AI transcript
0:00:02 – There was 80% smartphone penetration,
0:00:05 and I think about 20% credit card penetration.
0:00:07 – What works in Argentina doesn’t work in Brazil,
0:00:09 doesn’t work in Colombia, doesn’t work in Mexico.
0:00:13 – Today, companies go globally increasingly fast
0:00:14 from day one, but banking is still country
0:00:16 and currency specific.
0:00:18 – We’re gonna see the most valuable companies
0:00:21 in the region being technology companies.
0:00:25 – There’s no way to build in Brazil unless you’re in Brazil.
0:00:28 – It requires a totally different mindset
0:00:30 when it comes to product development.
0:00:33 – Hello everyone, welcome back to the A16Z podcast.
0:00:35 Now, if you’ve been listening over the last few weeks,
0:00:38 hopefully you’ve followed our Olympic series.
0:00:41 So far, you’ve learned how Olympian Ali Reisman
0:00:43 has traversed the transition from gymnast to investor,
0:00:46 but also you’ve explored how few technologies
0:00:48 actually move the needle in athletics,
0:00:50 and also we’ve dissected the forces
0:00:52 behind the ongoing competition for talent
0:00:55 across both France and the UK.
0:00:56 Now, if you’ve missed those episodes, of course,
0:00:59 be sure to go back and give them a listen.
0:01:00 But today, we cap off the series
0:01:03 by turning our attention to Latin America.
0:01:05 We’ll explore why the region has long been overlooked
0:01:08 despite a highly proficient, technical savvy,
0:01:10 internet penetrated population.
0:01:13 Plus, the role regulation has played as a tailwind,
0:01:16 the nuances of recruiting in the region, and much more.
0:01:19 Our guests today are all investing in Latin America
0:01:20 in their own way.
0:01:24 First up, Dilip Thasman, founder and CEO of Jeeves,
0:01:26 a financial platform for global startups
0:01:28 which operates in over 20 countries,
0:01:31 which has recently expanded its presence in Latin America.
0:01:33 Next, we have Santiago Suarez,
0:01:35 the co-founder and CEO of Addi,
0:01:37 a Colombian buy-now-pay-later fintech
0:01:39 with over 2 million clients.
0:01:43 We also have Gabriel Vasquez, investment partner at A16Z,
0:01:46 where he’s focused on enterprise and fintech investments,
0:01:48 of course, in Latin America.
0:01:50 And this conversation was moderated
0:01:52 by A16Z general partner, Angela Strange,
0:01:55 who, of course, has also long invested in the region.
0:01:58 All right, let’s kick things off with Santiago,
0:02:01 or Santi, who reflects on the opportunity
0:02:02 that drove him back to Colombia,
0:02:04 where he’s originally from,
0:02:06 after years of working in financial services
0:02:08 in the United States.
0:02:12 As a reminder, the content here
0:02:14 is for informational purposes only.
0:02:16 Should not be taken as legal, business, tax,
0:02:17 or investment advice,
0:02:20 or be used to evaluate any investment or security
0:02:21 and is not directed at any investors
0:02:24 or potential investors in any A16Z fund.
0:02:27 Please note that A16Z and its affiliates
0:02:28 may also maintain investments
0:02:30 in the companies discussed in this podcast.
0:02:33 For more details, including a link to our investments,
0:02:36 please see a16z.com/disclosures.
0:02:43 – There’s a sense of duty.
0:02:44 You know, I’m Colombian,
0:02:47 I’ve had the opportunity to see many incredible things
0:02:49 in the U.S., world-renowned companies,
0:02:54 JP Morgan, McKinsey, some fun startup experiences.
0:02:56 So there was a little bit of being able to go back home
0:02:58 and contribute to the local ecosystem
0:03:01 that I think inspired me.
0:03:02 And then the other thing you realize
0:03:05 is that Latin America is not China,
0:03:07 so I’m not gonna be sitting here,
0:03:08 be like, “Oh, it’s the new China.”
0:03:10 But it was so overlooked.
0:03:14 You had tens of millions of people in a single country,
0:03:16 and everyone just thought it was gonna fly over country
0:03:18 for technology development.
0:03:21 And then also realizing that you had a English proficient,
0:03:24 technically sophisticated population,
0:03:25 both in the consumer side, but also, frankly,
0:03:29 on the call it supply of talent side,
0:03:33 that then led me to say that I should probably move back
0:03:35 and see what we could make happen.
0:03:36 And in hindsight, it’s always easy to see,
0:03:38 like, “Oh, we had a master plan.”
0:03:41 There was a vague plan, I wouldn’t call it a master plan,
0:03:44 but enough of an intuition that there was a big thing going.
0:03:48 That’s what I needed to get myself on a plane
0:03:49 and move back to Colombia.
0:03:50 – Yeah, and I think one of the stats
0:03:53 that really struck me back when you started Adi
0:03:56 was there was 80% smartphone penetration,
0:03:58 and I think about 20% credit card penetration.
0:04:01 So just a real opportunity to bring
0:04:04 what is fundamental access to being able to run small businesses
0:04:06 to run commerce to the country.
0:04:09 So Dileep, you approached Latin America
0:04:10 from a different perspective.
0:04:12 It’s like, Jeeves was started right off the bat
0:04:15 with a very global ambition.
0:04:18 But then Latsam quickly became one of your biggest markets.
0:04:20 And I think interesting on the Jeeves website,
0:04:24 it says, “Latin America is entering the golden age for tech.”
0:04:27 – Sure, so we’re basically building a global business bank.
0:04:29 And the idea is that today,
0:04:32 companies go global increasingly fast from day one,
0:04:34 but banking is still country and currency specific.
0:04:37 So we provide corporate cards, payments, deposits,
0:04:38 et cetera, four business banking accounts.
0:04:43 So when we look at a country or region to start in,
0:04:45 there’s usually about two or three things we look at.
0:04:48 One, is it a region that’s opening up to in tech?
0:04:50 I think one of the things that’s most exciting
0:04:53 about Latin America was that there’s a regulatory push
0:04:55 to be more open towards fintech.
0:04:56 I mean, you look at picks in Brazil,
0:05:00 it’s just amazing what’s been done in about three, four years.
0:05:01 And so that’s a pretty good indicator
0:05:04 that you can build what I call banking two-pino
0:05:06 or three-pino on top of what’s already in market.
0:05:07 So that’s the first one.
0:05:10 The second one, which I keep saying company like Jeeves
0:05:12 couldn’t have been built really five, six years ago
0:05:16 because there was infrastructure components like open banking
0:05:17 that wasn’t around five, six years ago.
0:05:20 And again, if you look at Latin, if you look at Mexico,
0:05:22 you look at Brazil, that’s at a level
0:05:23 that’s actually more sophisticated
0:05:24 than a lot of other countries,
0:05:26 including some parts of the US.
0:05:27 And so that was very exciting.
0:05:29 And then the third one, which was very, very obvious
0:05:31 was where is the flow of capital going?
0:05:34 And that also correlated with Latin.
0:05:37 And so for us, our first launch market was Mexico.
0:05:39 Till today, it’s our biggest market.
0:05:42 And it’s also where we test any product that we launch.
0:05:44 And so it made it very, very simple for us
0:05:46 that Brazil would follow Mexico,
0:05:48 but Mexico was the origination point.
0:05:50 And the gap, I think, going back to what San Quim
0:05:52 was talking about was very, very clear.
0:05:55 You’d seen a version of what we’re building in the US.
0:05:57 It hadn’t really scaled internationally.
0:05:59 And so we looked at this from a perspective
0:06:01 of if you were building a global business bank,
0:06:02 what are the regions you touch?
0:06:05 Latin was always going to be the core of where that would sit.
0:06:08 And then two, does it have the infrastructure
0:06:11 that we need to be successful, which it does?
0:06:13 – That’s a good tip for talking about the region overall.
0:06:16 So Gabe, we’ve been investing in Latin
0:06:18 for probably more than five years now.
0:06:19 And I think a lot of investors actually
0:06:21 have gotten excited about Latin.
0:06:22 So the secret is out.
0:06:24 I think one of the arguments in the early days was,
0:06:26 well, there’s lots of opportunities
0:06:28 to invest in companies closer to us,
0:06:30 which obviously we do.
0:06:33 What drove the interest in the region back
0:06:34 when it was a little bit left obvious?
0:06:36 – Super excited to talk about Latin,
0:06:38 something that I’m incredibly passionate about.
0:06:40 So to your point, I think this is a question
0:06:42 that companies like Nubian got a lot
0:06:45 when people were initially analyzing the opportunity,
0:06:47 especially at the early stages.
0:06:51 Nubian is now a 55 billion market cap public company.
0:06:54 And when you think about the winners in the region,
0:06:56 you also have other players like Martel Lira
0:06:59 that came before, but as of last week,
0:07:01 actually became the most valuable company
0:07:05 in Latin America, finally surpassing Petrobras.
0:07:06 And I think that that’s an statement
0:07:08 of the opportunity in Latin America
0:07:10 that eventually we’re going to see
0:07:11 the most valuable companies in the region
0:07:13 being technology companies.
0:07:15 We have examples of successful companies
0:07:18 like Stone, XP, the local DTEX
0:07:19 that all of them have IPO
0:07:21 and are in the public markets right now.
0:07:23 And that leads to the second point
0:07:25 that is actually quite exciting,
0:07:29 which is you have all this talent kind of being nurturer
0:07:31 that had experience at operating
0:07:33 a successful technology companies in the region
0:07:37 and now want to build their second or third company.
0:07:40 And I’ll say that the last point is
0:07:42 there’s a lot of opportunities
0:07:43 when it comes to building Latin America
0:07:45 that is slightly different from countries
0:07:47 like the United States where in Latin America
0:07:49 there’s opportunity to build super apps.
0:07:51 The example that I usually like to use for this
0:07:55 is a company called Paxiguro based out of Brazil.
0:07:57 This company actually is a public company
0:07:59 that started as a merchant aquire
0:08:01 for micro merchants in Brazil.
0:08:03 Then they realized that a lot of the customers
0:08:06 that they serve, they didn’t have bank accounts.
0:08:10 So they created a bank that served this micro merchants.
0:08:12 Then they realized that a lot of the consumers
0:08:14 that went and buy with products from these micro merchants
0:08:16 didn’t want to transact online.
0:08:19 So they built a marketplace on top of it.
0:08:21 And they realized that these consumers
0:08:22 also didn’t have a bank account.
0:08:24 So they eventually developed like a consumer bank.
0:08:27 This company basically created four different companies
0:08:28 within one.
0:08:30 And I think that that speaks of the opportunity
0:08:31 of Latin America.
0:08:34 We’ve seen companies like Rapi launching a bank
0:08:35 or companies like Nuba now
0:08:38 that have actually launched a marketplace as well.
0:08:40 – Let’s stick on the talent point for a bit,
0:08:42 which I think is the opportunity to challenge
0:08:43 in every single market.
0:08:47 Santi, you’ve built a world-class talent team
0:08:48 based in Colombia,
0:08:50 but you’ve also recruited global employees.
0:08:51 What have been the things that have been
0:08:52 advantageous have been in Colombia
0:08:54 and what have been maybe some of the challenges?
0:08:56 – Things that are advantageous over being Colombia.
0:08:58 As a Colombian, you get to know the talent
0:08:59 a little bit better.
0:09:03 So you have that edge that you wouldn’t have otherwise.
0:09:04 It’s a small country,
0:09:06 certainly compared to Mexico or Brazil.
0:09:09 So it also allows you to plug into
0:09:11 the deep talent pools very quickly.
0:09:12 And probably the most obvious one is
0:09:14 you’re an employer of choice.
0:09:17 So we offer equity to every single one of our colleagues
0:09:19 from the call center operators
0:09:23 to starting sales folks all the way up to senior folks
0:09:24 that really allows you to get
0:09:27 like your pick of the litter where it comes to talents.
0:09:28 The challenging part is
0:09:31 you don’t have any executive experience.
0:09:33 And at some point you need to balance this.
0:09:36 So what has worked for us is
0:09:38 kind of get the raw material here
0:09:40 because you have very talented people
0:09:45 and then sprinkle it with extremely competent leadership.
0:09:46 And by the way,
0:09:47 some of these local folks eventually become leaders.
0:09:49 We’re seeing some of them actually be
0:09:51 transformation leaders to our company.
0:09:53 But then that’s because you pair them with product leaders
0:09:57 with experience that affirm, advise, capital one.
0:10:00 So for us, that has been the recipe for success.
0:10:02 And I think you have to be creative
0:10:03 when you’re in Latin America.
0:10:06 So for example, or a remote company in large parts
0:10:10 where we can attract these key folks in key positions.
0:10:11 But that has worked really well.
0:10:13 Get the raw talent in which there’s a lot
0:10:15 and then pair them with the right
0:10:19 CISO and leadership to see the magic happen.
0:10:20 – Would you say a little to Gabe’s point,
0:10:24 five years ago, maybe the scaled LATAM companies
0:10:27 didn’t have as many seasons execs,
0:10:30 but now those season executives are starting to come out
0:10:33 of some of the large will $2 billion exits in Latin America.
0:10:36 Because you don’t necessarily have to go to the U.S.
0:10:38 – I think so.
0:10:41 Though I would say that’s still very much
0:10:44 in the early beginnings, early beginnings in part
0:10:47 because I think it’s a weird ecosystem.
0:10:50 Mercado Leavers are almost 30-year-old company.
0:10:53 So we have some great ex-Mellie folks,
0:10:55 but when they joined Mellie,
0:10:56 Mellie was a 20-year-old company.
0:10:59 And then it’s just interesting because I think
0:11:01 some of the reference cases of LATAM,
0:11:05 Mellie, New and Rapi each has a very distinct way
0:11:07 in which they build the culture.
0:11:10 So you need to be very mindful of that
0:11:12 because you get a lot more, let’s say,
0:11:14 executive variety than in the U.S.
0:11:17 I think if you went to a B2B SaaS company in the U.S.
0:11:19 and you said, “I want a VP of product marketing,
0:11:22 “seriously, you’re gonna get the same person.
0:11:23 “I know exactly what you’re getting
0:11:25 “and you know exactly what you’re not getting.
0:11:27 “I think if you get the VP of product marketing
0:11:29 “at Mellie, at Rapi and at New,
0:11:31 “you’re gonna get three very different cats.
0:11:34 “None of whom may be the person you’re looking for
0:11:35 “because they’re very just in karate culture.”
0:11:38 So I think you just have to be very aware of that,
0:11:41 that you don’t yet have this kind of standard.
0:11:43 In part because the region is so varied, right?
0:11:44 So what works in Argentina doesn’t work in Brazil,
0:11:46 doesn’t work in Colombia, doesn’t work in Mexico.
0:11:47 – Makes a ton of sense.
0:11:50 So maybe if Sonzi’s built in Colombia,
0:11:53 you’ve built primarily in Mexico, Brazil,
0:11:55 and obviously other global regions.
0:11:57 When you talk about the experience of scaling up
0:11:59 in two countries that are in the same continent,
0:12:01 but very different beyond that.
0:12:05 – Yeah, so the way our model works is we break up the functions
0:12:07 depending on what touches the customer directly.
0:12:09 And so usually the first hire in any region
0:12:12 is a general manager and they tend to be fully local.
0:12:14 I think there’s no way to build in Brazil
0:12:15 unless you’re in Brazil.
0:12:18 There’s no way to really build in Colombia or Mexico
0:12:19 unless you’re in Colombia and Mexican.
0:12:22 So that model has worked fairly well so far
0:12:25 where anything that’s customer facing is fully local
0:12:27 and then we build the product,
0:12:29 engineering, finance, et cetera, centrally.
0:12:33 What’s changing now is as we get more into scale,
0:12:34 we’re actually starting to move
0:12:36 some of the product components also locally.
0:12:38 And that is a little bit different
0:12:39 from how it was in the beginning.
0:12:41 And by the way, we learned this also the hard way
0:12:44 where you can sell, but then if you need to collect
0:12:46 and you call them from Texas or Brazil,
0:12:48 they’re like, yeah, I’m not picking up your phone call.
0:12:50 You have to be local, you have to be on the ground,
0:12:51 you have to be collecting there as well.
0:12:53 So anything touching the customer
0:12:55 has to be fully local to that region.
0:12:56 What we’re learning now,
0:12:58 and we’ve been in market now for about three years,
0:13:01 is that even the product side at scale
0:13:04 has very specific nuances that need local knowledge.
0:13:06 And I think to the point Gabe was making,
0:13:08 now what’s interesting is you have folks
0:13:10 that have seen what good looks like.
0:13:12 They’ve been at new, they’ve been at Mercado.
0:13:14 They know a version of what this looks like.
0:13:16 That’s been really, really useful
0:13:18 that we didn’t have honestly even five, six years ago
0:13:20 where you can hire someone that’s built the product.
0:13:22 Now leadership, I think I kind of agree,
0:13:24 like you have to find the right person
0:13:26 for the right culture fit.
0:13:28 And we have had some success.
0:13:30 We’ve had some areas we’re still working through.
0:13:33 But you can find what I call kind of intermediate managers
0:13:35 that are, I think, fairly consistent for the region.
0:13:37 They know what payments looks like.
0:13:38 They’ve seen it at scale.
0:13:40 They’ve seen it at a public Latin company.
0:13:42 And that’s been very, very helpful for us.
0:13:46 – You operate in three, four, five maybe languages.
0:13:48 How do you manage to get smooth communication
0:13:49 across the country?
0:13:52 Do you hire necessarily speaking more than one
0:13:54 or using AI translation tools?
0:13:55 – Yeah, it’s a good question
0:13:57 because it really affects culture.
0:14:00 And so one of the things that we try to do
0:14:03 is we have people that obviously locally
0:14:05 are fully fluent in the local language,
0:14:07 but you have to be able to communicate in English as well
0:14:09 because you do have counterparts in UK.
0:14:12 You do have counterparts in the US, in Canada, et cetera.
0:14:15 But everything that we do in region tends to be local.
0:14:17 And it even took us about two years
0:14:21 just to get the localized experience on the product.
0:14:23 – Santi, how are you balancing Spanish and English
0:14:25 and recruiting employees across the country
0:14:28 who are very talented but might not speak English,
0:14:32 which then restrains the recruiting pool for sure?
0:14:35 – We’ve always been extremely religious
0:14:37 about the English speaking requirement.
0:14:40 We are now testing a couple of instances
0:14:43 on relaxing it and using AI to figure this out.
0:14:44 I agree with you.
0:14:47 I agree with Delib, the biggest challenge here is culture.
0:14:50 But we’re actually even airing on the other side.
0:14:52 At this point, we’ve actually gone almost all natives.
0:14:54 So now you need CO approval to hire anyone
0:14:55 that’s out in Colombia.
0:14:57 We’re a single country focus.
0:14:59 We were gonna go deep here.
0:15:04 And what we realized is that there are certain positions
0:15:09 for which the expertise outweighs the local knowledge.
0:15:10 Most famous, the credit.
0:15:14 But pretty much everywhere else, you want the person around.
0:15:16 You want them using your product on any given day.
0:15:18 You want them getting rejected.
0:15:20 You want their app crashing.
0:15:22 You want all of these things that are extremely difficult
0:15:26 to achieve if you’re not on the ground.
0:15:28 And also, we now serve a broader swath
0:15:29 of the Colombia population,
0:15:31 including a bunch of people who don’t speak English.
0:15:33 So culturally, even just having people
0:15:35 who speak English at your company,
0:15:36 they may as well be from a different country, right?
0:15:39 You just have a bunch of people out in the Presidio
0:15:40 in some Francisco building product
0:15:42 for the entire United States
0:15:44 with no real sense of what’s happening
0:15:47 in choose your favorite Midwestern state.
0:15:51 So that’s also a lesson we have recently learned.
0:15:54 – Watch out for those Presidio product managers, agreed.
0:15:57 All right, I wanna zoom out a little bit.
0:16:00 You guys are clearly building in financial services.
0:16:03 I think that there is a specific opportunity
0:16:05 for financial services in the region.
0:16:08 And we even wrote a post together entitled for Brazil,
0:16:10 which was that regulation is a tailwind.
0:16:12 There are two words that you never hear
0:16:13 in the same sentence in general,
0:16:15 but in Latin America, you sort of do.
0:16:19 So maybe we gave outline what’s going on in the region there
0:16:22 that creates a particularly interesting opportunity.
0:16:24 – Yes, so I think that there’s three main areas.
0:16:28 The first one, I think is less specific to the region,
0:16:32 but more specific that fintech is a local local business.
0:16:35 So there’s a lot of local regulation
0:16:37 that plays an important role
0:16:39 when it comes to operating different countries.
0:16:40 There’s domestic infrastructure,
0:16:42 like when you’re thinking about building a business
0:16:45 in Brazil or Mexico, you kind of have to rely on.
0:16:46 And there’s also cultural nuances.
0:16:49 Brazil completely different from the rest of Latin America
0:16:53 and even Mexico is completely different from South America,
0:16:56 even though all the countries speak Spanish instead of Brazil.
0:16:59 Brazil has actually been quite advanced.
0:17:01 The central bank has done a great job
0:17:03 basically disrupting the duopoly
0:17:04 between the merchant acquires
0:17:07 that enable players like Nuba to come in
0:17:08 and take advantage of that.
0:17:12 And then the rise of payment acquires like stone.
0:17:14 And then they created open finance
0:17:17 and from there, they started the instant payment solution
0:17:20 that now is the main payment method in Brazil called PICS.
0:17:23 One of the aspects that’s actually quite exciting
0:17:25 as well as the smartphone penetration
0:17:26 is quite high in the region.
0:17:30 So the numbers vary between 75 and 80%.
0:17:32 But when you look at the credit card penetration
0:17:35 or even the bank population in countries like Mexico,
0:17:39 it goes around 50%, which is quite low
0:17:40 when you compare it to countries like Brazil,
0:17:42 where it’s around 85%.
0:17:44 So there’s a lot of opportunities still.
0:17:47 They basically can have a bank in their pocket.
0:17:49 And when it comes to the size of the market,
0:17:54 Latin America, there’s 650 million people living in the region.
0:17:56 The GDP per capita is higher,
0:17:59 especially when you compare it to other emerging markets like India.
0:18:02 So I think that those are the three main reasons
0:18:05 why Latin America has become such an important hub
0:18:07 for fintech innovation.
0:18:10 Hey, it’s Steph.
0:18:12 You might know that before my time at A16Z,
0:18:15 I used to work at a company called The Hustle.
0:18:17 And then we were acquired by HubSpot,
0:18:19 where I helped build their podcast network.
0:18:20 While I’m not there anymore,
0:18:23 I’m still a big fan of HubSpot podcasts,
0:18:25 especially My First Million.
0:18:29 In fact, I’ve listened to pretty much all 600 of their episodes.
0:18:31 My First Million is perfect for those of you
0:18:33 who are always trying to stay ahead of the curve,
0:18:36 or in some cases, take matters into your own hands
0:18:38 by building the future yourself.
0:18:41 Hosted by my friends, Sam Parr and Sean Curry,
0:18:44 who have each built and sold eight-figure businesses
0:18:45 to Amazon and HubSpot,
0:18:49 the show explores business ideas that you can start tomorrow.
0:18:52 Plus, Sam and Sean jam alongside guests like Mr. Beast,
0:18:54 Rob Dirdek, Tim Ferriss,
0:18:57 and, every so often, you’ll even find me there.
0:18:59 From gas station pizza and egg carton businesses
0:19:01 doing millions all the way up to several guests
0:19:03 making their first billion.
0:19:05 Go check out My First Million
0:19:06 wherever you get your podcasts.
0:19:09 (upbeat music)
0:19:16 – It’s a great from a thesis point of view.
0:19:18 We have two people that are actually going through it,
0:19:19 starting maybe with you, Santi,
0:19:21 who’ve recently spent a lot of time
0:19:24 with the Colombian banking regulators.
0:19:28 Is the practicality the same as investors might perceive?
0:19:30 And what advice might you have
0:19:31 to other entrepreneurs in the region?
0:19:34 – I would say, no, the practicality is not always
0:19:36 the same thing that the investors might see
0:19:38 for many reasons, obviously,
0:19:41 and not least of which, this is still an emerging market.
0:19:43 And I think when you do venture investing,
0:19:44 you’re taking two types of risk.
0:19:45 You’re taking venture risk
0:19:47 and you’re taking emerging markets risk.
0:19:49 But that being said,
0:19:52 I think the situation in Colombia
0:19:54 is extremely pragmatic, right?
0:19:56 You’ve got a regulator who’s issued licenses.
0:19:58 You’ve got a regulator who’s pushing
0:20:00 for financial inclusion.
0:20:02 You’ve got a simple bank that’s driving
0:20:03 instantaneous payments adoption
0:20:05 following very much the playbook of Brazil.
0:20:08 So if you’re sitting here now over just 10 years ago,
0:20:09 I mean, when we started,
0:20:13 I think they hadn’t issued a single de novo banking license
0:20:16 and God knows, like a decade.
0:20:18 And now they issued three or four a year,
0:20:20 similarly with the payments side, right?
0:20:23 Like the payments system in Colombia is still a bit of a mess,
0:20:25 but it’s much less a mess than it was
0:20:29 in our own track launching takes in the next 18 months or so.
0:20:34 So you do see a very pragmatic regulator
0:20:35 and honestly, in that case,
0:20:38 they’re differentiated from the US event,
0:20:42 which is a bit more of a unknown, unknown, right?
0:20:45 You just don’t know what regulator and the agenda is.
0:20:46 You obviously have the Fed,
0:20:49 you have the FAC, the CFPB, the SCC,
0:20:51 and you can’t quite figure out what the boundaries are.
0:20:52 What I can tell them a lot of times,
0:20:54 it’s not like in the US where the boundaries are X,
0:20:56 but then you’ve got to like interpret the tea leaves
0:20:58 or what actually X means.
0:20:59 Here, it’s pretty well-defined.
0:21:01 So if you have the patience
0:21:03 for dealing with the emerging markets environment,
0:21:06 you have the patience of dealing with the natural challenges
0:21:07 that come from being outside the US,
0:21:09 it can be a very attractive hunting ground
0:21:12 and a very attractive place to build a company.
0:21:13 – I think just touching on this point,
0:21:15 actually one of our big hires last year
0:21:18 was getting the Chief Compliance Officer from Arqueta,
0:21:19 which is a public company to join us.
0:21:21 And a big reason is exactly this,
0:21:24 which is as we scale from a smaller company
0:21:26 moving really fast to a bigger company,
0:21:28 I think the biggest thing that we started noticing
0:21:31 was that we were much more on the radar for folks locally.
0:21:35 And so, Brazil so far, it’s smaller for us
0:21:37 as an operation compared to Mexico.
0:21:39 But in Mexico, we have invested quite substantially,
0:21:41 even from a licensed perspective,
0:21:44 but also from let’s call it light lobbying
0:21:46 in terms of companies that we work within,
0:21:48 such as external law firms, right?
0:21:51 And so it’s come back once or twice where we’ve had,
0:21:54 let’s just call it issues that we had to work through
0:21:54 in Mexico.
0:21:57 And the one learning for me is as we scale
0:21:58 and as we get bigger,
0:22:00 whenever you think you need to do it,
0:22:02 you probably should have done it six months before that.
0:22:04 – I think where you’re both hitting on is,
0:22:09 it’s still an onerous regulatory process.
0:22:10 But unlike in the US and other regions,
0:22:14 is at least a relatively clear onerous regulatory process,
0:22:17 such that if you put together a very strong team,
0:22:20 like you still need to recruit A plus compliance people,
0:22:23 they still need to do a lot of work to get it together.
0:22:27 But the government’s do seem much more motivated
0:22:29 to create competition in their regions.
0:22:30 And in particular,
0:22:35 I think one of the stats often quoted is banks in Brazil,
0:22:36 it’s a little bit different with new bank,
0:22:38 but the banks in Brazil, Mexico, Columbia,
0:22:41 serve the top 20% of the population
0:22:44 and the rest are very starved for good financial services.
0:22:47 And one of the ways to solve that is to allow
0:22:49 de novo licenses for new companies,
0:22:52 tend to the regions and provide more innovative products.
0:22:54 They want to try to work with new entrants,
0:22:57 whereas in the US, it isn’t always like that.
0:22:59 And I’m always surprised in a good way
0:23:02 in terms of the companies that we get to serve
0:23:04 in Mexico, Brazil, et cetera.
0:23:06 And it goes back to the same point,
0:23:10 which is most of the options are older banks.
0:23:11 When we were in Brazil,
0:23:13 we had a customer that was coming to us and be like,
0:23:14 “Hey, the fact that we have virtual cards, this is great.”
0:23:16 And for us, that’s almost table stakes.
0:23:17 Like we don’t even sell that
0:23:20 because we expect that to be just an offering in market.
0:23:22 And so that’s what I keep getting reminded about,
0:23:24 which is it’s still a huge monopoly.
0:23:26 And I think regulators do see that in a way
0:23:27 that they don’t in the US.
0:23:28 – Santi, you touched on this.
0:23:31 I think one of the advantages of building in Columbia
0:23:33 is you do become the employer of choice.
0:23:35 There’s not 50 adi competitors
0:23:38 that employees are choosing between,
0:23:42 but then you do run into different types of challenges.
0:23:45 – What’s surprising one is the mental model
0:23:49 of most investors around TAM remains very much
0:23:52 what it should be for about 95% of companies.
0:23:55 I think when you combine retail and financial services,
0:23:57 the way you think about TAM is probably a little bit different.
0:23:59 I mean, I will tell you, even I have learned,
0:24:01 if I look at the performance of our company today
0:24:04 versus what we expected out of the Colombian market,
0:24:06 and I don’t think anyone would have thought
0:24:07 we’d be here within five years, right?
0:24:11 So I would say the first thing is your understanding of TAM,
0:24:13 when you think about Columbia, it’s just very difficult.
0:24:17 And the other piece is your product development approach
0:24:20 has to be very different,
0:24:25 because what you lose by not being in the US or in Brazil,
0:24:27 you gain by being able to go extremely deep,
0:24:28 extremely quickly,
0:24:31 but it requires a totally different mindset
0:24:33 when it comes to product development.
0:24:35 And by the way, paradoxically,
0:24:38 the aspirations of choice are not in the US or not in the UK,
0:24:40 but are in Central Asia.
0:24:43 In Turkey, these are the places
0:24:47 where people have also figured out small country,
0:24:49 deep TAM equals massive successful outcomes.
0:24:51 So when people ask us, “Where do you get inspired by?”
0:24:52 We always start with CASPE,
0:24:55 it’s a $30 billion public company
0:24:58 that is single country focused in Kazakhstan, GDP,
0:24:59 half of Colombia’s.
0:25:02 So those are some of the things
0:25:04 that you’ve got to start thinking about
0:25:07 and also recognize that even the successful models
0:25:09 were built in a different paradigm.
0:25:12 So Robbie was built in a zero interest rates paradigm.
0:25:16 Nu was built without almost 12 year old company
0:25:18 built and raised in a different world.
0:25:21 So just knowing all of these things as a founder,
0:25:23 our important period of our NGO,
0:25:26 but certainly when your geography is not Brazil,
0:25:28 not Mexico, so to speak.
0:25:30 – Yeah, now when hitting on the point that Gabe made also
0:25:34 is that the products can encompass so many more,
0:25:37 almost many companies that the results end up
0:25:39 being a lot bigger than you might think
0:25:41 if you just looked at TAM.
0:25:42 – Well said.
0:25:46 I think one of the powers of Jeeves that you’ve discovered
0:25:51 is the strong need for Latin American companies
0:25:54 to move money both from the US into Latin America,
0:25:59 into other corridors that might be a little bit less obvious.
0:26:01 But along with that comes with, I think,
0:26:03 more than just one country regional challenges,
0:26:05 but multi-country regional challenges.
0:26:07 – So one of the things that’s interesting
0:26:09 is everything we do is B2B
0:26:11 and there’s obviously consumer components
0:26:14 and I would say most fintechs tend to focus
0:26:16 on the consumer side, which is massive.
0:26:18 But B2B has very different problems
0:26:19 that are also very unique
0:26:21 to how businesses move money and spend.
0:26:23 And so just as an example,
0:26:25 we launched the ability to move money
0:26:27 out of Mexico, Colombia, Brazil.
0:26:30 One of the hardest things is if you move money out of Colombia,
0:26:31 you’re usually gonna get flagged
0:26:34 and you’re not moving $50,000 or $100,000.
0:26:35 You’re moving $50,000 or $100,000.
0:26:37 And so part of where we invest in
0:26:39 is how do you have the ability to move that
0:26:42 in an efficient way so that we can actually compete
0:26:44 with local offerings in the region, right?
0:26:45 And so it’s one of those things
0:26:48 where you have to invest a lot in compliance.
0:26:50 You have to invest a lot in operational efficiencies,
0:26:54 but it is fairly untapped because it’s so, so hard.
0:26:55 I keep saying this, but for me,
0:26:57 the difficulty is the defensibility.
0:26:59 It’s the fact that it is this hard.
0:27:01 It’s the fact that moving money,
0:27:03 especially for B2B is very complex to do,
0:27:05 that gives an opportunity to us
0:27:06 to kind of succeed in the market.
0:27:08 But it takes a lot of work.
0:27:10 And what I’m coming back to on the payment side
0:27:12 is how do we layer this on top of credit,
0:27:13 which is our core offering,
0:27:16 so that the platform becomes much more sticky.
0:27:18 And one of the things we’ve started to see
0:27:20 is that retention is actually a lot higher
0:27:23 if a customer uses us both for cards,
0:27:24 which I call kind of like the candy, right?
0:27:26 It’s credit, we give you the money.
0:27:28 Everybody wants that in some sense,
0:27:30 but then moving to payments, which is your money,
0:27:32 and you’re trusting us to move your money,
0:27:34 which is a very different kind of go-to-market sales cycle.
0:27:36 But if you can combine the two,
0:27:37 kind of like given like a build.com
0:27:40 where you have Divi, which is the spend-management side
0:27:41 and then you have Bill, which is the payment side,
0:27:43 it becomes a very, very powerful product.
0:27:44 And so we’re still, I’d say,
0:27:46 in early innings on the payment side,
0:27:50 very, very different set of problems than corporate credit.
0:27:53 But combining those two to me provides much more value
0:27:55 to the companies that we work for,
0:27:57 especially when you come at it from a B2B angle,
0:27:59 which is very different from consumer.
0:28:00 – Yeah, I think one of the things
0:28:03 that you’re both hitting on versus in the US,
0:28:05 if you’re going to build many financial services products
0:28:07 or embed many financial services products,
0:28:10 there’s all of these different now very modern companies
0:28:15 that provide even credit as a service, KYC as a service,
0:28:17 lots of data fraud as a service.
0:28:19 When you go down to Latam,
0:28:23 those for the most part don’t yet exist.
0:28:25 And so you end up having to build a lot of that yourself,
0:28:27 which is, I would say, a disadvantage at the start
0:28:28 because it takes more time,
0:28:32 but then ends up being a significant source of defensibility.
0:28:34 – And I think one quick way to point this out
0:28:36 is when we started, one of the hardest things was,
0:28:38 how do you actually ship cards?
0:28:39 ‘Cause people forget the fact
0:28:41 that cards actually have to be delivered
0:28:42 to different countries, right?
0:28:45 And most card operators just deliver in that single country.
0:28:46 And so in the US, that’s fine.
0:28:47 It’s a massive single geo,
0:28:50 but the single currency, you can do that fairly easily.
0:28:51 But when you moved to Latam and you were like,
0:28:53 “I need to deliver cards,”
0:28:55 the provider of the cards don’t ship those cards.
0:28:57 And so we had to go figure out an operational way
0:28:59 to make that easy and bolt that on.
0:29:01 But there wasn’t a provider we could just go to
0:29:04 and be like, “Hey, can you ship this for us to six countries?”
0:29:06 – All right, I want to bring this back around
0:29:08 and looking forward to the future.
0:29:10 What are you excited about going forward
0:29:13 and what might other investors think about
0:29:15 that haven’t yet invested in the region?
0:29:18 – One of the verticals that actually has been quite exciting
0:29:20 in Latin America has been e-commerce.
0:29:23 You’ve seen players like Mercado Libre come in,
0:29:27 Rappi, iFood in Brazil, and even Calac in Mexico,
0:29:30 which is the largest private company now.
0:29:33 So I expect that we will continue to see a lot of these
0:29:35 companies tackling the e-commerce opportunity
0:29:38 as the majority of these people continue to come online,
0:29:42 and especially as the majority of the payments go online
0:29:44 and it becomes easier to transact.
0:29:46 But there’s a specific segment too
0:29:49 that I think gets, let’s notice in the region,
0:29:51 which is just the SaaS companies.
0:29:53 So in Brazil, you have companies like Totus,
0:29:55 which is a large public company
0:29:58 going after the European space.
0:30:00 But also you have companies like OutZero
0:30:02 that actually started in Argentina.
0:30:05 And when global, we’ve met a bunch of companies
0:30:06 that started in Latin,
0:30:09 they signed the largest enterprise companies
0:30:10 in Latin America.
0:30:13 They developed product really, really fast for them.
0:30:14 But then they’re also very ambitious.
0:30:15 And then they’re like, okay,
0:30:17 we want to expand outside of the region
0:30:20 because our customer set is probably not as big
0:30:20 in the region.
0:30:21 So we’re starting to see,
0:30:23 we invested in this company called UNO,
0:30:25 which is a payment orchestration company
0:30:28 started in Latin America, specifically Colombia.
0:30:30 They expanded to the region very quickly
0:30:34 and now they have operations in Europe and Southeast Asia.
0:30:37 So I think that we will continue to see a lot of that.
0:30:38 I think the opportunity set
0:30:40 when you come to the region are quite different.
0:30:42 So what gets developed in Brazil,
0:30:45 an ecosystem that the main payment method is picks
0:30:48 and 85% of the population is banked
0:30:51 and you have regulation that is pro innovation,
0:30:52 it’s very different.
0:30:54 It’s going to create different opportunity sets
0:30:55 than Mexico, for example,
0:30:57 where half of the population still doesn’t have
0:31:00 a bank account, the main payment method is cash
0:31:03 and regulation has not been a catalyst for innovation.
0:31:05 So it will be quite exciting
0:31:09 to see how this innovation emerges per country.
0:31:10 But I think with AI,
0:31:13 we’re starting to see a bunch of founders in the space
0:31:16 that are taking advantage of these new tools
0:31:18 to make their operations either more efficient
0:31:21 or lever that to have a better go to market motion
0:31:25 or actually increase even the willingness to pay for supper,
0:31:27 which I think has been one of the main challenges
0:31:28 historically in the region.
0:31:33 What do you think Silicon Valley could learn from Latam?
0:31:35 And what makes you particularly excited
0:31:38 about your regions in the next five, 10 years?
0:31:40 – One is resiliency, right?
0:31:42 You and I have a few mutual friends
0:31:45 who have been operating in the region for a long time
0:31:48 and there are nothing if not resilient and paranoid.
0:31:50 So that resilience and paranoia
0:31:52 is something I think comes in handy,
0:31:55 especially in the lean years of Silicon Valley, right?
0:31:58 So you can always do so much more with so much less
0:32:01 and I think that hustle and that resiliency
0:32:02 is something we can, if we count on.
0:32:04 And then what gets me excited?
0:32:07 I mean, honestly, it goes back to why I moved back here, right?
0:32:08 There’s just a lot of work to be done.
0:32:10 And I like what Gabe said,
0:32:15 which is that this idea of whatever is happening in AI
0:32:17 and whatever is happening in tooling
0:32:19 and ways of company building
0:32:21 can be quite transformational for Latin America
0:32:24 because in a place which doesn’t have a lot of capital,
0:32:25 and let’s be honest,
0:32:26 capital has come back to Latam,
0:32:29 but it’s not what it used to be.
0:32:33 Your ability to leverage AI, leverage no-code tools is awesome.
0:32:35 You could build companies in different ways
0:32:37 than you could even when we built a company.
0:32:39 There were a lot of things we had to invest upfront
0:32:40 that today I wouldn’t have to do
0:32:42 if I were building the company from scratch
0:32:45 because you can use AI, you can use no-code,
0:32:47 you can use some companies in the stack,
0:32:48 some of these sales vendors.
0:32:50 So I get excited about that.
0:32:53 I get excited about the fact that the jobs know we’re near done
0:32:56 and the tooling is only getting better.
0:32:56 – I think two things.
0:32:59 So one, what I really enjoy in some sense
0:33:01 is the ability to get things done.
0:33:05 Tends to have this spirit of just moving anything
0:33:07 that needs to be moved to get to an outcome.
0:33:09 And the second thing is the impact in some sense
0:33:12 that we have, even as Jeeves,
0:33:13 we would get companies that reach out to us
0:33:15 and were like, look, before Jeeves came along,
0:33:17 we weren’t able to expand.
0:33:19 And these are companies that do can manufacturing.
0:33:22 It’s not necessarily all sexy tech companies.
0:33:23 So its impact is different in a way
0:33:27 because there tends to be a monopoly on banking there
0:33:30 and actually providing credit and banking services
0:33:31 touches folks in a way
0:33:34 that I don’t see the same impact in the US.
0:33:37 I think those two things for me is very, very exciting
0:33:40 and the potential to Santee’s point is just getting started.
0:33:45 – All right, that’s all for our Olympic series.
0:33:47 Remember, if you missed some of our episodes
0:33:51 on the UK or France or the technology behind the Olympics
0:33:54 or even our episode with Olympian Ali Reisman,
0:33:56 make sure to go give those a listen.
0:33:58 But if you did like any part of the series,
0:34:02 let us know at ratethispodcast.com/a16z
0:34:06 or you can drop us a line at podpitches@a16z.com.
0:34:08 All right, we’ll catch you next time.
0:34:11 (upbeat music)
0:34:13 (gentle music)
0:00:05 and I think about 20% credit card penetration.
0:00:07 – What works in Argentina doesn’t work in Brazil,
0:00:09 doesn’t work in Colombia, doesn’t work in Mexico.
0:00:13 – Today, companies go globally increasingly fast
0:00:14 from day one, but banking is still country
0:00:16 and currency specific.
0:00:18 – We’re gonna see the most valuable companies
0:00:21 in the region being technology companies.
0:00:25 – There’s no way to build in Brazil unless you’re in Brazil.
0:00:28 – It requires a totally different mindset
0:00:30 when it comes to product development.
0:00:33 – Hello everyone, welcome back to the A16Z podcast.
0:00:35 Now, if you’ve been listening over the last few weeks,
0:00:38 hopefully you’ve followed our Olympic series.
0:00:41 So far, you’ve learned how Olympian Ali Reisman
0:00:43 has traversed the transition from gymnast to investor,
0:00:46 but also you’ve explored how few technologies
0:00:48 actually move the needle in athletics,
0:00:50 and also we’ve dissected the forces
0:00:52 behind the ongoing competition for talent
0:00:55 across both France and the UK.
0:00:56 Now, if you’ve missed those episodes, of course,
0:00:59 be sure to go back and give them a listen.
0:01:00 But today, we cap off the series
0:01:03 by turning our attention to Latin America.
0:01:05 We’ll explore why the region has long been overlooked
0:01:08 despite a highly proficient, technical savvy,
0:01:10 internet penetrated population.
0:01:13 Plus, the role regulation has played as a tailwind,
0:01:16 the nuances of recruiting in the region, and much more.
0:01:19 Our guests today are all investing in Latin America
0:01:20 in their own way.
0:01:24 First up, Dilip Thasman, founder and CEO of Jeeves,
0:01:26 a financial platform for global startups
0:01:28 which operates in over 20 countries,
0:01:31 which has recently expanded its presence in Latin America.
0:01:33 Next, we have Santiago Suarez,
0:01:35 the co-founder and CEO of Addi,
0:01:37 a Colombian buy-now-pay-later fintech
0:01:39 with over 2 million clients.
0:01:43 We also have Gabriel Vasquez, investment partner at A16Z,
0:01:46 where he’s focused on enterprise and fintech investments,
0:01:48 of course, in Latin America.
0:01:50 And this conversation was moderated
0:01:52 by A16Z general partner, Angela Strange,
0:01:55 who, of course, has also long invested in the region.
0:01:58 All right, let’s kick things off with Santiago,
0:02:01 or Santi, who reflects on the opportunity
0:02:02 that drove him back to Colombia,
0:02:04 where he’s originally from,
0:02:06 after years of working in financial services
0:02:08 in the United States.
0:02:12 As a reminder, the content here
0:02:14 is for informational purposes only.
0:02:16 Should not be taken as legal, business, tax,
0:02:17 or investment advice,
0:02:20 or be used to evaluate any investment or security
0:02:21 and is not directed at any investors
0:02:24 or potential investors in any A16Z fund.
0:02:27 Please note that A16Z and its affiliates
0:02:28 may also maintain investments
0:02:30 in the companies discussed in this podcast.
0:02:33 For more details, including a link to our investments,
0:02:36 please see a16z.com/disclosures.
0:02:43 – There’s a sense of duty.
0:02:44 You know, I’m Colombian,
0:02:47 I’ve had the opportunity to see many incredible things
0:02:49 in the U.S., world-renowned companies,
0:02:54 JP Morgan, McKinsey, some fun startup experiences.
0:02:56 So there was a little bit of being able to go back home
0:02:58 and contribute to the local ecosystem
0:03:01 that I think inspired me.
0:03:02 And then the other thing you realize
0:03:05 is that Latin America is not China,
0:03:07 so I’m not gonna be sitting here,
0:03:08 be like, “Oh, it’s the new China.”
0:03:10 But it was so overlooked.
0:03:14 You had tens of millions of people in a single country,
0:03:16 and everyone just thought it was gonna fly over country
0:03:18 for technology development.
0:03:21 And then also realizing that you had a English proficient,
0:03:24 technically sophisticated population,
0:03:25 both in the consumer side, but also, frankly,
0:03:29 on the call it supply of talent side,
0:03:33 that then led me to say that I should probably move back
0:03:35 and see what we could make happen.
0:03:36 And in hindsight, it’s always easy to see,
0:03:38 like, “Oh, we had a master plan.”
0:03:41 There was a vague plan, I wouldn’t call it a master plan,
0:03:44 but enough of an intuition that there was a big thing going.
0:03:48 That’s what I needed to get myself on a plane
0:03:49 and move back to Colombia.
0:03:50 – Yeah, and I think one of the stats
0:03:53 that really struck me back when you started Adi
0:03:56 was there was 80% smartphone penetration,
0:03:58 and I think about 20% credit card penetration.
0:04:01 So just a real opportunity to bring
0:04:04 what is fundamental access to being able to run small businesses
0:04:06 to run commerce to the country.
0:04:09 So Dileep, you approached Latin America
0:04:10 from a different perspective.
0:04:12 It’s like, Jeeves was started right off the bat
0:04:15 with a very global ambition.
0:04:18 But then Latsam quickly became one of your biggest markets.
0:04:20 And I think interesting on the Jeeves website,
0:04:24 it says, “Latin America is entering the golden age for tech.”
0:04:27 – Sure, so we’re basically building a global business bank.
0:04:29 And the idea is that today,
0:04:32 companies go global increasingly fast from day one,
0:04:34 but banking is still country and currency specific.
0:04:37 So we provide corporate cards, payments, deposits,
0:04:38 et cetera, four business banking accounts.
0:04:43 So when we look at a country or region to start in,
0:04:45 there’s usually about two or three things we look at.
0:04:48 One, is it a region that’s opening up to in tech?
0:04:50 I think one of the things that’s most exciting
0:04:53 about Latin America was that there’s a regulatory push
0:04:55 to be more open towards fintech.
0:04:56 I mean, you look at picks in Brazil,
0:05:00 it’s just amazing what’s been done in about three, four years.
0:05:01 And so that’s a pretty good indicator
0:05:04 that you can build what I call banking two-pino
0:05:06 or three-pino on top of what’s already in market.
0:05:07 So that’s the first one.
0:05:10 The second one, which I keep saying company like Jeeves
0:05:12 couldn’t have been built really five, six years ago
0:05:16 because there was infrastructure components like open banking
0:05:17 that wasn’t around five, six years ago.
0:05:20 And again, if you look at Latin, if you look at Mexico,
0:05:22 you look at Brazil, that’s at a level
0:05:23 that’s actually more sophisticated
0:05:24 than a lot of other countries,
0:05:26 including some parts of the US.
0:05:27 And so that was very exciting.
0:05:29 And then the third one, which was very, very obvious
0:05:31 was where is the flow of capital going?
0:05:34 And that also correlated with Latin.
0:05:37 And so for us, our first launch market was Mexico.
0:05:39 Till today, it’s our biggest market.
0:05:42 And it’s also where we test any product that we launch.
0:05:44 And so it made it very, very simple for us
0:05:46 that Brazil would follow Mexico,
0:05:48 but Mexico was the origination point.
0:05:50 And the gap, I think, going back to what San Quim
0:05:52 was talking about was very, very clear.
0:05:55 You’d seen a version of what we’re building in the US.
0:05:57 It hadn’t really scaled internationally.
0:05:59 And so we looked at this from a perspective
0:06:01 of if you were building a global business bank,
0:06:02 what are the regions you touch?
0:06:05 Latin was always going to be the core of where that would sit.
0:06:08 And then two, does it have the infrastructure
0:06:11 that we need to be successful, which it does?
0:06:13 – That’s a good tip for talking about the region overall.
0:06:16 So Gabe, we’ve been investing in Latin
0:06:18 for probably more than five years now.
0:06:19 And I think a lot of investors actually
0:06:21 have gotten excited about Latin.
0:06:22 So the secret is out.
0:06:24 I think one of the arguments in the early days was,
0:06:26 well, there’s lots of opportunities
0:06:28 to invest in companies closer to us,
0:06:30 which obviously we do.
0:06:33 What drove the interest in the region back
0:06:34 when it was a little bit left obvious?
0:06:36 – Super excited to talk about Latin,
0:06:38 something that I’m incredibly passionate about.
0:06:40 So to your point, I think this is a question
0:06:42 that companies like Nubian got a lot
0:06:45 when people were initially analyzing the opportunity,
0:06:47 especially at the early stages.
0:06:51 Nubian is now a 55 billion market cap public company.
0:06:54 And when you think about the winners in the region,
0:06:56 you also have other players like Martel Lira
0:06:59 that came before, but as of last week,
0:07:01 actually became the most valuable company
0:07:05 in Latin America, finally surpassing Petrobras.
0:07:06 And I think that that’s an statement
0:07:08 of the opportunity in Latin America
0:07:10 that eventually we’re going to see
0:07:11 the most valuable companies in the region
0:07:13 being technology companies.
0:07:15 We have examples of successful companies
0:07:18 like Stone, XP, the local DTEX
0:07:19 that all of them have IPO
0:07:21 and are in the public markets right now.
0:07:23 And that leads to the second point
0:07:25 that is actually quite exciting,
0:07:29 which is you have all this talent kind of being nurturer
0:07:31 that had experience at operating
0:07:33 a successful technology companies in the region
0:07:37 and now want to build their second or third company.
0:07:40 And I’ll say that the last point is
0:07:42 there’s a lot of opportunities
0:07:43 when it comes to building Latin America
0:07:45 that is slightly different from countries
0:07:47 like the United States where in Latin America
0:07:49 there’s opportunity to build super apps.
0:07:51 The example that I usually like to use for this
0:07:55 is a company called Paxiguro based out of Brazil.
0:07:57 This company actually is a public company
0:07:59 that started as a merchant aquire
0:08:01 for micro merchants in Brazil.
0:08:03 Then they realized that a lot of the customers
0:08:06 that they serve, they didn’t have bank accounts.
0:08:10 So they created a bank that served this micro merchants.
0:08:12 Then they realized that a lot of the consumers
0:08:14 that went and buy with products from these micro merchants
0:08:16 didn’t want to transact online.
0:08:19 So they built a marketplace on top of it.
0:08:21 And they realized that these consumers
0:08:22 also didn’t have a bank account.
0:08:24 So they eventually developed like a consumer bank.
0:08:27 This company basically created four different companies
0:08:28 within one.
0:08:30 And I think that that speaks of the opportunity
0:08:31 of Latin America.
0:08:34 We’ve seen companies like Rapi launching a bank
0:08:35 or companies like Nuba now
0:08:38 that have actually launched a marketplace as well.
0:08:40 – Let’s stick on the talent point for a bit,
0:08:42 which I think is the opportunity to challenge
0:08:43 in every single market.
0:08:47 Santi, you’ve built a world-class talent team
0:08:48 based in Colombia,
0:08:50 but you’ve also recruited global employees.
0:08:51 What have been the things that have been
0:08:52 advantageous have been in Colombia
0:08:54 and what have been maybe some of the challenges?
0:08:56 – Things that are advantageous over being Colombia.
0:08:58 As a Colombian, you get to know the talent
0:08:59 a little bit better.
0:09:03 So you have that edge that you wouldn’t have otherwise.
0:09:04 It’s a small country,
0:09:06 certainly compared to Mexico or Brazil.
0:09:09 So it also allows you to plug into
0:09:11 the deep talent pools very quickly.
0:09:12 And probably the most obvious one is
0:09:14 you’re an employer of choice.
0:09:17 So we offer equity to every single one of our colleagues
0:09:19 from the call center operators
0:09:23 to starting sales folks all the way up to senior folks
0:09:24 that really allows you to get
0:09:27 like your pick of the litter where it comes to talents.
0:09:28 The challenging part is
0:09:31 you don’t have any executive experience.
0:09:33 And at some point you need to balance this.
0:09:36 So what has worked for us is
0:09:38 kind of get the raw material here
0:09:40 because you have very talented people
0:09:45 and then sprinkle it with extremely competent leadership.
0:09:46 And by the way,
0:09:47 some of these local folks eventually become leaders.
0:09:49 We’re seeing some of them actually be
0:09:51 transformation leaders to our company.
0:09:53 But then that’s because you pair them with product leaders
0:09:57 with experience that affirm, advise, capital one.
0:10:00 So for us, that has been the recipe for success.
0:10:02 And I think you have to be creative
0:10:03 when you’re in Latin America.
0:10:06 So for example, or a remote company in large parts
0:10:10 where we can attract these key folks in key positions.
0:10:11 But that has worked really well.
0:10:13 Get the raw talent in which there’s a lot
0:10:15 and then pair them with the right
0:10:19 CISO and leadership to see the magic happen.
0:10:20 – Would you say a little to Gabe’s point,
0:10:24 five years ago, maybe the scaled LATAM companies
0:10:27 didn’t have as many seasons execs,
0:10:30 but now those season executives are starting to come out
0:10:33 of some of the large will $2 billion exits in Latin America.
0:10:36 Because you don’t necessarily have to go to the U.S.
0:10:38 – I think so.
0:10:41 Though I would say that’s still very much
0:10:44 in the early beginnings, early beginnings in part
0:10:47 because I think it’s a weird ecosystem.
0:10:50 Mercado Leavers are almost 30-year-old company.
0:10:53 So we have some great ex-Mellie folks,
0:10:55 but when they joined Mellie,
0:10:56 Mellie was a 20-year-old company.
0:10:59 And then it’s just interesting because I think
0:11:01 some of the reference cases of LATAM,
0:11:05 Mellie, New and Rapi each has a very distinct way
0:11:07 in which they build the culture.
0:11:10 So you need to be very mindful of that
0:11:12 because you get a lot more, let’s say,
0:11:14 executive variety than in the U.S.
0:11:17 I think if you went to a B2B SaaS company in the U.S.
0:11:19 and you said, “I want a VP of product marketing,
0:11:22 “seriously, you’re gonna get the same person.
0:11:23 “I know exactly what you’re getting
0:11:25 “and you know exactly what you’re not getting.
0:11:27 “I think if you get the VP of product marketing
0:11:29 “at Mellie, at Rapi and at New,
0:11:31 “you’re gonna get three very different cats.
0:11:34 “None of whom may be the person you’re looking for
0:11:35 “because they’re very just in karate culture.”
0:11:38 So I think you just have to be very aware of that,
0:11:41 that you don’t yet have this kind of standard.
0:11:43 In part because the region is so varied, right?
0:11:44 So what works in Argentina doesn’t work in Brazil,
0:11:46 doesn’t work in Colombia, doesn’t work in Mexico.
0:11:47 – Makes a ton of sense.
0:11:50 So maybe if Sonzi’s built in Colombia,
0:11:53 you’ve built primarily in Mexico, Brazil,
0:11:55 and obviously other global regions.
0:11:57 When you talk about the experience of scaling up
0:11:59 in two countries that are in the same continent,
0:12:01 but very different beyond that.
0:12:05 – Yeah, so the way our model works is we break up the functions
0:12:07 depending on what touches the customer directly.
0:12:09 And so usually the first hire in any region
0:12:12 is a general manager and they tend to be fully local.
0:12:14 I think there’s no way to build in Brazil
0:12:15 unless you’re in Brazil.
0:12:18 There’s no way to really build in Colombia or Mexico
0:12:19 unless you’re in Colombia and Mexican.
0:12:22 So that model has worked fairly well so far
0:12:25 where anything that’s customer facing is fully local
0:12:27 and then we build the product,
0:12:29 engineering, finance, et cetera, centrally.
0:12:33 What’s changing now is as we get more into scale,
0:12:34 we’re actually starting to move
0:12:36 some of the product components also locally.
0:12:38 And that is a little bit different
0:12:39 from how it was in the beginning.
0:12:41 And by the way, we learned this also the hard way
0:12:44 where you can sell, but then if you need to collect
0:12:46 and you call them from Texas or Brazil,
0:12:48 they’re like, yeah, I’m not picking up your phone call.
0:12:50 You have to be local, you have to be on the ground,
0:12:51 you have to be collecting there as well.
0:12:53 So anything touching the customer
0:12:55 has to be fully local to that region.
0:12:56 What we’re learning now,
0:12:58 and we’ve been in market now for about three years,
0:13:01 is that even the product side at scale
0:13:04 has very specific nuances that need local knowledge.
0:13:06 And I think to the point Gabe was making,
0:13:08 now what’s interesting is you have folks
0:13:10 that have seen what good looks like.
0:13:12 They’ve been at new, they’ve been at Mercado.
0:13:14 They know a version of what this looks like.
0:13:16 That’s been really, really useful
0:13:18 that we didn’t have honestly even five, six years ago
0:13:20 where you can hire someone that’s built the product.
0:13:22 Now leadership, I think I kind of agree,
0:13:24 like you have to find the right person
0:13:26 for the right culture fit.
0:13:28 And we have had some success.
0:13:30 We’ve had some areas we’re still working through.
0:13:33 But you can find what I call kind of intermediate managers
0:13:35 that are, I think, fairly consistent for the region.
0:13:37 They know what payments looks like.
0:13:38 They’ve seen it at scale.
0:13:40 They’ve seen it at a public Latin company.
0:13:42 And that’s been very, very helpful for us.
0:13:46 – You operate in three, four, five maybe languages.
0:13:48 How do you manage to get smooth communication
0:13:49 across the country?
0:13:52 Do you hire necessarily speaking more than one
0:13:54 or using AI translation tools?
0:13:55 – Yeah, it’s a good question
0:13:57 because it really affects culture.
0:14:00 And so one of the things that we try to do
0:14:03 is we have people that obviously locally
0:14:05 are fully fluent in the local language,
0:14:07 but you have to be able to communicate in English as well
0:14:09 because you do have counterparts in UK.
0:14:12 You do have counterparts in the US, in Canada, et cetera.
0:14:15 But everything that we do in region tends to be local.
0:14:17 And it even took us about two years
0:14:21 just to get the localized experience on the product.
0:14:23 – Santi, how are you balancing Spanish and English
0:14:25 and recruiting employees across the country
0:14:28 who are very talented but might not speak English,
0:14:32 which then restrains the recruiting pool for sure?
0:14:35 – We’ve always been extremely religious
0:14:37 about the English speaking requirement.
0:14:40 We are now testing a couple of instances
0:14:43 on relaxing it and using AI to figure this out.
0:14:44 I agree with you.
0:14:47 I agree with Delib, the biggest challenge here is culture.
0:14:50 But we’re actually even airing on the other side.
0:14:52 At this point, we’ve actually gone almost all natives.
0:14:54 So now you need CO approval to hire anyone
0:14:55 that’s out in Colombia.
0:14:57 We’re a single country focus.
0:14:59 We were gonna go deep here.
0:15:04 And what we realized is that there are certain positions
0:15:09 for which the expertise outweighs the local knowledge.
0:15:10 Most famous, the credit.
0:15:14 But pretty much everywhere else, you want the person around.
0:15:16 You want them using your product on any given day.
0:15:18 You want them getting rejected.
0:15:20 You want their app crashing.
0:15:22 You want all of these things that are extremely difficult
0:15:26 to achieve if you’re not on the ground.
0:15:28 And also, we now serve a broader swath
0:15:29 of the Colombia population,
0:15:31 including a bunch of people who don’t speak English.
0:15:33 So culturally, even just having people
0:15:35 who speak English at your company,
0:15:36 they may as well be from a different country, right?
0:15:39 You just have a bunch of people out in the Presidio
0:15:40 in some Francisco building product
0:15:42 for the entire United States
0:15:44 with no real sense of what’s happening
0:15:47 in choose your favorite Midwestern state.
0:15:51 So that’s also a lesson we have recently learned.
0:15:54 – Watch out for those Presidio product managers, agreed.
0:15:57 All right, I wanna zoom out a little bit.
0:16:00 You guys are clearly building in financial services.
0:16:03 I think that there is a specific opportunity
0:16:05 for financial services in the region.
0:16:08 And we even wrote a post together entitled for Brazil,
0:16:10 which was that regulation is a tailwind.
0:16:12 There are two words that you never hear
0:16:13 in the same sentence in general,
0:16:15 but in Latin America, you sort of do.
0:16:19 So maybe we gave outline what’s going on in the region there
0:16:22 that creates a particularly interesting opportunity.
0:16:24 – Yes, so I think that there’s three main areas.
0:16:28 The first one, I think is less specific to the region,
0:16:32 but more specific that fintech is a local local business.
0:16:35 So there’s a lot of local regulation
0:16:37 that plays an important role
0:16:39 when it comes to operating different countries.
0:16:40 There’s domestic infrastructure,
0:16:42 like when you’re thinking about building a business
0:16:45 in Brazil or Mexico, you kind of have to rely on.
0:16:46 And there’s also cultural nuances.
0:16:49 Brazil completely different from the rest of Latin America
0:16:53 and even Mexico is completely different from South America,
0:16:56 even though all the countries speak Spanish instead of Brazil.
0:16:59 Brazil has actually been quite advanced.
0:17:01 The central bank has done a great job
0:17:03 basically disrupting the duopoly
0:17:04 between the merchant acquires
0:17:07 that enable players like Nuba to come in
0:17:08 and take advantage of that.
0:17:12 And then the rise of payment acquires like stone.
0:17:14 And then they created open finance
0:17:17 and from there, they started the instant payment solution
0:17:20 that now is the main payment method in Brazil called PICS.
0:17:23 One of the aspects that’s actually quite exciting
0:17:25 as well as the smartphone penetration
0:17:26 is quite high in the region.
0:17:30 So the numbers vary between 75 and 80%.
0:17:32 But when you look at the credit card penetration
0:17:35 or even the bank population in countries like Mexico,
0:17:39 it goes around 50%, which is quite low
0:17:40 when you compare it to countries like Brazil,
0:17:42 where it’s around 85%.
0:17:44 So there’s a lot of opportunities still.
0:17:47 They basically can have a bank in their pocket.
0:17:49 And when it comes to the size of the market,
0:17:54 Latin America, there’s 650 million people living in the region.
0:17:56 The GDP per capita is higher,
0:17:59 especially when you compare it to other emerging markets like India.
0:18:02 So I think that those are the three main reasons
0:18:05 why Latin America has become such an important hub
0:18:07 for fintech innovation.
0:18:10 Hey, it’s Steph.
0:18:12 You might know that before my time at A16Z,
0:18:15 I used to work at a company called The Hustle.
0:18:17 And then we were acquired by HubSpot,
0:18:19 where I helped build their podcast network.
0:18:20 While I’m not there anymore,
0:18:23 I’m still a big fan of HubSpot podcasts,
0:18:25 especially My First Million.
0:18:29 In fact, I’ve listened to pretty much all 600 of their episodes.
0:18:31 My First Million is perfect for those of you
0:18:33 who are always trying to stay ahead of the curve,
0:18:36 or in some cases, take matters into your own hands
0:18:38 by building the future yourself.
0:18:41 Hosted by my friends, Sam Parr and Sean Curry,
0:18:44 who have each built and sold eight-figure businesses
0:18:45 to Amazon and HubSpot,
0:18:49 the show explores business ideas that you can start tomorrow.
0:18:52 Plus, Sam and Sean jam alongside guests like Mr. Beast,
0:18:54 Rob Dirdek, Tim Ferriss,
0:18:57 and, every so often, you’ll even find me there.
0:18:59 From gas station pizza and egg carton businesses
0:19:01 doing millions all the way up to several guests
0:19:03 making their first billion.
0:19:05 Go check out My First Million
0:19:06 wherever you get your podcasts.
0:19:09 (upbeat music)
0:19:16 – It’s a great from a thesis point of view.
0:19:18 We have two people that are actually going through it,
0:19:19 starting maybe with you, Santi,
0:19:21 who’ve recently spent a lot of time
0:19:24 with the Colombian banking regulators.
0:19:28 Is the practicality the same as investors might perceive?
0:19:30 And what advice might you have
0:19:31 to other entrepreneurs in the region?
0:19:34 – I would say, no, the practicality is not always
0:19:36 the same thing that the investors might see
0:19:38 for many reasons, obviously,
0:19:41 and not least of which, this is still an emerging market.
0:19:43 And I think when you do venture investing,
0:19:44 you’re taking two types of risk.
0:19:45 You’re taking venture risk
0:19:47 and you’re taking emerging markets risk.
0:19:49 But that being said,
0:19:52 I think the situation in Colombia
0:19:54 is extremely pragmatic, right?
0:19:56 You’ve got a regulator who’s issued licenses.
0:19:58 You’ve got a regulator who’s pushing
0:20:00 for financial inclusion.
0:20:02 You’ve got a simple bank that’s driving
0:20:03 instantaneous payments adoption
0:20:05 following very much the playbook of Brazil.
0:20:08 So if you’re sitting here now over just 10 years ago,
0:20:09 I mean, when we started,
0:20:13 I think they hadn’t issued a single de novo banking license
0:20:16 and God knows, like a decade.
0:20:18 And now they issued three or four a year,
0:20:20 similarly with the payments side, right?
0:20:23 Like the payments system in Colombia is still a bit of a mess,
0:20:25 but it’s much less a mess than it was
0:20:29 in our own track launching takes in the next 18 months or so.
0:20:34 So you do see a very pragmatic regulator
0:20:35 and honestly, in that case,
0:20:38 they’re differentiated from the US event,
0:20:42 which is a bit more of a unknown, unknown, right?
0:20:45 You just don’t know what regulator and the agenda is.
0:20:46 You obviously have the Fed,
0:20:49 you have the FAC, the CFPB, the SCC,
0:20:51 and you can’t quite figure out what the boundaries are.
0:20:52 What I can tell them a lot of times,
0:20:54 it’s not like in the US where the boundaries are X,
0:20:56 but then you’ve got to like interpret the tea leaves
0:20:58 or what actually X means.
0:20:59 Here, it’s pretty well-defined.
0:21:01 So if you have the patience
0:21:03 for dealing with the emerging markets environment,
0:21:06 you have the patience of dealing with the natural challenges
0:21:07 that come from being outside the US,
0:21:09 it can be a very attractive hunting ground
0:21:12 and a very attractive place to build a company.
0:21:13 – I think just touching on this point,
0:21:15 actually one of our big hires last year
0:21:18 was getting the Chief Compliance Officer from Arqueta,
0:21:19 which is a public company to join us.
0:21:21 And a big reason is exactly this,
0:21:24 which is as we scale from a smaller company
0:21:26 moving really fast to a bigger company,
0:21:28 I think the biggest thing that we started noticing
0:21:31 was that we were much more on the radar for folks locally.
0:21:35 And so, Brazil so far, it’s smaller for us
0:21:37 as an operation compared to Mexico.
0:21:39 But in Mexico, we have invested quite substantially,
0:21:41 even from a licensed perspective,
0:21:44 but also from let’s call it light lobbying
0:21:46 in terms of companies that we work within,
0:21:48 such as external law firms, right?
0:21:51 And so it’s come back once or twice where we’ve had,
0:21:54 let’s just call it issues that we had to work through
0:21:54 in Mexico.
0:21:57 And the one learning for me is as we scale
0:21:58 and as we get bigger,
0:22:00 whenever you think you need to do it,
0:22:02 you probably should have done it six months before that.
0:22:04 – I think where you’re both hitting on is,
0:22:09 it’s still an onerous regulatory process.
0:22:10 But unlike in the US and other regions,
0:22:14 is at least a relatively clear onerous regulatory process,
0:22:17 such that if you put together a very strong team,
0:22:20 like you still need to recruit A plus compliance people,
0:22:23 they still need to do a lot of work to get it together.
0:22:27 But the government’s do seem much more motivated
0:22:29 to create competition in their regions.
0:22:30 And in particular,
0:22:35 I think one of the stats often quoted is banks in Brazil,
0:22:36 it’s a little bit different with new bank,
0:22:38 but the banks in Brazil, Mexico, Columbia,
0:22:41 serve the top 20% of the population
0:22:44 and the rest are very starved for good financial services.
0:22:47 And one of the ways to solve that is to allow
0:22:49 de novo licenses for new companies,
0:22:52 tend to the regions and provide more innovative products.
0:22:54 They want to try to work with new entrants,
0:22:57 whereas in the US, it isn’t always like that.
0:22:59 And I’m always surprised in a good way
0:23:02 in terms of the companies that we get to serve
0:23:04 in Mexico, Brazil, et cetera.
0:23:06 And it goes back to the same point,
0:23:10 which is most of the options are older banks.
0:23:11 When we were in Brazil,
0:23:13 we had a customer that was coming to us and be like,
0:23:14 “Hey, the fact that we have virtual cards, this is great.”
0:23:16 And for us, that’s almost table stakes.
0:23:17 Like we don’t even sell that
0:23:20 because we expect that to be just an offering in market.
0:23:22 And so that’s what I keep getting reminded about,
0:23:24 which is it’s still a huge monopoly.
0:23:26 And I think regulators do see that in a way
0:23:27 that they don’t in the US.
0:23:28 – Santi, you touched on this.
0:23:31 I think one of the advantages of building in Columbia
0:23:33 is you do become the employer of choice.
0:23:35 There’s not 50 adi competitors
0:23:38 that employees are choosing between,
0:23:42 but then you do run into different types of challenges.
0:23:45 – What’s surprising one is the mental model
0:23:49 of most investors around TAM remains very much
0:23:52 what it should be for about 95% of companies.
0:23:55 I think when you combine retail and financial services,
0:23:57 the way you think about TAM is probably a little bit different.
0:23:59 I mean, I will tell you, even I have learned,
0:24:01 if I look at the performance of our company today
0:24:04 versus what we expected out of the Colombian market,
0:24:06 and I don’t think anyone would have thought
0:24:07 we’d be here within five years, right?
0:24:11 So I would say the first thing is your understanding of TAM,
0:24:13 when you think about Columbia, it’s just very difficult.
0:24:17 And the other piece is your product development approach
0:24:20 has to be very different,
0:24:25 because what you lose by not being in the US or in Brazil,
0:24:27 you gain by being able to go extremely deep,
0:24:28 extremely quickly,
0:24:31 but it requires a totally different mindset
0:24:33 when it comes to product development.
0:24:35 And by the way, paradoxically,
0:24:38 the aspirations of choice are not in the US or not in the UK,
0:24:40 but are in Central Asia.
0:24:43 In Turkey, these are the places
0:24:47 where people have also figured out small country,
0:24:49 deep TAM equals massive successful outcomes.
0:24:51 So when people ask us, “Where do you get inspired by?”
0:24:52 We always start with CASPE,
0:24:55 it’s a $30 billion public company
0:24:58 that is single country focused in Kazakhstan, GDP,
0:24:59 half of Colombia’s.
0:25:02 So those are some of the things
0:25:04 that you’ve got to start thinking about
0:25:07 and also recognize that even the successful models
0:25:09 were built in a different paradigm.
0:25:12 So Robbie was built in a zero interest rates paradigm.
0:25:16 Nu was built without almost 12 year old company
0:25:18 built and raised in a different world.
0:25:21 So just knowing all of these things as a founder,
0:25:23 our important period of our NGO,
0:25:26 but certainly when your geography is not Brazil,
0:25:28 not Mexico, so to speak.
0:25:30 – Yeah, now when hitting on the point that Gabe made also
0:25:34 is that the products can encompass so many more,
0:25:37 almost many companies that the results end up
0:25:39 being a lot bigger than you might think
0:25:41 if you just looked at TAM.
0:25:42 – Well said.
0:25:46 I think one of the powers of Jeeves that you’ve discovered
0:25:51 is the strong need for Latin American companies
0:25:54 to move money both from the US into Latin America,
0:25:59 into other corridors that might be a little bit less obvious.
0:26:01 But along with that comes with, I think,
0:26:03 more than just one country regional challenges,
0:26:05 but multi-country regional challenges.
0:26:07 – So one of the things that’s interesting
0:26:09 is everything we do is B2B
0:26:11 and there’s obviously consumer components
0:26:14 and I would say most fintechs tend to focus
0:26:16 on the consumer side, which is massive.
0:26:18 But B2B has very different problems
0:26:19 that are also very unique
0:26:21 to how businesses move money and spend.
0:26:23 And so just as an example,
0:26:25 we launched the ability to move money
0:26:27 out of Mexico, Colombia, Brazil.
0:26:30 One of the hardest things is if you move money out of Colombia,
0:26:31 you’re usually gonna get flagged
0:26:34 and you’re not moving $50,000 or $100,000.
0:26:35 You’re moving $50,000 or $100,000.
0:26:37 And so part of where we invest in
0:26:39 is how do you have the ability to move that
0:26:42 in an efficient way so that we can actually compete
0:26:44 with local offerings in the region, right?
0:26:45 And so it’s one of those things
0:26:48 where you have to invest a lot in compliance.
0:26:50 You have to invest a lot in operational efficiencies,
0:26:54 but it is fairly untapped because it’s so, so hard.
0:26:55 I keep saying this, but for me,
0:26:57 the difficulty is the defensibility.
0:26:59 It’s the fact that it is this hard.
0:27:01 It’s the fact that moving money,
0:27:03 especially for B2B is very complex to do,
0:27:05 that gives an opportunity to us
0:27:06 to kind of succeed in the market.
0:27:08 But it takes a lot of work.
0:27:10 And what I’m coming back to on the payment side
0:27:12 is how do we layer this on top of credit,
0:27:13 which is our core offering,
0:27:16 so that the platform becomes much more sticky.
0:27:18 And one of the things we’ve started to see
0:27:20 is that retention is actually a lot higher
0:27:23 if a customer uses us both for cards,
0:27:24 which I call kind of like the candy, right?
0:27:26 It’s credit, we give you the money.
0:27:28 Everybody wants that in some sense,
0:27:30 but then moving to payments, which is your money,
0:27:32 and you’re trusting us to move your money,
0:27:34 which is a very different kind of go-to-market sales cycle.
0:27:36 But if you can combine the two,
0:27:37 kind of like given like a build.com
0:27:40 where you have Divi, which is the spend-management side
0:27:41 and then you have Bill, which is the payment side,
0:27:43 it becomes a very, very powerful product.
0:27:44 And so we’re still, I’d say,
0:27:46 in early innings on the payment side,
0:27:50 very, very different set of problems than corporate credit.
0:27:53 But combining those two to me provides much more value
0:27:55 to the companies that we work for,
0:27:57 especially when you come at it from a B2B angle,
0:27:59 which is very different from consumer.
0:28:00 – Yeah, I think one of the things
0:28:03 that you’re both hitting on versus in the US,
0:28:05 if you’re going to build many financial services products
0:28:07 or embed many financial services products,
0:28:10 there’s all of these different now very modern companies
0:28:15 that provide even credit as a service, KYC as a service,
0:28:17 lots of data fraud as a service.
0:28:19 When you go down to Latam,
0:28:23 those for the most part don’t yet exist.
0:28:25 And so you end up having to build a lot of that yourself,
0:28:27 which is, I would say, a disadvantage at the start
0:28:28 because it takes more time,
0:28:32 but then ends up being a significant source of defensibility.
0:28:34 – And I think one quick way to point this out
0:28:36 is when we started, one of the hardest things was,
0:28:38 how do you actually ship cards?
0:28:39 ‘Cause people forget the fact
0:28:41 that cards actually have to be delivered
0:28:42 to different countries, right?
0:28:45 And most card operators just deliver in that single country.
0:28:46 And so in the US, that’s fine.
0:28:47 It’s a massive single geo,
0:28:50 but the single currency, you can do that fairly easily.
0:28:51 But when you moved to Latam and you were like,
0:28:53 “I need to deliver cards,”
0:28:55 the provider of the cards don’t ship those cards.
0:28:57 And so we had to go figure out an operational way
0:28:59 to make that easy and bolt that on.
0:29:01 But there wasn’t a provider we could just go to
0:29:04 and be like, “Hey, can you ship this for us to six countries?”
0:29:06 – All right, I want to bring this back around
0:29:08 and looking forward to the future.
0:29:10 What are you excited about going forward
0:29:13 and what might other investors think about
0:29:15 that haven’t yet invested in the region?
0:29:18 – One of the verticals that actually has been quite exciting
0:29:20 in Latin America has been e-commerce.
0:29:23 You’ve seen players like Mercado Libre come in,
0:29:27 Rappi, iFood in Brazil, and even Calac in Mexico,
0:29:30 which is the largest private company now.
0:29:33 So I expect that we will continue to see a lot of these
0:29:35 companies tackling the e-commerce opportunity
0:29:38 as the majority of these people continue to come online,
0:29:42 and especially as the majority of the payments go online
0:29:44 and it becomes easier to transact.
0:29:46 But there’s a specific segment too
0:29:49 that I think gets, let’s notice in the region,
0:29:51 which is just the SaaS companies.
0:29:53 So in Brazil, you have companies like Totus,
0:29:55 which is a large public company
0:29:58 going after the European space.
0:30:00 But also you have companies like OutZero
0:30:02 that actually started in Argentina.
0:30:05 And when global, we’ve met a bunch of companies
0:30:06 that started in Latin,
0:30:09 they signed the largest enterprise companies
0:30:10 in Latin America.
0:30:13 They developed product really, really fast for them.
0:30:14 But then they’re also very ambitious.
0:30:15 And then they’re like, okay,
0:30:17 we want to expand outside of the region
0:30:20 because our customer set is probably not as big
0:30:20 in the region.
0:30:21 So we’re starting to see,
0:30:23 we invested in this company called UNO,
0:30:25 which is a payment orchestration company
0:30:28 started in Latin America, specifically Colombia.
0:30:30 They expanded to the region very quickly
0:30:34 and now they have operations in Europe and Southeast Asia.
0:30:37 So I think that we will continue to see a lot of that.
0:30:38 I think the opportunity set
0:30:40 when you come to the region are quite different.
0:30:42 So what gets developed in Brazil,
0:30:45 an ecosystem that the main payment method is picks
0:30:48 and 85% of the population is banked
0:30:51 and you have regulation that is pro innovation,
0:30:52 it’s very different.
0:30:54 It’s going to create different opportunity sets
0:30:55 than Mexico, for example,
0:30:57 where half of the population still doesn’t have
0:31:00 a bank account, the main payment method is cash
0:31:03 and regulation has not been a catalyst for innovation.
0:31:05 So it will be quite exciting
0:31:09 to see how this innovation emerges per country.
0:31:10 But I think with AI,
0:31:13 we’re starting to see a bunch of founders in the space
0:31:16 that are taking advantage of these new tools
0:31:18 to make their operations either more efficient
0:31:21 or lever that to have a better go to market motion
0:31:25 or actually increase even the willingness to pay for supper,
0:31:27 which I think has been one of the main challenges
0:31:28 historically in the region.
0:31:33 What do you think Silicon Valley could learn from Latam?
0:31:35 And what makes you particularly excited
0:31:38 about your regions in the next five, 10 years?
0:31:40 – One is resiliency, right?
0:31:42 You and I have a few mutual friends
0:31:45 who have been operating in the region for a long time
0:31:48 and there are nothing if not resilient and paranoid.
0:31:50 So that resilience and paranoia
0:31:52 is something I think comes in handy,
0:31:55 especially in the lean years of Silicon Valley, right?
0:31:58 So you can always do so much more with so much less
0:32:01 and I think that hustle and that resiliency
0:32:02 is something we can, if we count on.
0:32:04 And then what gets me excited?
0:32:07 I mean, honestly, it goes back to why I moved back here, right?
0:32:08 There’s just a lot of work to be done.
0:32:10 And I like what Gabe said,
0:32:15 which is that this idea of whatever is happening in AI
0:32:17 and whatever is happening in tooling
0:32:19 and ways of company building
0:32:21 can be quite transformational for Latin America
0:32:24 because in a place which doesn’t have a lot of capital,
0:32:25 and let’s be honest,
0:32:26 capital has come back to Latam,
0:32:29 but it’s not what it used to be.
0:32:33 Your ability to leverage AI, leverage no-code tools is awesome.
0:32:35 You could build companies in different ways
0:32:37 than you could even when we built a company.
0:32:39 There were a lot of things we had to invest upfront
0:32:40 that today I wouldn’t have to do
0:32:42 if I were building the company from scratch
0:32:45 because you can use AI, you can use no-code,
0:32:47 you can use some companies in the stack,
0:32:48 some of these sales vendors.
0:32:50 So I get excited about that.
0:32:53 I get excited about the fact that the jobs know we’re near done
0:32:56 and the tooling is only getting better.
0:32:56 – I think two things.
0:32:59 So one, what I really enjoy in some sense
0:33:01 is the ability to get things done.
0:33:05 Tends to have this spirit of just moving anything
0:33:07 that needs to be moved to get to an outcome.
0:33:09 And the second thing is the impact in some sense
0:33:12 that we have, even as Jeeves,
0:33:13 we would get companies that reach out to us
0:33:15 and were like, look, before Jeeves came along,
0:33:17 we weren’t able to expand.
0:33:19 And these are companies that do can manufacturing.
0:33:22 It’s not necessarily all sexy tech companies.
0:33:23 So its impact is different in a way
0:33:27 because there tends to be a monopoly on banking there
0:33:30 and actually providing credit and banking services
0:33:31 touches folks in a way
0:33:34 that I don’t see the same impact in the US.
0:33:37 I think those two things for me is very, very exciting
0:33:40 and the potential to Santee’s point is just getting started.
0:33:45 – All right, that’s all for our Olympic series.
0:33:47 Remember, if you missed some of our episodes
0:33:51 on the UK or France or the technology behind the Olympics
0:33:54 or even our episode with Olympian Ali Reisman,
0:33:56 make sure to go give those a listen.
0:33:58 But if you did like any part of the series,
0:34:02 let us know at ratethispodcast.com/a16z
0:34:06 or you can drop us a line at podpitches@a16z.com.
0:34:08 All right, we’ll catch you next time.
0:34:11 (upbeat music)
0:34:13 (gentle music)
Latin America is emerging as a tech powerhouse, but it’s not a one-size-fits-all market.
In this episode, we explore why what works in Argentina won’t necessarily fly in Brazil or Mexico, and how companies are adapting to these unique regional dynamics. Join Dileep Thazhmon, Cofounder and CEO of Jeeves; Santiago Suarez, Cofounder and CEO of Addi; Gabriel Vasquez, a16z investment partner; and Angela Strange, a16z General Partner, as they discuss the future of fintech in LatAm and the unique approach required to succeed in this diverse market.
Whether you’re interested in the nuances of product development, the complexities of scaling across diverse markets, or the future of fintech in Latin America, this episode offers perspectives from industry leaders deeply invested in the region’s tech ecosystem who believe the next big tech giants might just come from Latin America.
Resources:
Find Dileep on Twitter: https://x.com/thazhmon
Find Santiago on Twitter: https://x.com/santiasua
Find Gabriel on Twitter: https://x.com/gevs94
Find Angela on Twitter: https://x.com/astrange
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Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures.