In a sector in trouble following the collapse of Silicon Valley Bank, Latin American fintech companies continue to draw in new early-stage funding deals. Mexican startup Cometa raised $5 million this month in a seed round. The fintech caters financial technology services to a particular clientele: Mexican private schools.
The startup closed an investment round backed by venture capital investors. Companies supporting Cometa include Kaszek, Reach Capital, Homebrew, Latitude, Investo VC, 500 Startups, and Salkantay Ventures.
Cometa provides private schools in Mexico with a digital platform that streamlines collection and cash flow management, aiming to reduce delinquencies and inefficiencies. According to its site, it also helps educational institutions build access to funding sources.
The startup was born out of a need for financial institutions to digitalize. Cometa says private schools in Mexico have faced declining enrollment in recent years, with many struggling to stay afloat. Rising costs and inflation are hitting the bottom line.
“The independent schools of Mexico have not been able to take advantage of the new technologies that have emerged with the irruption of fintech and software in the region, ” a study by Cometa found. “Meanwhile, the sector is struggling, not only the effects of the pandemic but an extremely competitive environment to attract and retain their students.”
“Understanding the fragility of private schools after COVID-19, we set out to create the infrastructure that powers them,” CEO and Co-Founder Andrés Benavides wrote. Together with Gonzalez Gallardo and Mateo Creamer, they started Cometa in 2021.
During its first year, the company claims it has contributed to reducing delinquency in tuition payments to below 20%. Private schools without a digital platform, it says, have an average delinquency of 34.3%.
To that end, the startup argues technology drives the difference. “Mexican private schools are still far behind, compared to other industries, in adopting financial technology,” it said.
Only 40% of private schools surveyed accept payments with credit cards. In a cash economy like Mexico, most institutions stick to traditional methods such as cash and bank transfers.
Cometa and a challenging 2023 for the sector
Although efforts have been made to address the adverse impacts of the pandemic, the nation is currently experiencing a challenging economic climate characterized by a high inflation rate. This situation significantly affects the profitability of independent schools.
“We are very happy for the trust we have received from some of the best investors in the region,” the CEO said regarding the new investment. “This will allow us to expand our presence throughout the country.”
Cometa claims private education in Mexico continues to be underpenetrated compared to other Latin American countries. It sits around 10% for Mexico, while in Peru and Argentina, it stands at 23% and 31%, respectively.
“This low penetration suggests a great opportunity to continue growing in this market,” the startup concluded.