Sao Paulo—Stark Bank, a fintech that wants to be the bank for medium and large companiesreceived US$45 million in a series B round led by Ribbit Capital and with participation of Amazon founder Jeff Bezos’ fund, Bezos Expeditions.
It is the first investment of Bezos Expeditions in Brazil. In Latin America, the fund had already invested in Chilean unicorn NotCo. Also participating in the round were SEA Capital and current investors Lachy Groom and K5 Global, as well as Airbnb founder Kavak, executives from DST, Visa and Coinbase.
Rafael Stark is the CEO of Stark Bank. An engineering graduate, he started his career developing apps for Android. He studied in the US and returned to Brazil in 2014 to open his first company, Hummingbird, which developed digital products for companies like Nextel and Banco Paulista. That startup grew 300 times a year, according to Stark.
“As a developer, I was used to doing integrations with the Google Maps API, the Twitter API. So I thought about connecting to a bank through the API and to my surprise no bank had it. Now, the central bank is forcing banks to have integrations”, said in an interview with Bloomberg Line.
Stark Bank was launched in August 2018, with the money the businessman raised from Hummingbird, investing almost US$1 million in the platform. The company then raised $500,000 from shadow investors and received a $2 million funding round. In December of last year, the company raised its US$13 million Series A led by Lachy Groom (ex-Stripe) with the participation of the founders of Coinbase, Dropbox, Flexport, Figma, Rappi, dLocal, Wildlife and Slack. Now, with series B, he has $58 million in cash to spend..
“The way payments were made seemed archaic to me. I started with that pilot, an API system to do transfers,” she says. Buser was the fourth client of Stark Bank, which used the platform to make refunds. “We entered the application, entered the account data and made that investment of payroll payments, payments to suppliers, we helped with the ticket and then we paid the taxes. In 2019, we were doing pretty much everything that banks do on the transactional side through the API. And we thought about how we could improve that,” he said.
Other products such as internet banking and connection to Excel and Google Sheets were added as many customers were making payroll payments through these spreadsheets.
“Companies kept asking us for things and over time we realized that those companies had problems with accounts payable and accounts receivable. Our vision today is very clear, we are building a bank focused on medium and large companies”.
According to Stark, the dynamics of a bank for individuals is different from that of a bank for companies. He says that while people value convenience, doing anything with a few clicks, for companies the value of the business is in control. “They want to know who raised the payment, who approved it, and have the expense schedule,” he explained.
What differentiates fintechs, according to Stark, is not a control panel, but mechanisms within the card itself so that the employee can only spend in certain countries within specific categories, with a maximum value, for expenses such as food and transport. American companies such as Marqeta, Ramp and Brex work with these characteristics.
For accounts payable, Stark Bank has custom rules for any payments, meaning payments over that amount, executives have to approve. The startup has also developed resources within Pix, in which the company can issue the charge, block duplicate payments and make cancellations, as is done in the ticket. “We want to be the bank of the future,” Stark said.
“We have had a relationship with Ribbit for a year and a half. Since March 2020 they follow our work. Our figures have been growing, since Series A we have tripled the volume transacted on the platform and revenues in three months. It’s one thing to have nothing and multiply it up to a high number, [pero nosotros fuimos] to a billion, processing millions,” he said.
To be a bank, fintechs must give credit
Currently, the company plans to expand the offering with a loan product, originating the loan from the US$58 million in cash and eventually raising more or using FIDCs (accounts receivable investment funds).
Stark Bank serves over 300 new economy clients including Loft, Buser, Flash Benefits, Daki, Cora and Bitso. “These companies are very well capitalized, they don’t need working capital. The credit they need is to pay for cloud services, run the Google Ads campaign. The credit will be in this sense, with very high limits so that they consume on the card, but eventually other needs”, affirmed the CEO.
From October 2020, Star Bank is licensed to operate as a Direct Credit Company. “We were the first regulated fintech in the Seed phase,” said the CEO.
The fintech has already reached the break-even point. The new round will apply to contracting and expanding products. At the end of last year, the company began issuing business debit cards. Now the next step is the corporate credit card, acquisition and investments. Stark Bank is already engaged in foreign exchange, but wants to expand the service. “Companies do not want to have several banks or fintechs. They want a unique player who does everything well. Nowadays only the big banks do everything”.
Stark Bank will be divided into two companies, opening another business unit for the financial structure. The company will provide APIs for the companies to be participants in the direct or indirect Pix agreement. The Central Bank has created the figure of the indirect participant, in which, when the user performs the Pix, the name of the bank and the details of the beneficiary appear. The participant appears as Banco Itaú, for example. In the indirect Pix, it appears with the name of the fintech. “Our idea is that any company that wants to participate in the Pix directly or indirectly can make this connection with the Central Bank within a week,” said Stark.
Stark Bank also plans to offer a “white label” card so that the client company can issue a card with its brand. Another of the fintech plans is to offer banking services from credit institutions. “Today, companies that are not financial institutions that create a FIDC to make loans buy CCBs (Bank Credit Notes) from a financial company in order to lend. As we are a financial company, we can launch this product”, explained the executive.
“This contribution comes to show how many good people there are in Brazil. Relevant founders like Airbnb, Kavak, are looking at Brazil. There are several funds that did not look at Brazil and are now doing so, this only opens the doors for other companies to see Brazil as the country of entrepreneurship”, he said. Stark Bank aims to grow 10 times this year.
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A bet of Jeff Bezos in Brazil: Stark Bank raises US $ 45 million