Em Conversa: Accelerating LatAm Fintech With Shearman & Sterling

Em Conversa tries to uncover the secrets of Latin America (LatAm) which has caused the fintech market to boom, from being worth less than $50 million in 2016, to $2.1 billion in 2022. Carmelo Gordiana partner in the emerging growth practice of the global law firm, Shearman & Sterlingexplains how the LatAm market is catching up with more advanced fintech countries.

Carmelo Gordian has represented buyers and sellers in numerous cross-sector transactions in North America (US, Mexico and Canada), Latin America (Central and South America), Europe and Asia. He has acted as advisor in 56 public issue transactions with 28 transactions representing the company, 25 transactions representing underwriters and three transactions advising significant shareholders.

In addition, he has also acted as company and investment adviser on several hundred private offers, mainly venture financing over the past 30 years.

Gordian advises companies and governs in matters of corporate governance. This is in addition to acting as an adviser to special committees formed by the boards. He has an active practice representing GPs and LPs from hedge funds, private equity funds, venture capital and real estate funds. These funds range from tens of millions of dollars to multi-billion dollar funds.

The LatAm market shows no signs of slowing down. Indeed, Gordian predicts that within 25 years it will catch up with global markets such as the US. He draws parallels to its current state and the US market in the 1980s and 90s. Development is already underway, it’s only a matter of time before it booms.

Can you tell me more about Shearman & Sterling and your role within it?

I am a partner in Shearman & Sterling’s Technology Group, and my work focuses on global venture capital related deals and transactions. Our activity in Latin America includes recent transactions in Brazil, Mexico, Chile, Colombia, Argentina, Peru, Bolivia and El Salvador. Our deep bench of bilingual lawyers has extensive experience in advising new growth companies and financial institutions across the region.

Can you talk about fintech trends in the region? How do they compare to the rest of the region/world?

Fintech has been a popular sector globally for decades and remains the largest investment vertical in Latin America. Unlike other more advanced economies, the opportunity in Latin America is focused on the underserved market. This consists of individuals and businesses that do not have access to banking, lending, credit, insurance and other financial products. Products that are often taken for granted in the US and other more advanced economies.

What is Shearman & Sterling doing to help improve fintech in the region?

As a firm, we act as a bridge between Latin American companies in need of financial support and capital sources in the US (and other markets). We also look for Latin American-based sources of capital when appropriate. What makes us special is the fact that we provide the connectivity that results in critical funding for emerging growth companies.

What specific sub-sector of fintech is Shearman & Sterling looking to help and how does this LatAm sub-sector compare to the rest of the world?

Our Shearman & Sterling Latin America group assists in transactions that indirectly support underserved markets. As a Latin American born in the US, I understand how important it is to have access to capital. Capital that allows people to get an education, own a car, buy a home or start a business. It is extremely rewarding for our team of attorneys to be able to make an impact for a variety of individuals. All throughout the LatAm region.

What are some of the region’s unique challenges in the specific sub-sector?

Demonstrate how a business plan can succeed in raising the seed capital that will allow the emerging company to come to fruition. In turn, obtaining additional growth capital is a unique challenge that must be solved. The market opportunity is huge, but reaching the first step is not easy.

From a broader perspective, we see that inflation and strained economic growth are putting pressure on valuations. Especially in the form of corrections after the pandemic. Globally, investors are questioning high valuations and pushing numbers down.

Latin America is not immune to this development. Investors are likely to be more selective when allocating capital, as public markets influence the valuation of private markets. As a result, the nature of dealmaking is shifting toward small-dollar, early-stage investments and fewer late-stage, hundred-million-dollar plays.

Future for Shearman & Sterling in Latin America

We have had an important role in Latin America for over a century. The growth in venture capital investment in Latin America has been a phenomenon at best over the last ten years. We are on the ground floor of this growth. As an organisation, we are committed to continuing to invest in the region, to strengthen and deepen our offer. In turn, creating an even stronger platform to serve our customers. Now we see the tip of the iceberg.

Final thoughts

The venture market in Latin America is at a stage comparable to the US in the late 1980s and early 1990s. We all know the history of the United States. We expect Latin America to replicate this success over the next 25 years.