FinTech Collective Invests in Nexu
Published:
Oct 22, 2023
Authors:
Carlos Alonso Torras
Kate Wang
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We are very pleased to announce FinTech Collective’s investment in Nexu, a Mexico City-based financing platform for car dealerships across Mexico. The company allows car dealers to offer personalized financing to both credit and leasing customers via a fully digital process, cutting transaction time from days to minutes.
Car financing in Mexico is difficult to obtain, and prior to Nexu, 53% of Mexican credit-worthy car buyers were rejected from financing. Incumbents offer a single APR, lack tiered pricing, and rarely have valid credit scoring models. These approval processes are also paper heavy and very manual. Nexu’s product powers the user experience, inherently increases conversion rates for dealerships and creates a high-performance credit product on the backend.
The company was founded by Bolivian entrepreneur Abdon Nacif and Mexican entrepreneur Fernando Gómez, who met while attending graduate school in the US at Wharton. We met the pair over two years ago, via an introduction from a respected founder within our portfolio, with whom we have cultivated a decade-long relationship attesting to his lending expertise. Having originally evaluated Nexu’s Series A, the exponential commercial traction and operational excellence exhibited since proved importantly revealing in our diligence.
We are excited to back the team’s mission to democratize access to private transportation in Mexico. The Series B was led by Valor Capital and included participation from Endeavor Catalyst, as well as prior investors Altos Ventures, Wollef, Squareone, Clocktower Ventures, Gilgamesh Ventures, FJ Labs, Ivernet and Capem. Several of these names are funds with whom we’ve partnered before, and among the most respected fintech investors in the region.
FTC Summary
Worldwide, we have invested in credit businesses with differentiated distribution, as capital is still frequently the biggest obstacle to accessing products and services of vital importance to consumers and businesses. As such, credit - as a customer acquisition tool - can demonstrate lower-than-market acquisition costs and higher lifetime values than other wedges into a given demographic. We are mindful that this is done while controlling for loss rates through data-driven underwriting and sophisticated fraud prevention. Some other credit businesses that we have invested in include Octane Lending, Moneylion, Anyfin and Mondu.
We see Nexu as a key player in increasing per capita automotive access in Mexico, and car ownership represents a crucial purchase for most Mexicans (and Latin Americans), typically second only to a person’s home. Thus, we see Nexu as a catalyst of financial inclusion for the rising Mexican middle class, which ties neatly into our thesis of credit as an enabler for socioeconomic mobility in emerging markets. When provided responsibly, we are believers in the transformative power of credit, especially when coupled with technological enablement to reduce operational complexity in processes and increase the ease of customer access to such financial products.
Today, car financing in Mexico is difficult to obtain. Compared to the U.S. market where financing accounts for upwards of 80% of new vehicle sales and 40% of used vehicle sales in 2022, Mexico sees only 59.1% and 1.9% for new and used vehicle sales, respectively. This low penetration of vehicle financing can be attributed to the old, analog processes which takes an average of 3 days to process and approve, as well as the low rates of approvals by traditional banks.
Nexu’s platform solves both of these problems through its digital platform that analyzes applications in real-time, providing a seamless and immediate financing experience at car dealerships to previously served and underserved car buyers. Using its proprietary risk algorithm, NEXU can approve 2x more buyers than traditional banks, without increased risk, ultimately enabling more people to access the benefits of car ownership.
Rated as AAA by HR Ratings, Nexu’s debt facility with HSBC marks an important milestone for the auto industry in Mexico. It will allow the company to continue providing dealerships the ability to offer better products to their current customer base and expand to new customer segments, giving millions of car buyers in the region the ability to reach their dream of acquiring a vehicle, whether to improve their quality of life or to grow their small businesses.
"When you apply for financing at a car dealership in Mexico, you need to wait on average three days, but at least a day to get a response. So it's a very bad experience for the car buyer, which provides a lot of uncertainty. We created our own credit score based on information that comes from public and private data sources and variables that we built ourselves.”
Abdon Nacif - Nexu co-CEO