Neobank Albo taps $40M in series-C round to expand SME products

In a climate where capital is in short supply, fintech companies in Latin America and Mexico persist in gaining recognition from investors. Notably, the neobank Albo recently secured $40 million in a Series C round, marking one of the latest investment rounds for startups in the Latin American region.

California-based venture capital firm Morpheus Ventures led the funding round. Valar Ventures and Mexico-based Nazca Ventures also participated.

CEO and founder Angel Sahagun Fernandez said the goal was to achieve breakeven as of next year. Risk aversion in investment markets has pushed fintechs to chart a new, much faster course toward profitability. “We are actively working towards significantly expanding our product portfolio,” he said.

“Surge” in customers

Investors noted Albo’s “substantial surge” in customer growth during the past few quarters, according to comments by Joseph Miller, a partner at Morpheus Ventures. In a press release, the company noted it had reached 2 million customers.

Albo is somewhat different from other digital banking firms in Mexico because it focuses mostly on SMEs. Many of the online startups that have attracted attention in recent years have aimed at individuals. On the contrary, the market for small and medium-sized companies remains underserved to this day. Other fintechs in this arena include Konfio, backed by Softbank, and Kapital.

In Mexico, most of the workforce engages in informal economic activities. This results in limited verifiable data for financial institutions to evaluate creditworthiness. Consequently, SMEs in Mexico and the broader region frequently do not meet the criteria for credit assessment.

The digital banking sector in North America has witnessed a surge in competition. Regional digital banks like Nubank and Uala have expanded their presence, intensifying the rivalry. Additionally, domestic initiatives have emerged, further adding to the competitive landscape. Furthermore, non-financial entities, including retail giant Walmart and Femsa, a Coca-Cola bottler in Latin America, have ventured into the digital wallet arena, focusing on serving the underbanked population.

Albo aims at SMEs with previous acquisitions in Mexico

Angel Sahagun Fernandez, CEO and founder at Albo.

The funding news follows closely on the company’s $20 million acquisition of technology firm earlier this year. The latter is a firm part of the Y Combinator program, which focuses on corporate lending. According to Albo, the acquisition improved its proposition to SMEs, including payments receivables, transfers, debit cards for employees and financing.

Previously, the neobank had raised $45 million in late 2020 as part of its series-B funding round. The company obtained a fintech license from the regulator in Mexico last year.

Investment funding stabilizing in Latam

The update from Albo arrives at a time when investment funding for Latin American startups is becoming increasingly scarce. After witnessing record-high investments in the sector for several years, there has been a noticeable reduction in investment opportunities in recent quarters, although the current levels are still considerably higher than in pre-Covid times.

Nonetheless, there were early indications of investment flows stabilizing earlier this year. While they have not yet fully rebounded, the third quarter did witness substantial investment rounds, such as a $61 million series-B funding deal for Brazilian fintech Nomad, or Creditas Series-F round worth 70 million.

  • David Feliba

    David is a Latin American journalist. He reports regularly on the region for global news organizations such as The Washington Post, The New York Times, The Financial Times, and Americas Quarterly.

    He has worked for S&P Global Market Intelligence as a LatAm financial reporter and has built expertise on fintech and market trends in the region.

    He lives in Buenos Aires.