Aug 19, 2021 · 37m · 20vc
20VC LATAM Part 2: a16z's Angela Strange on When To Expand Beyond Your Core Market, Why Serving the Unbanked is Such Good Business & Whether the Startup Will Acquire the Distribution before The Incumbent Acquires the Innovation?
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of TwentyVC, Andreessen Horowitz General Partner Angela Strange discusses the Latin American fintech ecosystem, detailing market expansion strategies, the unit economics of serving unbanked populations, and how local startups build defensible competitive moats against global entrants.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 28.1% of the talking time here. How this is scored →
Harry as informed peer 3.8 Guest teaching 4.2 Guest disagreement 1.4 Harry pushing back 2.1
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 24:19 Rabbit vs. Fox dynamic on global competitors
Angela forcefully rejects the idea that global giants can easily enter LATAM, using the Richard Dawkins rabbit vs. fox metaphor to emphasize local startup urgency over corporate expansion.
Hardest push from Harry ▶ 24:00 Challenging local flavor as a true moatHarry refuses to accept that 'local flavor' is a sufficient defensive moat, naming global behemoths like Stripe, Bond, and Galileo as immediate threats.
Biggest teaching moment ▶ 12:10 Dismantling traditional affluent customer economicsAngela counters Harry's belief that fintechs must target affluent customers, using ROE data and distribution-versus-infrastructure cost breakdowns to prove the unbanked market is vastly more lucrative.
Harry holds his own ▶ 27:07 Calling out ridiculous round valuation jumpsHarry demonstrates keen market expertise and pushes back on market frothiness, calling out rounds jumping from 2-on-8 to 9-on-40 overnight.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Angela Strange's Career Path from Engineering to Venture | 1 | 2 | 0 | 0 | Harry asks a standard conversational question about Angela's background. Angela provides an extensive narrative on her career path from engineering and consulting to product management at Google and venture capital at a16z. | |
| Market Granularity and Geographic Dynamics in LATAM | 3 | 4 | 1 | 1 | Harry raises a relevant market segmentation question regarding LATAM hubs versus a unified block. Angela provides granular demographic and regulatory context, clarifying why fintech expansion across LATAM borders is inherently 'default local'. | |
| Strategic Guidance on International Market Expansion | 4 | 4 | 2 | 3 | Harry offers his own perspective on advising founders to delay international expansion until core market concentration is achieved. Angela reframes the criteria around operational bandwidth and playbooks, slightly nudging against rigid pre-expansion rules. | |
| Economics of Serving the Unbanked Population | 4 | 6 | 2 | 3 | Harry challenges the thesis of targeting unbanked populations by citing traditional fintech wisdom that affluent customers yield better margins. Angela educates Harry by dissecting LATAM bank ROE figures and explaining how lowering distribution and infrastructure costs unlocks high profitability in lower tiers. | |
| Incumbents versus Innovators in LATAM Fintech | 5 | 4 | 1 | 2 | Harry brings up Alex Rampell's famous quote regarding incumbents vs innovators and questions if incumbents will innovate under pressure. Angela breaks down the dynamic using Wealthfront vs Schwab as an example while noting structural differences in LATAM. | |
| The Transition from Cash to Digital Payments | 3 | 5 | 1 | 1 | Harry makes a helpful comparison between LATAM and India as cash-based economies. Angela details the statistics behind pre-pandemic cash usage and highlights how the pandemic dramatically accelerated digital adoption. | |
| Debunking the LATAM 'Copycat' Misnomer | 5 | 6 | 3 | 4 | Harry presses Angela on common LP skepticism regarding LATAM startups being simple copycats and asks whether local nuance is enough to stop global players like Stripe. Angela firmly rejects the copycat misnomer, citing complex local infrastructure moats like credit bureaus and regulatory hurdles. | |
| Evaluating the LATAM Exit Environment and Venture Ecosystem | 5 | 5 | 2 | 3 | Harry cites LP concerns regarding limited exit paths and voices his own anxiety over rapidly inflating valuations in LATAM seed rounds. Angela counters by reframing valuation risk against massive underlying market size, citing Nubank's trajectory from $1B to $35B. | |
| Partnering with Local VCs vs. Global Venture Firms | 4 | 3 | 1 | 2 | Harry asks about the necessity of boots on the ground for local vs global VCs and trades anti-portfolio stories. Angela explains how global firms complement local VCs with scaling playbooks, and openly shares her own past miss on Nubank. | |
| Debunking Talent Constraints in Emerging Ecosystems | 4 | 3 | 1 | 2 | Harry asks about talent constraints and executes a quickfire round, including a sharp question on confirmation bias in thesis-driven investing. Angela explains ecosystem maturity through corporate mafias and addresses the intellectual traps of confirmation bias. |
Statements from this episode (26)
a16z Invested in LATAM Startups Loft, Jeeves, Pomelo, and Addy
“Andreessen has made some very significant investments in LATAM over the last few years, in the likes of Loft, Jeeves, Pomelo, and Addy, to name a few.”
Latin America Has 650 Million People Across 33 Countries
“LATAM as a whole is large. It's six hundred and fifty million people in 33 countries.”
Fintech Is Default Local Due to Distinct Regional Regulations
“We talk about fintech being default local versus Default Global, because you want to hop from one country to the other, even if it's next door in Latin America, you've got a different set of regulation, a different set of infrastructure, probably a different s…”
International Expansion Without Home Market Leadership Is a Losing Strategy
“Being number five for a business, like being the number five Robin Hood in Brazil, and then expanding to Mexico to be the number six in Mexico, Is not going to be a winning business model. You would much rather be the number one in your country and then expand…”
Top Five Banks Control 80% of Brazil's Market
“So the, like, top five banks have 80% of the market in Brazil, and Serve maybe 10 to 20% of the socioeconomic pyramid.”
Latin American Banks Boast Double the Return on Equity of US Banks
“Layer on top of that, like, the Latin American banks are some of the most profitable banks in the world. So return on equity, a good measure of measuring this, is over 10%, which is literally double that of American banks.”
30% to 50% of People in Mexico and Brazil Are Unbanked
“And then there's a massive percentage of the population, like, 30 to 50% underbanked or unbanked across Mexico and Brazil that don't have anything.”
LATAM Fintech Disruption Will Take Longer Than in the US
“I think in Latin America, it's going to take a little bit longer for a couple of reasons. One, they haven't felt yet as much of the competition, I would say, from the earlier fintechs”
Acquiring Unbanked Users Is Easier Than Overcoming Bank Customer Inertia
“It's arguably much easier to get a customer that doesn't have a debit card, doesn't have a credit card, doesn't have an investing account, you know, within that kind of middle tier, than it is to get somebody to switch from a product that they're moderately ha…”
Incumbents Will Execute a Massive Wave of Early-Stage Fintech Acquisitions
“I think in the world of fintech more broadly, though, we're about to see the most seismic shift in terms of incumbents acquiring startups in the realization that they have to now. And actually, you know, they have to do it quite early as well. Otherwise they c…”
LATAM Online Payments Grew 100% Month-Over-Month During the Pandemic
“Online payments started growing like a hundred percent month over month.”
Casai's Unit Economics Benefit From Lower Operational Costs in LATAM
“The complexity of serving the operations is a lot higher, but the cost for it a lot lower. So your unit economics, if you're Kasai, can be that much better, right?”
Regional Copycats Are Superior Businesses When Local Barriers Create Defensibility
“So I'd flip it as, you know, X For why, if it makes even more sense in that geography with the local flavor, is a better business.”
Local LATAM Fintechs Hold Head Start Over International Entrants
“So any new international player is going to have to go through that same experience, and the local team is going to have a very, very big head start.”
Latin America Saw Five Public Listings in 2020
“If you look at LATAM, like, there were five IPOs in twenty-twenty.”
LATAM Raised $10B in Venture Capital Last Year, Half in Fintech
“There was close to, I think it was a nine or ten billion dollars of venture funding poured into the region just in the last year. Half of that was fintech, by the way, right?”
Nubank's Growth to $35B Proves Initial Valuation Concerns Wrong
“Like, new bank, At a billion dollars, looked pretty damn expensive. What's it worth now? Like, thirty-five billion dollars? Not so expensive.”
Soaring Round Valuations Are Justified for Market Category Winners
“And if you think that they can be number one, maybe even number two across very, very large categories, then it probably looks expensive at the time, but not so expensive in retrospect.”
Local VCs Outperform Global Firms in Local Markets and Hiring
“Local investors are going to know How to help better with recruiting. They're going to know better the nuances of local markets. Like there's lots of things that they will do better than international VCs.”
Harry Stebbings Passed on Pre-Seed Startup Now Valued at $6.5B
“The worst mistake that I've made, I turned down a company, it was six million pre-seed, and it's now 6.5 billion.”
Terrible Employees Often Make Fantastic Startup CEOs
“Terrible employees often make fantastic CEOs.”
Passing on Nubank Was Angela Strange's Most Painful Investment Miss
“Oh, so many, but just the Latin American most painful one is NewBank. And this was early in my career in venture when I hadn't spent that much time in Latin America. And it seemed like a relatively high check at a relatively high valuation. And I didn't know t…”
Nubank, Rappi, and dLocal Mafias Will Build Next LATAM Startups
“Like you've got NewBank, Rappi, Dlocal, right? And so like the kind of mafias from those companies are going to spin out and join the next generation of companies or grow the next generation of companies.”
Jeeves' Orchestration Layer Enables Seamless Cross-Border Scalability
“And they have Built this orchestration switching layer on top, such that by definition, their platform is going to be seamless from country to country. It's going to reconcile in the back end. It's just like a very, very clever way of approaching the problem t…”