims to eventually become the leading credit bureau in Latin America that leverages alternative source of information.
<h2>Clients</h2>
Destácame directly serves <a href="http://www.accion.org/what-do-you-do-if-your-credit-score-is-zero/">thin-file and no-file customers</a> looking to prove their financial behavior and build a credit history. Destácame currently operates in Chile, where <a href="http://datatopics.worldbank.org/financialinclusion/country/chile">35 percent of individuals</a> do not have a bank account and 80% do not have access to a loan at a bank.

The opportunity for expansion elsewhere in Latin America is quite large. There are over 200 million unbanked individuals in Latin America, and Destácame plans to expand to Mexico in 2017 (where <a href="http://datatopics.worldbank.org/financialinclusion/country/mexico">90 percent of the population</a> of approximately 120 million people lack access to formal credit) and Colombia (where <a href="http://datatopics.worldbank.org/financialinclusion/country/colombia">85 percent of the population</a> of approximately 48 million people lack access to formal credit), and eventually Peru (where <a href="http://microdata.worldbank.org/index.php/catalog/2476">85 percent of the population</a> of approximately 31.4 million people lack access to formal credit).
<h2>Destácame's Innovative approach</h2>
Destácame addresses a financial services industry pain point: Underwriting for thin-file clients is historically costly, time-consuming, and often subjective. Destácame’s solution reduces the cost and time burden of a detailed risk analysis and <a href="http://www.investopedia.com/terms/k/knowyourclient.asp">KYC</a> on a new applicant by providing insight into 12 months of utilities payment history and basic customer ID verification (e.g. name, address, e-mail, phone number). Financial institutions currently serving low-income segments can use Destácame to make better credit decisions and decrease customer acquisition costs. Therefore those looking to expand to serve thin-file customers can reliably incorporate the Destácame´s products, into their credit analysis process. Destácame also is testing the application of machine-learning to improve their credit scoring algorithm such that the scoring would more precisely predict which customers would default based on individuals’ historical financial behavior.

[caption id="attachment_7514" align="aligncenter" width="495"]<img class="wp-image-7514 size-full" src="http://blogs.accion.org/wp-content/uploads/2017/01/Destacame-office.jpg" alt="Destácame's office" width="495" height="371" /> Destácame's office[/caption]
<h2>Destácame and alternative data</h2>
With Destácame, there’s a potential for alternative data analysis to drive better access and quality: credit bureaus in Chile and other countries such as Mexico, Colombia, and Peru are largely based on negative reporting, which, by nature, is limiting.

The Destácame score is an inclusive opportunity for the credit-invisible to better understand the importance of their financial information and to have control over managing and sharing this information. This innovation builds into Venture Lab’s overarching theme of promoting the idea that individuals should be <a href="http://www.accion.org/financial-health-digitization/">empowered and have ownership of any and all information about their own financial history</a> in order to access financial services and products.
<h2>The team</h2>
The founders, Sebastián Ugarte, Augusto Ruiz-Tagle and Jorge Camus, started building Destácame while they were finishing their MBA at MIT. The three of them have strong entrepreneurial backgrounds and networks in Chile and across Latin America. Jorge previously co-founded two companies: NanduAir, a Chilean airline, and ZeroHotel. He also worked at Red Facil, a Chilean mobile technology company.

Sebastián is an engineer and previously worked at Arauco, a sustainable forest product company and co-founded Los Vasquitos, an investment office in Santiago. Augusto worked as a management consultant for Virtus Partners, a leading management consulting firm in Latin America, after several years at Arauco. Jorge, Augusto, and Sebastian have excellent reputations within the industry, and the Venture Lab team has been impressed with their responsiveness, willingness to collaborate, and openness to input, all vital qualities for successful entrepreneurs.
<h2>Destácame and the Catalyst Fund</h2>
Even as an early-stage investor, Venture Lab still finds some companies to be very promising, but too early for commercial investment to come in. To support companies at such an early stage, <a href="http://nextbillion.net/blueprint-for-ignition-how-the-catalyst-fund-got-started/">Venture Lab worked closely with a group of innovators in the space to form the blueprint of the Catalyst Fund</a>.

Destácame was first introduced to Venture Lab in its very early days. We liked their innovation, their business model, and the team, but we needed to see them achieve certain tractions prior to investing Venture Lab investment. Around this time, Catalyst Fund had launched and we considered Destácame a perfect fit for the initiative. Destácame went on to become Catalyst Fund’s <a href="http://catalyst-fund.org/blog/2016/4/12/catalyst-fund-announces-the-first-investment-in-destacame">very first grantee</a>, supported by Venture Lab. In addition to grant funding, Destácame received strategic support from BFA and Venture Lab.

Venture Lab’s support of Destácame through Catalyst Fund took the form of portfolio engagement, in which we helped the Destácame team assess and refine their business-to-business (B2B) sales strategy. Destácame’s path to scale heavily relies on its capacity to partner with data providers (telecommunications companies, utilities) to feed its model and with financial institutions as clients that utilize Destácame’s data.

Venture Lab’s investment in Destácame truly demonstrates the value of Catalyst Fund, since the Fund’s holistic support made Destácame a stronger investment for Venture Lab. We’re glad to see that Destácame can be a successful demonstration case of the value of an initiative like Catalyst Fund targeting pre-seed startups. The Catalyst Fund’s resources helped boost Destácame’s growth and traction and took it to a stage of certain maturity.

Matthieu Albrieux

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