(Bloomberg) -- Mexico fintech startup Stori closed a new funding round worth $212 million, in a mix of equity and debt financing that includes Goldman Sachs Group Inc., to boost investments and expansion to other markets.
Of the total, $105 million was in equity led by Notable Capital, BAI Capital and existing investors, and $107 million was in debt led by Goldman Sachs and Davidson Kempner Capital Management LP, co-founder and chief governance officer Marlene Garayzar said in an interview.
Stori provides payment cards and high-interest deposit accounts in Mexico focusing on the underbanked population. The company plans to use the cash from the equity investment to improve its technology and add to its product suite while funds from the debt portion will be used for lending, Garayzar said.
The investment will allow the company to move forward with a plan to invest 7 billion pesos (about $360 million) in Mexico over the next two years to lure in more clients as part of its strategy to increase financial inclusion in a country where a large swath of residents don’t have formal bank accounts. Stori has more than 3 million active users, and for around 80% of its cardholders, the company was the first to provide them with a credit card.
“For Mexico, that represents not only deepening the financial inclusion — which is our reason for being from day one — but also generating jobs,” Garayzar said in an interview at Stori’s Mexico City offices. “And that also tells the government that we are serious.”
Stori also plans to use the funds to expand its reach into other parts of Latin America. Later this month, the company will announce the next country it will expand to in the region, Garayzar said.
The latest round was done at a higher valuation than the previous fundraise in July 2022, she said, though declined to give additional details. Back then, Stori hit unicorn status with a valuation of $1.2 billion.
The Stori transaction is among the largest venture capital deals in Latin America this year, as dealmaking has hit its slowest pace in six years amid high interest rates that have kept investors waiting on the sidelines. Stori’s raise marks the fifth triple-digit VC deal in the region this year, according to PitchBook data through the first week of August.
It also comes amid increased competition from the likes of Nu Holdings Ltd. and MercadoLibre Inc. which are both investing heavily in Mexico to capture clients.
Other investors that participated in the equity portion of the round include ACE Redpoint Ventures, GIC, General Catalyst, Goodwater, Lightspeed Ventures, and Tresalia Capital, the family office of billionaire Maria Asuncion Aramburuzabala, according to a statement.
The company also announced that it has hired Diego Cabrera Canay to be chief financial officer. Cabrera’s most recent role was as CFO of Uruguay’s dLocal Ltd., and held prior positions at MercadoLibre and PwC.
Like competitors, Stori offers high interest rates in its deposit accounts to lure clients. Its 15% annual yield on its deposit account is “sustainable under the right structure”, and the company has committed to always being above a key central bank rate. Stori, which is a deposit-taking entity under the Sociedad Financiera Popular (Sofipo) framework, has no plans to pursue a banking license at this time, according to Garayzar.
The financing round is a positive sign that venture capital activity could pick up going forward, according to Garayzar.
“I think the message from investors is clear,” she said. “They have confidence in the country.”
(Updates with PitchBook data through August 2024 in eighth paragraph)
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