We are delighted to announce our Seed investment in Quansa, a company focused on financial health of employees, distributed through employers as a benefit.
Financial Uncertainty: a very large and serious problem
The anxiety and stress caused by financial insecurity have been part of our society since the early days of capitalism. Millions of people around the world have experienced firsthand the physical and mental pains brought up by financial struggles, and almost all of us have gone through, or seeing someone we love, going through difficult times due to the lack of financial stability.
This situation was only exacerbated in times of economic volatility, and what happened during COVID is just another recent example of this phenomenon. Only in Latin America, we believe that there are at least 50 million workers with a total of ~$200-300B in annual salaries who could be served and helped by financial and educational solutions such as Quansa’s.
One of the major negative consequences of this problem lies in the workplace. According to a research from PwC, 59% of employees report financial stress as the major cause for distraction at work, well above factors such as unemployment risk (15%), difficulties in relationships (10%) and health issues (around 4%). In addition, another research from MetLife shows that 40% of employees have taken some unexpected time off in the past 12 months to deal with a personal financial issue.
In summary, what we see is that the fabric of our society is being harmed by ruptures in our financial well-being, and we are strong believers that the power of technology can help us design new ways to improve the lives of millions of people, with innovative business and revenue models that align interests of companies, providers, and employees.
Strong business model with aligned interests
In the past few years, we’ve seen multiple discussions around how to provide solutions for this problem, and what we realized is that, before thinking about any aspect of the business model, it is crucial to align incentives as a matter of first principles. Companies who decide to take upon the challenge of helping employees to improve their financial lives should start giving the first steps already in the right direction.
In the case of Quansa, the first key insight the team had towards aligning interests was to charge employers (instead of employees or even financial services companies), so as to avoid costs being passed through to the employees. The essence of this idea is to provide the solution as a true corporate benefit. Why is that so important? When a company offers financial health for free, but charges an origination fee for every client that takes a loan, the incentive is guided towards volume origination, which can lead to overleverage and even more financial stress. As Charlie Munger said, “Show me the incentive and I will show you the outcome”.
Once the first foundation has been established, Quansa came up with a three-pronged approach that focuses on delivering real value.
- Scan of financial situation: first, the company performs a comprehensive analysis of an employee’s financial situation, understanding where the main gaps and opportunities for improvements are;
- Tools for financial education: second, Quansa offers several tools for immediate and continued financial education in a simple and systematic way, with real practical examples employees can relate with;
- Solutions to improve financial health: lastly, it offers employees the best options and practical steps on how to improve their financial lives via solutions such as debt refinancing, access to government benefits, wage anticipation, etc. Also, by linking to paychecks, Quansa helps employees automate behaviors like paying off debts and saving part of their salaries, with an opportunity to fundamentally change how financial products are priced and delivered.
Through these principles and business model, Quansa helps not only employees, who experience a drastic reduction in financial stress and anxiety, but also employers, who will have happier, less stressed, and more productive employees. And, as a byproduct, it creates a very sticky solution that employers will not want to remove.
The right team with the right mission
At Valor, we always prioritize investments in companies that go after real problems in very large markets via innovative business models, but more importantly, who are led by exceptional people driven by a clear purpose and mission.
When we first met Mafalda Barros and Gonzalo Blanco at Stanford Business School, we were struck by their passion and interest in finding a way to truly help Latin American people improve their lives, by bringing a solution that caters to people’s real needs. We were also very impressed by their accomplishments in their personal and professional lives, with solid experiences working with multiple challenges in many countries of LatAm.
Once they laid out their vision and plan to Quansa, it became clear that this is a model and these are the Founders we want to support: they founded the Company while still at Stanford, opened operations in Chile during the early months of COVID-19, and showed an impressive resilience since the early days of the project. And, more recently, they brought their mission to Brazil, in order to help more and more employees to just live better and bring a disruptive and positive change to the country.
Valor is fully aligned with Gonzalo’s and Mafalda’s vision of empowering workers in Latin America to get control of their financial lives and by doing so improving the lives of millions of people in the region.
We are excited to welcome them to the Valor family!