R2 ENABLES PLATFORMS TO PROVIDE FRICTIONLESS CAPITAL TO MERCHANTS
This week, R2 is thrilled to announce the conclusion of a round of $5.9M in a series seed funding led by General Catalyst, with participation from Y Combinator, and 166 2nd. Additionally, R2 has launched a new lending partnership with Clip, one of the leading POS providers in Mexico, to finance its traders.
According to the World Bank, small businesses in Latin America to deal with $1.2 trillion credit spread. Visa reports that 85% of small businesses in the region do not have access to financing, which limits their growth potential. R2 seeks to bridge this gap by enabling technology platforms, such as payment processors and marketplaces, to offer capital to their merchants.
As Central Americans, co-founders Roger Larach and Roger Terán knew the importance of small businesses in terms of job creation and productivity. They realized that the financial institutions of Latin America often left small businesses unattended because they could not secure this segment profitably. “We realized that banks’ inability to finance small businesses profitably is largely a data problem: how can they assess the risk profile of small businesses that typically lack financial information? And if they have it, does this information provide a sufficient signal to predict their future performance?” said co-founder Roger Terán, who leads the company’s data and risk efforts.
With the onset of the pandemic, cash transactions dropped by 35%, forcing many small businesses to buy and sell digitally through technology platforms. These platforms have begun to capture increasing amounts of data on the activity of small businesses. According to Visa, 80% of businesses that started accepting electronic payments during the pandemic were small businesses. The shift to digital buying and selling has prompted R2 to enable technology companies to fund their merchants risk-free and cost-effectively through its end-to-end lending infrastructure.
“Tech platforms are a more natural and comfortable place for small businesses to receive financial services. But offering capital, which sounds simple, requires a different core skill: risk management. With R2, platforms don’t don’t have to compromise between We abstract away all the complexity – underwriting, compliance, service, collections and capital markets – with our infrastructure,” said the co-founder and CEO. Roger Larach. “Platforms can now offer capital to their merchants without putting their balance sheet at risk, while maintaining control of the experience with white-labeled components available through our set of APIs.”
R2 currently offers two financial products. First, platforms can leverage R2’s infrastructure to offer revenue-based funding to their sellers. By investing the money in inventory or marketing campaigns, sellers often see an immediate increase in sales, which increases a platform’s trading volume. In addition, through a partnership agreement, these platforms participate in the increase generated by the financing offered by R2. Second, for businesses that buy online, R2 allows platforms to add a white-label “Buy Now, Pay Later” experience. Leveraging R2’s lending infrastructure, platforms can integrate a one-click funding option at checkout, allowing shoppers to make a purchase they would otherwise have put off. This particular product is designed for marketplaces and e-commerce platforms that primarily sell to other businesses, which has been shown to increase order frequency and customer loyalty.
With an established presence already through Mexico, Colombia and Ecuador, R2 is on a path of rapid expansion in the region. R2 is confident that growth will parallel the progress they seek to propel in the region, redefining financial infrastructure in Latin America.
Founded in 2020, R2 enables payment processors, point-of-sale systems and marketplaces to provide financing to small and medium-sized businesses in Latin America. Through its API, R2 provides its integrated lending infrastructure to technology platforms so that they provide capital to traders without taking any risk. R2 works with some Latin America leading companies, such as Rappi, Clip and Kushki, among others. They are backed by General Catalyst, Y Combinator, 166 2nd, among others.
To learn more about R2, visit https://www.r2capital.co/.
Roger Larach, co-founder and CEO