Banking options for Latin American startups who establish their holding companies in Cayman and in the US are historically bureaucratic, expensive and slow; Trace Finance upends this experience and significantly expands access to FX, banking and credit products
Trace Finance, a Brazilian fintech startup that enables faster and more streamlined cross-border banking for startups, has announced a $4.3 million seed funding round. The investment is led by HOF Capital (investors in Dapper Labs, Terra, Flutterwave, and SpaceX) with participation from Circle Ventures (the company behind USDC – a leading USD-pegged stablecoin with a $50 billion fully diluted market cap), The Chainsmokers (via their fund Mantis VC), and others. Seed funds will be used to expand the company’s seamless global banking solution for startups, beginning with the US and Brazil.
Currently, Latin American startups – particularly those based in Brazil – who raise venture capital funding have to deal with a slow and expensive process when accessing funds from their US-based holding companies and transferring them to local operations. They have limited options for banking institutions to work with and pay upwards of a 4% fee every time they transfer money. Furthermore, this process can take 1.5 months on average, during which these businesses cannot access banking or credit, and undergo extensive scrutiny. Trace Finance solves these problems by automating the onboarding process and working with multiple banks on the backend – reducing the spread from 4% to 0.2% and offering a more user-friendly experience.
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“Trace Finance is at the forefront of bridging the benefits of crypto with traditional finance, starting with treasury management and seamless cross-border payments for startups in Latin America,” said Victor Wang, Partner at HOF Capital. “The company’s services will ease several pain points faced by Brazilian startups today and we’re excited to partner with them as they disrupt business banking in the continent and beyond.”
“We are seeing incredible demand among startups and investors from Brazil and LatAm that are raising large rounds but have a hard time finding good banking partners to receive those funds and send them to their operating entities,” noted Bernardo Brites, co-founder and CEO of Trace Finance. “The problem is too much red tape and bureaucracy holding them back. We have created a new, more efficient platform that unlocks opportunity between these regions, which will lead to explosive growth. We are honored to work with such a great group of clients and investors and this round will considerably improve the financial life of those companies globally.”
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The round was oversubscribed, with more than 30 funds and individuals participating. Stellar Development Fund also joined the round, 2TM (the venture arm of Mercado Bitcoin), as well as BlockFi Ventures and its CEO Zac Prince, Marcelo Sampaio of Hashdex, Miguel Fernandez of Capchase, Oliver Jung (who invested into Nubank, Brex and Airbnb), and founders of Rappi, Coinmarketcap and Quantstamp.
The funding will be used to create a US-based bank account for LatAm startups, expand operations in both Brazil and the United States, and further streamline the process of exchanging capital across borders. Trace Finance currently has over 30 enterprise clients including Noh, Condoconta, Pomelo, Zippi, The Coffee and Big Bets and a big waitlist for the US banking product.
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”We could not be more thrilled to be investing and supporting the team and vision at Trace Finance. We feel as though the investment opportunities in Latin America are significant, and so far largely untapped. Trace Finance is one of those rare companies that is well-positioned with a great product at the right time, which we are excited to see them execute as American investors continue to expand their horizons throughout Brazil and Latin America. It will be a great year for Trace Finance!” – The Chainsmokers, Drew and Alex, Partners of Mantis VC.
”I’m amazed by how superior Trace Finance’s experience is. I was able to localize my seed round money in a single day, with an excellent exchange rate and with a customized user experience provided by Bernardo and Rafa. This was a delight for me, after having had to wait two months for my foreign entities and bank accounts to be opened – which Trace Finance will be tackling soon and I can’t wait.” – Ana Zucato, CEO & Founder of Noh.
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