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Brazilian Fintech Educbank reloads USD$14.22M in bonds to accelerate its growth

August 8, 2023
Por
Finsiders
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The fintech has reached 300 schools in its portfolio in 25 Brazilian states. Now, the idea is to scale to more educational institutions.
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Founded in 2020, the startup has as its main product the guarantee of full receipt of monthly instalments, even in case of delay by families. This helps to maintain the positive cash flow of the partners during the year. In addition, it has development lines, payment methods and management tools for customers.


"Before finalising this fundraising, we always used equity as our main source of funding. The time has come to access the credit market through structured operations. This is extremely important for our thesis, so that the zero-default product reaches more schools in Brazil," says Caio Noronha, co-founder and CFO of Educbank, in an interview with Finsiders.


With this range of products on the shelf, the fintech reached 300 schools in the portfolio in 25 Brazilian states. Now, the goal is to scale to more educational institutions.


In this regard, Educbank plans to make available to partner schools a medium- and long-term financing line focused on infrastructure investments, such as increasing the capacity of the units and modernising classrooms.


Strategy


According to Danilo Costa, co-founder and executive chairman of Educbank, there are some barriers to entry in the educational segment that the company has had to overcome over the past few years. The first of these was the branding work. "As it is a very fragmented sector, you need to have a very recognisable brand to navigate retail and schools," he says.


The second point was distribution. Currently, the fintech has exclusivity to distribute financial products to Vasta Educação, a network of 4,000 schools that is part of Cogna, with annual revenues of BRL 15bn - Vasta is an old partner of the fintech, having led the past round of equity worth BRL 200m in December.


In addition, the company has 60% of the business management system niche for educational institutions (ERPs), through partnerships or its own ERPs.


Therefore, the third bottleneck to be solved is precisely capital to invest in raw materials. Therefore, the founders are also preparing a Series B later this year. The estimate is to raise funding in the order of BRL 330 million, totalling BRL 400 million in 2023.


Pipeline


With these steps, the startup expects to increase its market share from less than 1% to 25% within four years and transact BRL 1bn in payments in the next 12 months. The company does not open current figures.


To get ahead in such a competitive market, Educbank has developed a proprietary technology that is capable of processing a set of operational, academic and social variables of schools. The platform establishes a correlation between student learning, operational quality and tuition fees to form a complete score.


According to the CFO, the option to raise through debt was part of the plans and should continue from now on, since the startup has plans to make rounds during the 'winter' of venture capital funds. "The credit market was very complex and suffered a lot. This fundraising brought a very positive message, because it occurred in the midst of a super pessimistic phase," he says.

"Almost 80% of the population is not attending public schools and more than 50% of municipalities do not have private institutions on their premises, and it is not for lack of demand. Access to education is a desire as great as home ownership or health insurance. Our purpose is to change this reality, and fast", says Danilo Costa, co-founder and executive chairman of Educbank.


Competition on the rise


According to the 2022 School Census, Brazil had 47.4 million students in basic education, in 178.3 thousand schools. In the transition from 2021 to 2022, the sector increased by 1.5%, adding another 714,000 students. Growth was higher in public schools, with a 10.6% increase in enrolment.

In such a hotly contested sector, it is natural that Educbank is not alone. Another startup fighting for space is Isaac, a financial services platform for schools. In November, the company raised $125 million in a round led by General Atlantic, joined by Softbank and Kaszek.

Educbank, a fintech that works to solve the problem of default in primary schools, has just raised BRL 70 million through a debenture fully securitised in tuition fees. The operation - the first of its kind for the segment in the country - was coordinated by Itaú BBA. The issue will be carried out in three series, the first two with public distribution and the third, private. The maturity of the papers is 2026.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y de ellas son responsables sus autores. No reflejan ni comprometen el pensamiento u opinión de Latam Fintech Hub, por lo cual no pueden ser interpretadas como recomendaciones emitidas por la platafomra. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista sobre el ecosistema Fintech.


Founded in 2020, the startup has as its main product the guarantee of full receipt of monthly instalments, even in case of delay by families. This helps to maintain the positive cash flow of the partners during the year. In addition, it has development lines, payment methods and management tools for customers.


"Before finalising this fundraising, we always used equity as our main source of funding. The time has come to access the credit market through structured operations. This is extremely important for our thesis, so that the zero-default product reaches more schools in Brazil," says Caio Noronha, co-founder and CFO of Educbank, in an interview with Finsiders.


With this range of products on the shelf, the fintech reached 300 schools in the portfolio in 25 Brazilian states. Now, the goal is to scale to more educational institutions.


In this regard, Educbank plans to make available to partner schools a medium- and long-term financing line focused on infrastructure investments, such as increasing the capacity of the units and modernising classrooms.


Strategy


According to Danilo Costa, co-founder and executive chairman of Educbank, there are some barriers to entry in the educational segment that the company has had to overcome over the past few years. The first of these was the branding work. "As it is a very fragmented sector, you need to have a very recognisable brand to navigate retail and schools," he says.


The second point was distribution. Currently, the fintech has exclusivity to distribute financial products to Vasta Educação, a network of 4,000 schools that is part of Cogna, with annual revenues of BRL 15bn - Vasta is an old partner of the fintech, having led the past round of equity worth BRL 200m in December.


In addition, the company has 60% of the business management system niche for educational institutions (ERPs), through partnerships or its own ERPs.


Therefore, the third bottleneck to be solved is precisely capital to invest in raw materials. Therefore, the founders are also preparing a Series B later this year. The estimate is to raise funding in the order of BRL 330 million, totalling BRL 400 million in 2023.


Pipeline


With these steps, the startup expects to increase its market share from less than 1% to 25% within four years and transact BRL 1bn in payments in the next 12 months. The company does not open current figures.


To get ahead in such a competitive market, Educbank has developed a proprietary technology that is capable of processing a set of operational, academic and social variables of schools. The platform establishes a correlation between student learning, operational quality and tuition fees to form a complete score.


According to the CFO, the option to raise through debt was part of the plans and should continue from now on, since the startup has plans to make rounds during the 'winter' of venture capital funds. "The credit market was very complex and suffered a lot. This fundraising brought a very positive message, because it occurred in the midst of a super pessimistic phase," he says.

"Almost 80% of the population is not attending public schools and more than 50% of municipalities do not have private institutions on their premises, and it is not for lack of demand. Access to education is a desire as great as home ownership or health insurance. Our purpose is to change this reality, and fast", says Danilo Costa, co-founder and executive chairman of Educbank.


Competition on the rise


According to the 2022 School Census, Brazil had 47.4 million students in basic education, in 178.3 thousand schools. In the transition from 2021 to 2022, the sector increased by 1.5%, adding another 714,000 students. Growth was higher in public schools, with a 10.6% increase in enrolment.

In such a hotly contested sector, it is natural that Educbank is not alone. Another startup fighting for space is Isaac, a financial services platform for schools. In November, the company raised $125 million in a round led by General Atlantic, joined by Softbank and Kaszek.

Educbank, a fintech that works to solve the problem of default in primary schools, has just raised BRL 70 million through a debenture fully securitised in tuition fees. The operation - the first of its kind for the segment in the country - was coordinated by Itaú BBA. The issue will be carried out in three series, the first two with public distribution and the third, private. The maturity of the papers is 2026.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y solamente sus autores son responsables de ellas. No reflejan ni comprometen el pensamiento o la opinión del equipo de Latam Fintech Hub y, por lo tanto, no pueden interpretarse como recomendaciones emitidas por la plataforma. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista en el ecosistema Fintech.

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