In this episode of Creating Markets, IFC speaks with Santiago Sosa, co-founder of the online commerce platform Nuvemshop about what it takes to start an online business and how to scale it. We also speak about the opportunities for growth and investment in Latin America and how to support small business owners so they can thrive.
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Jasmin Bauomy [JB]: Hello, and welcome to another episode of Creating Markets. I'm your host, Jasmin Bauomy, and on today’s episode we are talking entrepreneurship and online commerce with Santiago Sosa. Santiago is joining me from Argentina, where he runs Nuvemshop.
Santiago Sosa [SS]: Basically NuvemShop is a platform that allows SMEs, entrepreneurs, broadly speaking businesses in general, family-owned businesses, fully native businesses, whatever kind of business you can think of. To basically digitize themselves to enter the digital economy by launching an online store. Simply put, it's a site where they can sell their products.
JB: This season, we're asking our guests to walk us through three important questions; how did we get here? what is happening now and just where is this industry going in the future. But first we are starting with some ice breaker questions, to get to know our guests a little bit better.
JB: So let's start off with our icebreaker questions.
JB: During this pandemic, we all picked up random hobbies, very nerdy hobbies. A lot of the times as you can see, I'm a plant mom. I've become a plant mom. What's your nerdy hobby?
SS: Well to be honest I haven't been able to... I will say 99% of my non-working time has been with my family, and with my daughters. So I have a one year and a half daughter that has lived literally her entire life at home due to the pandemic, and a four-year-old one. And we've had a lot of lockdowns here. We have a lot to do here at the house just to keep the family running. So I would say most of the non-working time has been there.
JB: Well, that's not nerdy at all, that's actually really, really wholesome. So that's really lovely.
JB: Well, then let's dive into the actual interview, which is going to be three parts. So the first part we’ll dive into the past and how we got here. So tell me about how you started your company? What made you even start, become an entrepreneur in Argentina, which is a country where people have started to become used to economic struggles a lot of the times, and currency struggles. So what is it that triggered this idea and to start it off?
SS: So the company has a very interesting story, I would say, I always like to connect it a little bit with my own personal story. So if you think about Argentina, year 1991, 1992. I was only five-six years old, and nobody had a computer at home, and less an internet connection.
SS: So I'm saying all of these because this triggered a lot of curiosity, and attention around technology broadly speaking. So it started with video games, but then moved to developing websites when I was 12. And then when I was 15, I remember playing a lot with Linux operating systems and networking. And all that eventually led me to a university that's called Buenos Aires Institute of Technology. It’s a great engineering school that we have here in Buenos Aries and that's where I met our co-founders. When you are the last year of this university, you're required in order to get your diploma, you're basically required to do some mandatory real work experience. So most of the people would go and work for a technological company that’s kind of the standard. But we didn't want to go to work for any large company. We just felt excited about the idea of creating technology.
JB: So instead of going to work for some big tech company, Santiago and his friends went to work for a start-up, and...well… like start-ups sometimes do...it failed.
SS: Literally the business never took off. And after probably one of the biggest mistake was that we spent three or four years working on that.
JB: The start-up they worked at was an online marketplace, and that part - the marketplace - wasn't working. But what Santiago and his colleagues found was that the sellers on the marketplace wanted to create better sites to sell their stuff to consumers directly.
JB: They had arrived at a gap in the market.
SS: They wanted more personalization, they wanted more customization, they wanted more control over their brand, how their brand looked. And we basically stopped developing to the marketplace and pivoted into the business model that we have today, what we call the platform model in which merchants can connect more directly with consumers. And that is how Nuvemshop was born.
SS: At first we had five customers, and it went one by one, then we have 10, and then we have 15, and then we have a hundred, and all of this was happening fast and organically. And when we started seeing that traction, we started meeting other entrepreneurs. There was a community of entrepreneurs that was being born in not just in Buenos Aries. In Bueno Aries, Sao Paulo, we were starting to see this happening in the region.
JB: Okay. Wait, let's double back just real quick, what were some of the biggest challenges you're facing at the time with your founding team?
SS: Well, actually fundraising was very hard in the early years. First of all, imagine that we were four, as I said, software engineers in their very early twenties. So we didn't know much about anything, honestly speaking. We just knew how to code but we didn't knew about sales, we didn't knew about marketing, we didn't knew about talent attraction, we didn't knew about legal stuff... Honestly, we didn't knew how to build a business, and less how to fundraise. So there was this kind of big big knowhow gap that we bridged during the first four or five years. We had this very steep acceleration learning curve on pretty much every category that’s needed to run a business.
JB: The first thing Santiago and his co-founders realized was that if they were going to grow as big as they wanted to, they were going to have to go international.
SS: We’re Argentine born. Argentina is a beautiful country that we love. It's sizable in terms of the Latin American economy. But if we want to have a much larger business in the Latin American context, we need to go to Brazil.
JB: When Santiago landed in Brazil he found an apartment. An apartment with...six other guys working in start-ups.
SS: It was a very small apartment. There were three Brazilian guys and then myself, and I stayed there for pretty much a year, and then two more Argentinian guys came. And we really didn’t have too much room. They couldn't stop snoring at night, so I literally moved into the kitchen.
JB: Eventually Santiago’s sacrifices paid off, and Nuvemshop was able to attract investment and grow and grow.
SS: Today we have 86,000 merchants that are using our service. They're processing more than a hundred million dollars per month in transactions. Basically we have this business model that evolved. It evolved into what's called a subscription business model, in which basically the merchants pay a subscription fee to use their platform, but they also pay a transaction fee. These are distributed in every Latin American country, mostly concentrated in Brazil and Argentina. With merchants in Mexico, in Columbia, in Chile, Peru--pretty much every country in the region. Last year, it was very hard for the world, as you know. But our category in particular saw a lot of tailwinds. Our merchant base grew four times within a year. It's crazy growth all happening remotely. We raised two rounds...500 employees. So this is how the company looks now, but we still have this feeling that this is just the beginning because there's so much that we can build. There's so much infrastructure to be developed. There are so many problems to be solved that we remain excited as on the first day.
JB: So how do you sleep? I'm sorry. If somebody gave me this much money I'd be so anxious. Isn't your head full of ideas? How do you do that?
SS: Well, I have to admit it creates anxiety, right? Because we're trying to deal with... There's a lot of expectations from everyone. There're expectations from the investor’s side because they want to have their growth and the returns. Our investors are very sophisticated and long-term oriented, but that doesn't mean there are no short-term expectations or goals. Then we have expectations from our merchant base which has grown very large, and very diverse in terms of geography and size and category. So there's expectation from the team that they want to grow as professionals. So at the end of the day, you realize that you're... A part of my job is managing all these expectations, and trying to align everyone to the same goal. At the end of the day what we're trying to do, the ultimate purpose of the company is to make sure that all these businesses and entrepreneurs, things that really matter today will have a long term impact.
JB: Many of those businesses that use Santiago’s platform are owned and run by women.
SS: Half of the people that are managing this business are women, or are women-led businesses. For example, a brand called Morango Brasil which would be translated, something to a Brazilian strawberry. I think that will be the translation. And the founder is called Dayani. She was a journalist. She is journalist actually, but she was much more passionate about fashion than journalism. And she wanted to launch this brand over beach apparel , like bikinis and all of these kind of clothing. I think it's incredible. It's not a... I'm telling you about women-led businesses, but I think more broadly speaking all these idea of managing your own time. It's creating a lot of opportunities for people everywhere from every kind of community. So I think it's super, super exciting.
JB: All right, so let's move on, because we are running out of time, to a third part of this interview, to look into the future. So of course my question has to be, where's the company going? Where's the industry going, e-commerce and Latin America?
SS: Latin America, it's a huge region if you take it from a population perspective, it's 600 million people. That's twice the US population, and then there's a number of studies that indicate that the density of SMBs is very high. We've seen different studies saying it's somewhere between 50 percent to 100percent higher than the US. So this means that there's a big number of SMBs or businesses per the ratio of business per population. Right. So it's, in other words, it's a very vibrant ecosystem in terms of small businesses. And when we started e-commerce penetration was less than 1 percent. So it was pretty much inexistent, today it's getting to 10 percent. So 10 percent of the transactions are happening online. But we envision a future in which 90 percent of commerce is going to be digitized. A way I'd like to think of this is in order for a country or for a region to progress, infrastructure needs to be built in a very broad sense like railroads, roads or highways or electrical networks, sewers, whatever you can think of in terms of infrastructure. I like to think that we're building like a second level of infrastructure that has to do with the digital infrastructure.
JB: So last question is, clearly you've had the experience that there is interest in investing in e-commerce ventures in Latin America. But would you say there's still the need for more investment for maybe smaller e-commerce ventures? And what would you tell investors who are thinking about investing to convince them that this is a good idea, because the markets are in part volatile. You know currencies go up and down. So what is it that you would tell investors that they need to know before they invest in e-commerce in Latin America?
SS: I think, I think the risks are more clear because as you said all these ups and downs and economic turmoils and effects... but that's the downside, right? On the upside, I think that there are opportunities that most of the categories are still under-penetrated in terms of e-commerce, in terms of banking, in terms of connectivity, more broadly speaking. So everything is to be built here. There's much less competition compared to the US. So I think conceptually from a VC perspective, it makes sense to diversify. And we're seeing more and more top US firms that are looking outside the US, which is very encouraging and very exciting because it's going to make all other regions progress much faster in terms of infrastructure.
JB: There's a lot of potential for growth with a population like that. Like you said, in a lot of areas. What is the one thing that makes you really optimistic for what you do right now?
SS: I think it comes down to our purpose, which is, as I said, is empowering all these businesses to be successful. It really connects to your question around women-led businesses we're seeing more and more communities. And we have been talking a lot about inclusion in terms of well inclusion in a very real sense. But then specifically, for example, about financial inclusion, or other kinds of more business, let's call it business-related inclusion. So I think what we're developing is a platform that allows literally everyone that has a dream or a passion project to thrive. You don't really need that much, we're lowering the barriers. Ten years ago, it was pretty much impossible to launch, for a small business to launch and be successful in this digital economy. We have simplified it. We still have a lot to do, but the future is super exciting for me.
JB: And that's it for this episode of Creating Markets. If you enjoyed my chat with Santiago please like or subscribe to our podcast, tell your friends about us, go back and listen to our other episodes. We really really appreciate your support.
In our next episode, I’m excited to be speaking with Kenya’s Victoria Sabula.
Victoria Sabula: In today's times it is very important for every one of us to have ability to have lighting to be able to cook using clean cooking solutions that are not you know, destructive of our health or you know, are time consuming or expensive. When it comes to the agri sector. We have seen how SMEs create employment, you know what they contribute to the incomes of the countries they bring in innovation.
JB: Once again, I'm your host, Jasmin Bauomy.This podcast is produced by Maeve Frances, Aida Holly-Nambi and me, for the IFC communications team. I'll talk to you again soon.