The Challenges Of Building A Successful Business In Latin America: Accomplished Entrepreneur Shares His Experience
IguanaFix is one of the most successful start-ups in Latin America, currently functioning in Argentina, Brazil and Mexico, the three largest markets in the region. The company operates a site and mobile app that connects customers with certified handymen-and-women, electricians, plumbers, painters, etc. In 2016, the company handled more than 35,000 transactions per month and generating revenues of $10 million — with a take rate of roughly 20 percent; for 2017, IguanaFix is projecting sales of $30 million.
In addition to providing on-demand home improvement services to retail customers, IguanaFix serves large corporations looking to outsource their maintenance needs. Among its clients are Anheuser Busch Inbev NV (ADR) (NYSE: BUD), Starbucks Corporation (NASDAQ: SBUX), Restaurant Brands International Inc (NYSE: QSR)’s Burger King and Sodimac.
“We take background checks for the people we work with very seriously: we meet them, we register their personal information — so, the fact that it’s a curated marketplace makes it especially secure,” co-founder and CEO Matias Recchia told Benzinga.
“Another thing we offer is pricing transparency, which, as most people know, is a big issue when it comes to specialized work,” he continued. “However, it is not only the retail customer that is our client; the professionals in our network also are. So, our idea is to help them enter the formal economy. Moreover, the app we provide them with optimizes their work route, saving them time, generating more revenue, and saving consumers money. We’ve got enough demand to have people allocated to certain areas of each city, generating better unit economics for everyone involved.”
Getting Funded Outside Silicon Valley
A few months ago, IguanaFix closed a $16 million financing round, where it got backing from Singapore-based Temasek Holdings and QUALCOMM, Inc. (NASDAQ: QCOM)’s Qualcomm Ventures. Proceeds will be used to fund regional expansion, especially in Brazil and Mexico.
Javier Hasse: So, how do you get such big firms to fund a project that makes most of its revenue out of Argentina?
Recchia: Raising capital in Latin America is much harder than doing it in North America. The main challenge is that, you don’t only have to explain how your company is growing and why its unit economics make sense, but also why the economies of the countries where we operate can offer growth opportunities; there are a lot of macro issues involved.
It’s not just about proving your company deserves an investment, but that the countries where it operates also do.
What I think Qualcomm and Temasek saw is that the services market in Latin America is really huge, worth tens of millions of dollars, but also, that it’s extremely inefficient — so, technology and pricing transparency can help ameliorate these market conditions, and we’re the company positioned to capture this market.
Right now, the big opportunity is not in content creation or information for us — as we’d have to compete with Google and Facebook Inc (NASDAQ: FB), but in services. It’s true that it’s hard to scale up, and that requires a lot of groundwork. However, this also creates real barriers to entry.
Prepping For Success
Recchia was born in Argentina, raised in Venezuela, and finished his studies at the London School of Economics. After that, he started working for Procter & Gamble Co (NYSE: PG) but left a couple years later to pursue an MBA in Harvard University, and eventually stated working for McKinsey & Company.
He finally decided to quit McKinsey and start a social gaming company with a couple of friends he’d met in Harvard. “We wanted to create something like Zynga Inc (NASDAQ: ZNGA),” he voiced.
“We named it Vostu, and made it the largest social gaming company in Latin America, with about 50 million users. In no time, we were Google’s (NASDAQ: GOOGL) (NASDAQ: GOOG) largest customer in the region,” he added.
Hasse: So, how did IguanaFix come to life?
Recchia: About three years ago, Vostu’s CTO and I decided to leave the company and, inspired by Mercadolibre Inc (NASDAQ: MELI), decided to go after the marketplace opportunity in Latin America. Looking at what American companies like IAC/InterActiveCorp (NASDAQ: IAC)’s HomeAdvisor or Angie's List Inc (NASDAQ: ANGI) were doing — helping people get easier access to certain services near them, we came up with IguanaFix.
Home Depot Inc (NYSE: HD) and Lowe's Companies, Inc. (NYSE: LOW) already had similar products in their portfolios, but none of them were available in Latin America, where the complications related to finding a good plumber or electrician certainly created a market opportunity.
Hasse: Any advice for entrepreneurs looking to start a successful company in Latin America? How do you see the business environment in the region right now?
Recchia: It’s always a good time to start a company, if you’re making any business more efficient than it currently is. However, economic crises make for great opportunities. That’s why, I think, we did so well in Brazil last year, because companies all around were looking to cut costs by outsourcing their maintenance needs; even half a percentage point on your P&L [profit and loss statement] can make a big difference.
Right now, Latin America is navigating tough times as governments cut back on public spending, but I think great times are coming next year — companies are ready to grow.
I like volatility and exciting markets, so Argentina, Brazil and Mexico are my favorites. However, Chile, Peru and Colombia have reached higher levels of stability, and could offer better opportunities for risk-averse investors.
Note: This interview was originally conducted in Spanish. The author translated the statements, remaining faithful to the original content.
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