0/ Great podcast with @velez_david & @patrick_oshag discussing not just what David & the @nubank team have done building the world's largest digital bank (40M customers), but the LatAm startup ecosystem at large, raising money from Berkshire, disrupting incumbents, & culture
1/ Across LatAm the largest companies are often banks; in Brazil 5 of the top 10 companies are banks. David highlights that over the last 20 years Brazilian Banks have earned an ROE of ~20-30% sometimes 10x what you'd see in the US & Europe through volatile macro cycles
2/ It was in 2012 where the smartphone penetration was starting to grow very fast in Brazil & he got excited about the opportunity to deliver financial services to anyone via their phone; in a region where 250M+ people are unbanked & many more underbanked
3/ He talks about his time @sequoia & emphasis on culture "One of the things I heard a lot at Sequoia was the initial success of a company was very much based on the culture. And that the culture of a company is set up in the first 5-6 months, with the first 5-10 employees...
4/ They asked questions around what the culture is, how that culture is built. Those initial conditions will tell you a lot about the next 100 employees you'll hire & the values that you will create as a company."

After his pitch deck he built a culture deck
5/ In dealing w/ incumbents & regulators they heard for months, "You are not even Brazilian. You have no idea what you're talking about. It's impossible to go against these guys. You don't know these local."

New regulations would pop up that required them to expedite dev time
6/ They made their appeal directly to the regulators by flying to Brasilia where the CB is & saying "You have 5 banks that own 90% of these markets & they're charging the highest interest rates in the world. You have 40M Brazilians outside this banking system. How is this type
7/ of concentration good for Brazil?" And they agreed. They said, "It's not good. We want competition."

Re: unit economics he talks about their cost advantage. Itaú, the biggest bank in Brazil, has 50M customers and they have 120,000 employees; Nubank has a ~50x cost advantage
8/ They now have added benefits of scale in negotiating with partners, "My ability to negotiate a better contract w/ data providers, w/ logistics co's, w/ $MA, w/ any other type of provider, when I have 40M customers is way, way better than when I had 10,000 customers."
9/ On LatAm more broadly he highlights we're still in the earliest innings "We still have 250M people out of 750M in LatAm, completely unbanked. They're literally grabbing cash and putting them under their mattress."
10/ "This is financial services, one of the biggest industries, but then when you look at all our verticals, insurance, you talked about Loft and real estate. When you see transportation, when you see healthcare, when you see education, it's all effectively, still offline."
11/ This episode comes a day after @sonyatweetybird wrote "The Latin America Startup Opportunity" re: @sequoia's view after making investments in co's such as @nubank & @RappiColombia telling their perspective of @velez_david origin story
12/ "Latin America is one of the largest economies globally, with 600M people and $6T of GDP. To put the sheer size of LatAm’s economy in context, the population is twice that of the US, and GDP is 40% of China’s and 2x the size of India’s."
13/ "LatAm’s real economy- banks, hospitals, infrastructure-is not delivering. Infrastructure lags developing economies (the quality of roads/infrastructure is lower than China or India according to the OECD). The public health system is spread so thin that private health
14/ insurance is a “top 3” consumer wishlist item. Brazilian banks enjoy some of the highest returns in the world. E-commerce penetration is only 6% because of the lack of innovation in delivery infrastructure and the lack of access to online payments."
15/ This sets the stage for technology to eat into the real economy & deliver fundamentally better consumer experiences."

"LatAm is the ideal setting for the internet economy to disrupt the real economy. LatAm is home to a relatively young population that is internet & mobile
16/ native (internet penetration at 70% surpasses China/India at 59/50%, & mobile internet penetration at 67% surpasses China/India at 56%/50%). LatAM countries have some of the highest internet engagement rates in the world, averaging >9 hours per day of internet usage
17/ (closer to 6.5 hours in the US and the rest of the world). In particular, Brazil has been a consumer internet heavyweight for global messaging apps (Brazil is WhatsApp’s #2 market after India) & social media usage (Brazil has the 5th largest population of social media users
18/ worldwide and the largest outside the U.S. and Asia). Moreover, Latin America is home to a rising middle class that is now purchasing healthcare and education, cars and homes, delivery services and e-commerce."
19/ In terms of opportunities they highlight
1) Fin Services
2) Consumer Internet
3) Healthcare
4) Education

The whole post is worth a read & a great compliment to the podcast

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with John Street Capital

John Street Capital Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @JohnStCapital

6 Jul
0/ We've seen a number of S1s filed for FinTech IPO's recently including $HOOD $MQ $GLBE $DLO. The co's / their advisors pay for / commission industry reports which we get to be slight beneficiaries of regarding broader macro data points / projections

A few highlights...
1/ Re: $HOOD

"30% of retail investors in the US place orders using a mobile app, according to 2018 FINRA surveys. That number grows to 59% when looking solely at participants aged 18-34."

"Retail investing now comprises roughly 20% of U.S. equity trading volume, doubling in
2/ the decade from '10 to '20."

"~60% of all Americans still do not have investments outside of their retirement accounts, and, an even greater % of young adults aged 18-29—68%—have no money invested in the stock market at all.
Read 34 tweets
6 Jul
0/ Leading FinTech co's are seeing CAC decrease as they scale.

$SQ finished '20 w/ a CAC <$5 & 36M MAUS (up from 24M in '19) while $HOOD saw CAC hit $15 in 1Q21 down from $20 for '20, $32 in 1Q20 & $53 in '19 w/ 18M accounts in 1Q21 up from 12.5M, 7.2M & 5.1M respectively
1/ These customer bases are starting to surpass incumbents: E.g., $BAC has 39.3M "digital users" (12.9M Zelle) while $JPM has 63.4M households, 55.3M digital / 40.9M mobile customers

$SCHW has 32M active broker accounts with $7.4T in clients assets & $IBKR at 1.4M /$363B
2/ The CAC associated with legacy broker accounts has ranged from ~$750-$1,000 while bank accounts ranged considerably from ~$350-$1,500 per @ARKInvest
Read 8 tweets
1 Jul
0/ @RobinhoodApp filed their S1 now that the FINRA settlement is behind them...They have 18.0M cumulative funded accounts, 17.7M MAUs, & $81B in AuC.

They did $522M in 1Q21 revenue vs. $127.6M in 1Q20 and did $958.8M in revenue in '20 reporting $7.5M in net income.
1/ User growth has been astronomical over the past 2 years.

They finished 2019 at 5.1M accounts & added 5.5M funded accounts in 1Q21 alone.

This account growth has also corresponded with an increase in revenue / funded account almost doubling during that period
2/ How did COVID-19 impact trading? Look at the DAU / MAU ratio from 2018-2019 to 2Q20-today.
Read 11 tweets
1 Jul
0/ $BTC "closed" June (6%) its third consecutive lower month for the first time since 6 straight months from August '18-Jan '19.

It finished 2Q down (40.4%), the worst on record & only the 2nd ever negative 2Q (which historically had been the best Q of the year).
1/ $BTC realized cap (or theoretical cost basis) closed the month at $19.4K or down (1.7%) the first negative month since March of '20 and only the 6th negative month since Jan of '19.
2/ $BTC spot price vs. realized cap closed at an ~80.6% premium which is in the top ~40% all time.

Looking it as a ratio of market value / realized cap were <2.0x for the first time since Sept
Read 9 tweets
30 Jun
0/ @RobinhoodApp received a record $70M in penalties for "supervisory failures" & the suit provided us insights on their growth:

31M accounts (18M funded as of 1Q21) median age of 31 / acct size $240 (avg acct was $5,000)

In Feb during Vlad's testimony they cited 13M customers
1/ During 1Q they generated ~$330M in PFOF of which options were ~$197M (60%), Non-S&P 500 stocks were $126M (38.1%) & S&P 500 stocks were $7.1M (2.2%).

This compares to $90.9M in 1Q20 & $221M in 4Q20.

Given growth in $NSTB (@apexclearing) they probably did comparable in 2Q
2/ What was Robinhood charged with? " Systemic Supervisory Failures and Significant Harm Suffered by Millions of Customers"
Read 9 tweets
30 Jun
0/ JPM published a report looking at private equity ("PE") vs. public equity performance. PE is still o/p public equity, but outperformance narrowed due to fiscal / monetary stimulus, & PE acquisition multiples rising. They use a public market equivalent (PME) measure as a
1/ multiple of invested capital; PME >1.0 = PE outperformance

Re: VC there has been outperformance vs. PME. Since 2010 the gap between top & bottom quartile VC managers has narrowed & bottom quartile VC manager underperformance vs public equity is very modest (bottom left)
2/ Perhaps not surprisingly private credit has the most narrow distribution of returns, while VC has the largest distribution of returns but the highest median return (while private credit is the lowest)
Read 7 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!