Overview: Chipax, QuickBooks for SMBs in LatAm
Chipax is a software-as-a-service venture that is building a full-stack payments, invoicing, and reconciliations solution for SMBs in the Latin American markets. While founded in 2016, Chipax is still technically at the seed-stage with respect to capital raised, as it’s only fundraising so far has been pre-seed fundraising through Y-Combinator in the Summer 2021 cohort ($125k raised during this round). Further, the company has since reached an annual recurring revenue of $1.6m with over 1,100+ paying customers, which suggests the founders have chosen a path of product-led growth, which would in turn suggest that the product has strong stickiness with its user base. Therefore, given its healthy fundraise relative to growth, its customer-centric product, and the macro-conditions surrounding this market opportunity, Chipax is a serious consideration for seed-stage fundraising, especially for investors focused on (1) LatAm SaaS, (2) product-led software companies, and (3) SaaS companies targeting SMB customers.
Market Opportunity: SMBs in LatAm
Chipax’s customers are small and medium-sized businesses in Latin America and the Caribbean. For a region with a gross domestic product between $4.6-$6.4 trillion[1] and where SMBs represent over 99% of all businesses and commercial activity in the region[2], the market opportunity for a payments and invoicing solution tailored to the specific issues facing these enterprises is substantial. With roughly 27.5m SMBs in this region and with Chipax’s average monthly cost of $93/month, the expected total addressable market can be estimated at $30.7bn for the region given the current early-stage of the product. However, this point-in-time estimate doesn’t take into account (1) the growth rate of SMBs in Latin America and the Caribbean and (2) the Chipax product roadmap, which could easily increase the average contract value (ACV) through expanding into providing adjacent services to its existing customers.
Founder Profiles
The founding team of Joaquín Brenner, Antonio Correa, François Gueneau de Mussy, and Felipe Urzúa consists of a designer, two engineers, and a revenue operations professional (respectively) who all operate out of Chile. Between Correa’s experiences in keeping SMBs solvent earlier in his career, Urzúa’s experience in leading the expansion of TGA across Latin America, and de Mussy’s/Brenner’s technical and design experiences, the four founders bring a rich understanding of their problem space, operational experience in expanding a business across the LatAm region, and the technical/product know-how to continuously refine their solution.
Growth Trajectory & Product Evolution
Over the past five years, Chipax has prioritized (1) building a product users love and (2) becoming profitable before seeking additional investment, the company is well-positioned to use investment capital for augmenting its go-to-market efforts, market presence, and sales/customer success channels. It’s likely that, if they were to take on VC financing at this point, it would be allocated towards customer & market expansion efforts across Latin America and the Caribbean. As such, it would be reasonable to assume that at this point in the company’s growth, they would be prioritizing investing in expansion efforts through broader social media campaigns, strategic partnerships, community building, and direct sales efforts.
Creating a sticky product in the SMB market presents two opportunities for further growth and product roadmapping: (1) the product can continue to evolve into providing adjacent services to Latin American SMBs, which would increase the average contract value by way of extracting more value from existing customers and would keep average customer acquisition costs fairly constant or (2) the product can enter new markets (new markets with respect to geographies, size of business, etc.), which would increase the average contract value by way of targeting larger customers in more developed markets but would increase average customer acquisition costs. If I were to hedge a bet on which strategic decision Chipax would execute, I would bet that they would lean towards the former decision.
Given the company’s focus on Latin American SMBs, they continual product evolution of their accounting SaaS platform would involve providing adjacent services for SMBs in Latin America; potential adjacent services this product could evolve into include providing banking, payments, international transactions, compliance, customer relations management, and governance tools for SMBs. Down-the-road, Chipax could potentially integrate with other software tools (CRMs, sales tools, etc.) popular with Latin American SMBs to create a more streamlined business management experience.
Risks & Competition
Chipax is the first full-stack payments, invoicing, and reconciliations solution exclusively for SMBs in the Latin American region. However, there exist numerous competitors outside of the Latin American region, including Quickbooks, Odoo, Zoho Books, Xero, and Freshbooks, although none of these solutions are tailored for the Latin American region. However, Chipax has two strategic advantages over competitive products: (1) with respect to more expensive, established, and global solutions (e.g. Quickbooks), Chipax provides a much more affordable full-stack solution for SMBs in Latin America, making Chipax a possible acquisition target for these larger global brands and (2) with respect to more cost-friendly, SMB-specific solutions, Chipax is the only affordable solution specifically tailored for Latin America, giving the product a go-to-market advantage over these competitors. As such, while the universe of accounting tools is expansive, Chipax has carved out a unique and sizable niche that, over the course of their growth efforts, can be expected to turn into a successful acquisition target or become an established force in the Latin American software industry.
[1] https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=ZJ
[2] https://www.oecd.org/latin-america/regional-programme/productivity/sme-development/
These company profiles provide a point-in-time analysis of early-stage, observable characteristics for investors & analyst teams to reflect against one’s own investment thesis. If the analysis aligns with investment thesis goals, then further due diligence would still be required to confirm the validity of further engagement. As such, please consider this analysis and all future company profiles to be a succinct, macro-level exposé into the company and not a recommendation as to whether it should be a target for any investment decisions.
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