São Paulo, Brazil, January 12, 2021 – Agriculture fintech company TerraMagna announced today that it has raised $40 million in new equity and debt funding by SoftBank Latin America Fund, Shift Capital and Milenio Capital with the participation of previous investors. Previously, the company had raised $2.2 million from ONEVC, MAYA Capital, Accion Venture Lab, The Yield Lab and Canary.
TerraMagna fills the credit gap in Brazilian agriculture by financing everything farmers need to keep the season going, from inputs to machinery parts, embedded directly in the very place they are used to purchase them – retailers, industries, cooperatives and other members of the agriculture value chain. With more than $120 million book in 2021 – an increase of more than 10x over 2020, making it the largest AUM agriculture fintech in LatAm – TerraMagna’s outlook is to expand both its regional footprint and diversify its financial products offering.
Brazil’s juggernaut agricultural sector is widely known, but the hurdles that Brazilian farmers face in order to keep producing are much less disseminated. One of these is the very low liquidity of farmers and their dependency on credit to purchase most of their inputs including seeds, fertilizers and crop protection – a market that in Brazil alone stands $40B tall and of which 80% of which is bought on credit. However, due to the multiple risks associated with agriculture, geographical dispersion, tight margins, lack of branch infrastructure and their deficiency in sector-specific underwriting and collection processes, traditional banks have historically ignored or underserved farmers.
As a result, farmers rely on opaque, expensive and short-term commercial credit from input retailers, industries and trading companies to get through each season. This, though up to now necessary, is toxic for the value chain: not only farmers suffer, but retailers and tradings have neither the checks and balances nor the margins necessary for credit providing and industries have their balance sheets bloated with accounts receivables and the entailing risk.
TerraMagna provides embedded financing in the countryside by partnering with retailers, industries and other members of the value chain that already have a long-term, on-the-ground relationship with farmers and managing their sales and credit analysis workflows. The integration with these processes enables TerraMagna to tackle the shortage of information regarding farmers’ financial health and credit performance, which is then leveraged alongside alternative data sources to both accurately assess farmer creditworthiness and make POS lending available for the partner’s products. This way, farmers are able to make purchases in a simpler, faster, cheaper way and with a more diverse offering, whereas retailers and industries drive more sales – in some cases, revenue increase was over 20% while doubling the bottom line – without the operational overhead and the ensuing credit risk.
Considered an essential service, Brazil’s agribusiness market has largely been sheltered from the fallout of COVID-19. The sector grew 24.2% during 2020 and yet another 8% in the first semester of 2021. On the other hand, the gap of credit offerings to farmers is expected to continue expanding alongside the sector, as the government continues to cut subsidies and agricultural output increases.
“Agriculture has a colossal, severely unattended value chain that directly impacts the livinghood of every person across the globe through food security and derivative products. Not only its current importance cannot be overstated, but it will also play an increasingly major role throughout the next decades as we face existential crises from environmental, humanitarian and political challenges,” says Bernardo Fabiani, co-founder and CEO of TerraMagna. “Credit has been the ubiquitous lifeblood that kept agriculture ticking, but in order for it to be able to rise up to this crucial role, it will need not only tick. It will need to have the proper long horizon incentives, mentality and perspectives that only healthy businesses enjoy the luxury of having. It is this very pervasiveness in the value chain added to its catalyzing potential that makes credit the best vessel to spread this transformation. We are thankful to our investors, whose aid will be invaluable in this long journey to help agriculture undertake its vital task to continue nurturing the world.”
“Agriculture is a massive market in Brazil but small and medium farmers still lack working capital financing to purchase seeds, fertilizers and pesticides. TerraMagna’s team developed an innovative technology and business model that enabled them to serve this segment efficiently”, says Felipe Fujiwara, Investment Leader of SoftBank Latin America Fund. “Over time we believe more data will continue improving TerraMagna’s underwriting models to consistently reduce small and medium farmers’ cost for funding”.
“We analyzed Brazilian agribusiness and understood the huge demand for credit in the sector, creating high conviction about the possibility of a unicorn in the ecosystem. We met with dozens of companies in this space and found that TerraMagna has all the attributes we look for. TerraMagna is the most technologically prepared, with the capacity of deploying and monitoring multiple credit operations simultaneously and effectively”, says Bernardo Garcia, General Partner at Shift Capital. “Also, the company’s go-to-market is extremely efficacious – by leveraging on channels which the farmers are familiar with, it makes the best use of the agriculture value chain and drives incredible portfolio growth in a market historically contrary to innovations. We knew the company for some time and decided to invest after it systematically delivered exceptional credit performance and growth.”
“Despite agribusiness accounting for more than 25% of the Brazilian GDP, the lack of basic financial services is one of the greatest obstacles for the continued development of the sector. Joining our structured finance expertise with TerraMagna’s distribution and technology, we developed the financial products best suited to the sector – starting the construction of what will become the largest Brazilian agribusiness bank. We are glad to have taken part, alongside SoftBank and Shift Capital, in the structuring of a deal to best streamline TerraMagna’s growth”, says Gustavo Ahrends, Managing Partner of Milenio Capital.
TerraMagna is an embedded financing BNPL platform for agriculture that partners with retailers, industries and other members of the value chain to provide credit to all of the farmer needs, from inputs to machinery, through tech-enabled strong underwriting and collection capabilities.
The SoftBank Group invests in breakthrough technology to improve the quality of life for people around the world. The SoftBank Group is comprised of SoftBank Group Corp. (TOKYO: 9984), an investment holding company that includes stakes in telecommunications, internet services, AI, smart robotics, IoT and clean energy technology providers; the SoftBank Vision Funds, which are investing more than US$135 billion to help extraordinary entrepreneurs transform industries and shape new ones; the US$5 billion SoftBank Latin America Fund, the largest venture fund in that region; the newly-launched US$3 billion SoftBank Latin America Fund II; and the SB Opportunity Fund, a US$100 million fund dedicated to investing in enterprises founded by entrepreneurs of color in the U.S. To learn more, please visit https://group.softbank/en.
About Shift Capital
Shift Capital is a Brazilian hands-on venture capital firm with the goal of supporting exceptional entrepreneurs tackling relevant problems in tech or tech-enabled businesses. Combining a network of investors and entrepreneurs with a value-add approach through capital concentration, Shift offers strategic support to portfolio companies, aiming to create long term market leaders.
About Milenio Capital
Focused on the credit market, Milenio Capital supports companies by structuring customized solutions all throughout the credit cycle. Differentiated via extensive credit expertise and proprietary technology, we are committed to delivering efficient, innovative, and scalable solutions to our partners in order to democratize access to credit and foster business in Brazil.