Episode 003 - FOCUS-ON-FINTECH Series: Frederico Rizzo, Founder & CEO, Basement.io São Paulo, Brasil (A first-hand look into Brazil Fintech and why it's attracting record investment)

Introduction

• Welcome to Distilling Venture Capital. I am your host, Bill Griesinger
• Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world, including Fintech. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use.

Episode Introduction:

• Today's Episode is another in my Focus-on-Fintech Series where I bring you a close-up look into companies in the sector and the innovations they are bringing to the market
• Given that Fintech is global movement and phenomenon that is changing, for the better, the way we participate in and get finance done around the world, one of the hottest places on the globe for Fintech investment today is Brazil. In today's Episode, I delve into and distill down why Fintech is attracting such interest and investment in Brasil

Fintech in Brasil: The Basement.io Story

• To help me do that, I am pleased to be joined today by Frederico Rizzo, Founder and CEO of Brazilian Fintech company, Basement, based in São Paulo, Brasil. Basement is a fintech company leading the way in Brasil related to innovation in the investment sector, providing a platform for individuals to invest in SME private companies and other services.

Frederico, thank you very much for joining me today.

• Please tell us a bit about what Basement does, when and how you got started, and the reasons that motivated you to create the company. What was the impetus, motivation for the formation of Basement?
• What is the story around the company name Basement?
• What is the opportunity or need for Basement to collaborate or partner with other major financial or investment institutions? Is it necessary for success in your business model?
• Can you Provide a short history of the role of credit and equity in Brasil…Brasil has not historically had "deep" credit markets. This access to financing is simply not available to well-managed SMEs. You must be a big corporation and listed publicly to get access to credit at reasonable interest rates…
• Meaning, if you weren't a large corporation with access to the public stock market, you really couldn't raise capital – you had to grow your business with cash – which means limiting and constraining your growth.

Fintech in Brasil, é Muito Quente (is super-hot)

• What is driving this? One reason is a result of concerted effort by the key financial governmental regulatory bodies in Brasil over the last 1-2 years to move toward open, digital banking through open data sharing mandates…
• What does this mean?
• CVM – Comissão de Valores Mobiliários; Brazilian equivalent of the SEC
• The Brazilian Central Bank and the National Monetary Council set out open banking regulations earlier (May 2020). The data-sharing framework aims to foster financial inclusion, drive competition in financial services and increase security.
• "The premise is that the personal data held by banks and other financial institutions do not belong to them, but to the respective holders, customers," according to Marcelo Chiavassa, professor of digital law at Universidade Presbiteriana Mackenzie Campinas
• Financial institutions must begin adhering to new rules stipulating that data belongs to individuals, says Maristela Martins, country manager for Brazil at Backbase. That means that clients' journeys will need to include explicit, simple, quick and secure consent agreements.

Other Comments on Brasil Credit Markets:

• In recent posts you written, you have noted some delays in certain key regulatory initiatives on the private investment front. Can you describe what those are and what, in your view, needs to be done to move forward?
• How important are these regulations for Brasil, in your view?

The Basement Business Model & Business Model Characteristics

• You offer several services, please elaborate on the services offerings of Basement
• Cap table management and valuation services
• Ultimately an alternative exchange, but it's the early days and that will take time

Growth Prospects for the Basement Business?

• Huge addressable market;
• Two main things:
• • 1st, Regulation changes that are already in motion have to move forward. We work closely with the regulators in this regard.
  • 2nd big challenge is the go-to-market. Learning a lot along with the market. Education, product-market fit, channels. We are testing all of this
  • After 6 years in the market we know a lot of intermediaries – funds, angel groups, accelerators, lawyers – so we are trying to build the channels and go-to-market.
  • We knew early we couldn't have the type of venture model where we scale fast so we've spent 6 years developing. That's been the best approach – almost boot-strapping model
• We've raised about 4 rounds; have over 300 investors, the huge majority with no control. A very healthy cap table in our perspective. It's all about execution now.
• Now for us, the next 12-18 months, we have what we need to execute and develop a great go-to-market strategy.

Competitive Advantages

• Describe the competitive landscape, relative cost/pricing structure and how you leverage your expertise to bring a compelling value proposition to clients
• Other competitive advantages, differentiation…

Closing Remarks:

Frederico, thank you very much for joining me today. I would love to do a follow up sometime as you progress and things are going.

• We will ultimately become a Delaware co. eventually to get closer to a bigger market – in terms of capital structure.

Contact Information, Basement

• Frederico, How can those seeking additional information and wishing to learn more about Basement contact the firm?
• Website: www. basement.io
• Frederico Twitter: @Frederico.rizzo
• Linkend also as Frederico Rizzo

Thank you for joining me for this edition of DVC. I hope you found the topic interesting and it gave you some things to think about regarding how to implement successful Fintech services. I am currently working on the DVC website. In the meantime, Please send questions and your comments regarding today's Episode to: bill@ccs.capital

Stay tuned for my upcoming Episodes in which I am going to provide a follow-up to Episode 001, Unicorn-Mania. We'll do a Unicorn-mania-II Redux where I will dig into and discuss the sagas of WeWork and Uber in the context of Unicorn-mania. And, I'll be bringing more episodes highlighting the Fintech sector in Brasil with other innovative companies that are changing the financial services landscape in Brasil. Thank you again and I look forward to joining you for my next Episode of Distilling VC.