What This Fintech VC Learned From A Near-Disaster In Brazil

On this episode of the Fintech Focus Podcast we’re journeying overseas with Monica Brand Engel, co-founder and partner at Quona Capital. Quona is a VC fund focused on emerging markets fintech, and Monica talks to us about the challenges in different fintech markets around the globe, how they compare to the U.S., and what happened when one of their investments was nearly shut down by the Brazilian central bank. 

Some of our favorite quotes are below. Listen to the full episode here. 

In what ways are emerging markets behind the U.S. in terms of fintech?

One of the ways they're behind is the availability of talent. So kind of mainstream tech talent: developers, product heads, those are roles that are very hard to fill locally because the venture ecosystem and the technology infrastructure are so new there, and in general the education infrastructure, people come from all over the world to study in the U.S. because our institutions of higher learning are unparalleled, similarly in Europe. So there is a big human capital talent gap that constantly becomes as a constraint to growth, that's first.

The second big constraint to growth is financial capital. So people, when they hear Nigeria or Brazil, especially when you have political events that cause evaluations, get quite skittish, and I would say, overreact. Capital markets tend to be very lopsided in both the enthusiasm as well as in the overreaction. That is very hard to finance in business. 

In what ways are they ahead of the U.S.?

Number one is just the level of penetration. There are enormous addressable markets. If you think about some innovations happening even in Silicon Valley, you really are fighting over table scraps, the way I describe it. You have fundamental services to like bill pay, things that are pretty basic, that don't exist. So it actually creates a huge opportunity, a huge white space, for competing ideas, innovative companies to come in and really help move the needle, so I think that's one huge way.

The second way has actually the problem with legacy. So some of the challenges of integration taking hold in western markets is that you have entrenched interests. Whether it’s the banking infrastructure, kind of the traditional four-party system that most credit cards work under, remittances, money transfers. Much of the infrastructure that was initially created in the west actually becomes the impediment for innovation because you have entrenched interests who stand to lose. So in emerging markets, the good and the bad of not being very developed is you are really an ocean of opportunity. So we are quite excited about what we see here.