With a fresh $40m in the bank, TerraMagna is bringing ‘buy now, pay later’ to Brazilian farmers

Brazilian ag fintech startup TerraMagna recently raised $40 million in funding from Japanese tech giant SoftBank and other investors.

• The round included $30 million in debt financing and a $10 million equity component.
• SoftBank Latin America Fund, Shift Capital, and Milenio Capital were among the new investors to come board for this round, while several existing investors re-upped.
• TerraMagna previously raised $2.2 million from ONEVC, MAYA Capital, Accion Venture Lab, The Yield Lab Latin America, and Canary.

Why it matters:

According to data from AgFunder, this is the second-largest funding round on record for an agtech startup in Brazil; digital ag platform Solinftec set the record in February 2020 when it raised $60 million for its Series B round [disclosure: AgFunder is AFN‘s parent company and is also an investor in Solinftec.] 

The big picture:

Despite the formidable size of Brazil’s agricultural industry, the country’s farmers – particularly those with smaller operations – struggle with liquidity.

Brazil’s traditional banking sector has historically underserved farmers, due to a combination of risk aversion, geographical distance, and a lack of understanding about the industry.

Instead, to buy essentials such as seeds, fertilizer, and equipment, farmers typically rely on securing lines of credit from the retailers of these items (an estimated 80% of all inputs in Brazil are purchased on credit, according to Accion.)

This commercial credit tends to be short-term and expensive, reflecting the risk that retailers perceive themselves to be taking on – and adding risk for the farmers, too.

How it works:

TerraMagna seeks to solve this problem by helping these ag retailers lend more money, more confidently to their farmer customers at point-of-sale.

The São Paulo-based startup calls this model ’embedded financing.’ It manages vendors’ sales and credit analyses and uses the data it collects from this — and from other sources, such as satellite imagery to determine compliance with environmental initiatives — to assess farmer creditworthiness. This allows farmers to buy the products they need more easily, while driving more sales for retailers.

By the numbers:

• Founded in 2017 by Bernardo Fabiani (CEO) and Rodrigo Marques (chief operating officer)
• 110 employees
• Credit portfolio reached $120 million in value in 2021, marking growth of over 10x on 2020
• Retailer revenues increased by up to 20%

Competitive landscape:

Other ag-focused fintech startups in Brazil include Traive and Agrolend, which last week announced the close of its $21 million Series A round.

What they say:

Felipe Fujiwara, investment leader, SoftBank Latin America Fund:

“Over time we believe more data will continue improving TerraMagna’s underwriting models to consistently reduce small and medium farmers’ cost for funding.”

Bernardo Garcia, general partner, Shift Capital:

“We met with dozens of companies in this space and found [that] TerraMagna is the most technologically prepared, with the capacity of deploying and monitoring multiple credit operations simultaneously and effectively.

The company’s go-to-market is extremely efficacious. By leveraging on channels which the farmers are familiar with, it makes the best use of the agriculture value chain and drives incredible portfolio growth in a market historically contrary to innovation.”