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Fairplay closes $35M in equity, debt to provide revenue-based financing to entrepreneurs

·3 min read

Mexican revenue-based investment startup Fairplay secured $35 million in Series A funding to invest in the online marketing campaigns of direct-to-consumer e-commerce brands and marketplace sellers in Latin America.

The investment round consists of $15 million in equity, co-led by Dila Capital and Kayyak Ventures, and participation from Speedinvest and Elevar Equity, and $20 million in debt led by Architect Capital. Existing investors in the round also included QED Investors, Nazca and several individual investors, including Kavak CEO Carlos García, Jüsto CEO Ricardo Weder and ZeBrands CEO Carlos Salinas. In total, the company has raised $40 million.

Fairplay co-founder and CEO Manolo Atala started the company with Andrew Devlyn in 2019. He told TechCrunch that small business owners often have to choose between putting money into their inventory, logistics or marketing campaigns, and a wrong choice could have significant impact on the company’s growth. Those who do invest in marketing usually put a majority of their spend into channels like Google or Facebook, he added.

Traditional loan options are often long and complex processes that could tie a business owner to aggressive guarantees, Atala said. Looking to make the choice easier for entrepreneurs reliably earning sales, Fairplay provides a sales advance as funding in exchange for a flat fee and a steady revenue share of earnings until the capital is paid back. Rather than give the money to the client, the company pays the client's providers directly.

Aside from leveraging the debt, the new funding will go toward growing Fairplay’s headcount. Atala expected to double its 38 employees in the next few months.

The company is working with a wide range of clients -- for example, small companies selling $15,000 per month up to large DTC companies selling $10 million per month. The average investment Fairplay makes is about $85,000, Atala said.

“Most of the money goes to inventory because the cycle from when you order to when you start selling a product is around 45 to 60 days,” he said. “By providing this capital, we are helping e-commerce companies shorten the cycle to avoid cash flow constraints.”

The Mexican e-commerce market is poised to reach $45 million in 2022, and Atala says Fairplay is also seeing that growth. The company’s third quarter of 2021 was the best in its history, growing 250% in originations over the second quarter and more than 200% in revenue. He was expecting two-digital growth in the fourth quarter and a five-fold growth in 2022.

QED Investors partner Mike Packer, who is on Fairplay’s board, says the company is in the middle of a “megatrend” that is affecting e-commerce infrastructure in Latin America. He saw Fairplay’s early traction two years ago and has been watching Atala and Devlyn build out their team with a talented pool of people, create the product and test their hypothesis.

“We are seeing a current explosion that has been pulled forward five-plus years into one year of growth,” Packer said. “All of the commerce and transactions moved online, while growth was happening, the infrastructure was lacking. We see massive opportunity to enable businesses to run more smoothly, and Fairplay is in the middle of that.”