🇵🇪 Raising Millions in VC 💵 Building FinTech Success in Lima | 🎙 The Nearshore Cafe Podcast

Welcome everyone to the Nearshore Cafe podcast. I'm Brian Samson, your host, and I wanted to first thank our sponsor, Plug Technologies. That's P-L-U-G-G.tech. Plug provides software developers for U.S. companies. I am very excited today to introduce our guest Amparo Navarrete. I tried my best to roll my Rs for you, but welcome Amparo. It's so nice to have you.

Thank you very much for the invitation.

Absolutely. Before we get into all these great topics, tell me about the chair that you're sitting on. That is a really cool chair.

Really?

This one?

It's a normal chair, actually. I am in my office, home office, home office. So no worries.

Good. I like it. Well, you know, we talk with entrepreneurs and business leaders all over Latin America on the show. And what I first want to do is maybe set the stage on, you know, you're from Peru. So tell us first, you know, for people that are listening and watching that have never been to Peru, where to go, the major tourist attractions? Maybe let's start there.

If you talk about Peru, there are two things that you will hear a lot. The first one is Machu Picchu. Everybody knows or wants to go to Machu Picchu at least once in life. So it's a really good place where you should go or people should go. And the other thing is food. The Peruvian food is delicious, delicious, delicious, delicious. So there are people that only come to Peru for gastronomic tourism. So really, it's really good.

Now, when I went to Peru, so I did Cusco and Machu Picchu, of course, and the food that I remember having— now, I was also a solo backpacker at the time. And I remember having incredible chicken. The chicken was like the best tasting chicken maybe I've ever had. Is that something that Peru is known for? Or maybe what are some of the other cuisines that you'd recommend?

Yes, no, that's a pollo a la brasa. That is awesome. It's delicious and it's cheap. So everybody can eat that.

Yeah, I remember, I think I even got it from the supermarket and it was just like, oh my gosh, I could not believe it was probably like the equivalent of $3 US and I had so much food and it was so tasty. I don't know, what is the secret? What is, maybe if you could share a little more about the secret or what does it taste like for people that are listening?

Um, actually, that's like, uh, the best secret of the restaurant. We don't know the ingredients at all. I don't know how they prepare that, but the difference in the preparation, in the process, is that you don't put the chicken on the oven. You put on a, like, a big oven, but put in a line And this is the line and the chicken is around this line and this is going like turning, turning around. So the preparation is different. So, and also that gives us like a different flavor because of the carbón. Carbón is the name in Spanish. Okay.

Okay. Good enough. Good enough. Yeah. That was, it was so excellent. And then Machu Picchu, what should people know about Machu Picchu that haven't had a chance to travel there yet?

There are two types of people. If you like adventure or if you don't. If you don't like adventure and you don't like to walk a lot, you can take the train, then the bus, and then go to Machu Picchu and they walk around for 2 hours. You can see— now you have different routes, A, B, or C, I think, or 1, 2, or 3. You can choose one of them and you can see the— and you can see Machu Picchu. But if you are more adventurous and you want adrenaline in your life, you can do Caminos del Inca. It's the Incas' the trek, and it can take around 2 days, 3 days, 4 days, 8 days, depending on what you want to do. So the difference in Machu Picchu, we are like very high, so you cannot breathe well, and that's something that you want to know before you go there. So you need at least 1 or 2 days to prepare your body and be comfortable with the space there. So if you want to walk 8 days or 5 days or 4 days, it's like you need to be prepared for that.

Yeah, I remember having, I think it was like coca leaf tea to help me acclimatize. Oh my gosh, I felt fantastic, by the way. Is that common throughout Peru or mostly in the higher elevation?

Only in the highest places. Yes.

Yeah, yeah.

It's not good for people that do sports. For example, we had here a Paulo Guerrero, a soccer player, that he, he drank— no, he drank one of this tea, and when he had the process for antidoping they saw that this tea was part of the ingredients. So it's like, hmm.

Oh, okay.

You couldn't play for a long time. Yes.

Oh, wow.

Wow. Yes.

Interesting. So we'll, we'll make maybe make a caution for athletes, uh, check to see if it's banned.

Exactly. Yes.

Okay. I like it. And then, um, you're in, in Lima, correct?

Yes.

Okay. So I've been to Lima. I loved it. I thought it was a really interesting city, but you're there. So who better to hear more than you? Tell our audience more about what Lima is like, what they should know about it.

Lima, it's a big city. There are around 11 million people living in Lima and in Peru, We are like 33 million people, so one-third party lives here. So there is a lot of people, a lot of traffic. We have different zones like the zone for tourism, like Miraflores or Barranco, that is a bohemian place for people that want to have fun. We have San Isidro, that is the financial zone. Yes, and we have different places that are around Lima, but if you want to go to the airport, for example, at least you need to prepare for 1 hour. So, okay, yes, for the traffic, and it's not that near to the city center.

So yeah, I do remember that. Yeah, I do remember the traffic to the airport. And I'd imagine that the majority of business is happening in Lima versus the rest of the country? Yeah.

Yes.

Yeah. Tell us about the business culture and the business climate in Lima. What is it like doing business there? What's the work style?

I think that there are two different types of businesses here. Actually, the people that live here are really good entrepreneurs because there are a lot of entrepreneurs there. But because of necessity more than because of a passion. They want to resolve the problems of their families and they have to work and they create their own jobs. And we have seen people on the street selling things or selling desserts or sanguchitos. Anticuchos or food on the street, and we have a lot of that, that things. So, but, but the culture of, of entrepreneurship here, it's really, it's really strong. But those are like more traditional businesses and are like very small businesses. In the other side, we have like the startup world, you know, the startup and technological fintechs or, or health tech or any the other, the other type of businesses. We have the ecosystem that is supported by investors, by the academy, by the government. The technology, the technological part is not that strong We have good developers, but there are not enough developers. That's a problem. But we are working on that. We have some exits in the market. I mean, people that sold their companies. But for example, we don't have a unicorn here. That's something that is missing.

Yeah, I think, you know, there's often a couple different pieces you need to create a perfect startup ecosystem. You know, developers, you need investors and capital, you need a culture of people being able to take risk, right? And then, and then you need, you know, just the overall environment. You need enough people, population. You know, I'm curious, you know, your take on that. And, you know, maybe besides lack of developers, is Peru trending positive on the other things? Are there other areas for improvement related to the developer part?

We have two really good universities that are not in Lima, are in the south of Peru, and we have very, very good developers there. What is the problem that we see is that they are being hired by bigger companies. So for example, I don't know, PayPal hire one of my team and I cannot support that salary. It's like if I'm paying in soles and PayPal pay the same but in dollars, it's like 4 times what I'm used to pay. So I cannot compete with that.

Yeah, I can see that. As we look at other markets as well, say Argentina, It's very hard for domestic companies, especially if they have an English-speaking developer, because there's opportunities to work directly with the US and US dollars and big companies and big money.

And now that they can do home office, it's like, oh yeah, yeah, for them it's awesome. It's like, good luck, no, but remember that they give you your first job.

Don't forget me. Don't forget me.

Don't forget me. Exactly.

Yeah. Well, let's, let's talk more about you and your background. I found your, your profile and our earlier conversation just fascinating. And I'd love to maybe start from the beginning, you know, where did you grow up? How did you develop this entrepreneurial mindset, your education? And then I'm sure I'll have, you know, a dozen other questions.

When I was young, when I was at school, no, I mean, my family, my dad, he's an entrepreneur since always. So I grow with the mindset that I should be my own boss, I should have my own company, I should be independent. And for me, that was good, no? But like, for everybody that hear those things, it's like, okay, but what I should do? No, which is the million idea that I should work with? And so that's like, that's like weird. But it had that information always in my mind, so I knew that I will be an entrepreneur at any time, but I didn't know doing what. So when I was at university, I studied business administration. To finish the career, I had to create a business plan. So I create Kulki. That was my first startup. Kulki was born, you know.

That was a very successful business too. And your very first one.

Yes. Actually, this is my second job, no, or my second the second course because I failed the first one. My first business plan was failed. Like, I did tourism in the north of Peru or something like that, but it doesn't work. I didn't approve the, the course, so I had to do that again, and Kulki was born there.

Yeah, yeah, yeah. Well, tell us, tell us more about, uh, Kulki. Um, what, what did it do? Who is it for? The market? Um, and maybe, you know, some of the interesting parts of that journey?

Well, in that moment, well, until now, there is a problem, no, that the cash is the king in most of the cases or in most of Latin American countries. That's a problem. But in 2013, when I started with Kulki, there was a bigger problem. And when we tried to discover why people was using only or was accepting only cash, and why they weren't accepting credit cards, for example. We realized that it was too expensive for them. The acquiring work was divided in different brands. So you, in that moment, you need a terminal for Visa, then you need another terminal for Mastercard and things like that. And that was expensive also for people. And if you were a small company, you had to wait like 6 months to receive your terminal. So, so that was, that was a problem. And of course it was expensive. And at the university, we had one person that was selling like small food or snacks outside the university, and he only received cash. So we wanted to give him the solution to use Kulki to set credit card payments for the people that study at university. So that was like our user persona. We wanted to solve his problems and we started with that. And when we had the prototype of the product, we went to him and said, okay, use it. And he said like, good, okay, but I won't use that. And we say like, what? No, but it helps you. I mean, this helps you a lot. No, but I need to use a QR code. I need to use my cell phone to accept payments. No, no, I prefer to receive cash and continue writing in my notebook. And we were like, okay, okay. We were in an industry where the problem was still there because the money was a problem. I mean, the cash was a problem. And we said, okay, we need to find the early adopters. Who are the early adopters for this solution? So we were in that moment, we were part of Wayra, one of the acceleration programs of Telefónica, and we were working with other startups there. And the other startups, they were doing e-commerce in that moment, you know, so they were the perfect clients for us because they were processing or accepting payments with payment gateways in other countries because in Peru they didn't find anything that gave them the solution. So we said, okay, we have the payment processing, That is the most important thing, is the core of our solution, but just change the way we integrate with these companies. And we only change like the face of the solution and change the market. And we start with the startup and with e-commerce for online payments.

Very interesting how your user persona changed over time. That's very interesting. When you say we, what did the initial founding team look like?

We were two people, Nicolás, Nicolás Di Pace. We studied together at university when we wanted to enter university, like when I was like 17. Then during the, during the, the university, we didn't see too much, but at the end of the, of the, of the university, we get together to, to do the, the business plan. Yeah, and we continue as partners.

And, uh, uh, you were the business side, and was Nicholas also on the business side or the technical side?

No, we were both the business side. I mean, the technological part for us was like, we will solve that. Yeah, no, we need to— we will bring someone that has the the knowledge of that and we can resolve that with the specialist. But in our side, both were focused on the, on the business side, but with different perspective. Now, for example, he was really focused on the product because he's like so analytic and very focused on the details. And for him, like, the best thing was to be responsible of the product. In my case, what do you think? I was focused on selling. Yeah, selling was my part, like try to find new partnerships, try to find new clients, and always be outside trying to find new solutions and incomes for investment and everything for the company.

Yeah. And did you end up raising capital for that business?

Yes, yes, we received around $1 million in total in 3 rounds.

Incredible. And these were, the investors were from Peru or outside?

Almost, yes, almost all of them were from Peru. Yes.

Yeah. And, you know, as we talked about earlier, Peru is up and coming, you know, as a technology center. And, but even this is almost 10 years ago that the business was started. What were some of those early investor conversations like? Was it hard to raise money or there were fewer startups or less competition? You know, how was that early on?

No, it was really hard to get to get money because in that moment it was something new for people. So I remember that one person wanted to give us $50,000 for the 50% of the company.

Wow.

And we said like, what? No, no way, no way, no way.

Yeah.

So we always had a trainee salary at least for 3 or 4 years. Yeah. But something that really helped us was the programs like the accelerator program from Guaira. We received that. We received there $50,000. For the government also, we received $50,000 more. So we could support with that money the first years of the company. And we were like very efficient with with, with money, not trying to make it work for months or years. No, we did that. But now I have a new startup. And with Kulki, I sold Kulki. I had an exit in 2018, 2019. And when I create my second startup, for me it was very easy to receive investment because I had something successful in my portfolio, you know, like the start that could say like, okay, she could do a business, she could sell that business to a big company that is that company. So it's like for me, like a check now. Okay, she has this support.

Yeah. And did you know right away that you wanted to raise money for this current venture or were you thinking about bootstrapping, you know, after you had already had this success?

There are different situations. When we start in 2020 with B89, that is this second company, we start looking for investment and we receive in one year and a half around $9 million. With that money, we did a lot of things. We hired a lot of people. We were in the team around 100 people. There was a— it was a big team. But when in November 2021, things went like not so good, and we start like we were spending too much money and we didn't have too much cash and the market was sharing. It was that moment where investors, they were looking for a lot of numbers. Yes, specifically numbers, good KPIs. We said like, okay, no, we cannot continue looking for investment in that way, we need to be more efficient. So we did a lot of change. We received our last investment in that year that was $4 million, and we still have that money now. We are still, since November 2021 until now, more than one year, it's like we are still working with that money. And we are now like very, very efficient. We are not 100 people, we are 30 people in the team. We change a lot of providers, we renegotiate the contracts, the conditions, and everything. We have to do a lot of change to, to be sustainable. That's our main focus now. No, we don't want to launch or to look for investment in the next 6 or one year, no, 6 months or one year. I mean, something that really, if we stop losing money, we will look for investment.

Yeah. Yeah.

If not, not.

Yeah. You're not alone. The last 18 months has really been a year of efficiency for startups all over the place. Right. And I think you're also not alone of probably a little over-hiring, you know, as we all were very optimistic, right, with the global economy. So out of the 30 or so people, what are they focused on? I don't think we've talked so much about what you're building right now.

Yes, now I have B89. B89 is a neobank. We are helping people to get their first credit card. So we have a program that it's a credit builder solution. If you want to apply for a new credit card and you don't have information in the system like the bureaus or financial bureaus, we help you to create that history for 6 months. And then if you pass the process, it works with gamification. You need to complete some challenges and if you do that, then you graduate and get your first credit card. It's like our challenge or our main purpose is to give access to the people. That's actually what we are doing. Yes. And we have the cards that are Visa. We are partners with Visa and we are also in the cross-border payments solution because For example, one part of the market in Peru are foreign people like Venezuelan people that live here and they work here. They don't have information here. They need a credit card here and they also need to send money to their countries, not to their countries of origin. So we are helping them too with this, with our solution.

Oh, interesting. Interesting. Who do you run up against the most with that? And maybe what are, what are some of the key differences that you're doing?

We're giving them like an ecosystem to our clients. We're a mix of Wise and Nubank, for example. We want to be a mix of that in one solution that you can have like the credit card, the prepaid card, and also you can send money. That's the main focus.

Got it.

We're a mix.

Yeah. And another area I wanted to get into is what we talked about earlier about building that ecosystem in Peru and Latin America in general. And you often not only need developers and ideas and and business people in the environment, but you also need capital, you need investment, and you've become an investor yourself. And I'd love to hear, you know, maybe, maybe two things. First, a little bit about some of the investments that you've made, and then second, what are you looking for, you know, in, in companies that you decide to invest in?

I, I think that as opportunities now startups related to agriculture and education and healthcare. In those three segments, there are like a lot of opportunities that are growing a lot. And what do I look in people to— no, in one investment, I see people. I'm always focused. I mean, if you have a business and it's your— and that business is what supports you or supports your family, that means that you're going to kill for that. No, you are going to do the best to make that work. And I think that that is very, very, very, very important. Because I had, I invest in one startup and the founder was, this startup was his second, like his second job or something parallel. And in one year it was dead. So it was a disaster, but I learned that if it's your main source of resources for you and your family, you are going to die for that.

I think that's a great point and probably works universally. It doesn't matter where you are in the world. That's a great, great perspective. Yeah. Yeah. And how about specifically, what are some of the companies that are still around that you've invested in? Maybe you can give them a little bit of a plug too.

Yes. Most of them are related to fintech because I'm really focused on fintech. No, for example, I invest in Rexty, that is an exchange. Yes, exchange. They change soles and dollars, the currency. They are growing, they're expanding now to Canada and they are growing, they're growing really good. The founders are a couple, a couple, they're husband and wife. They are 100% on that. I have another investment that I'm working on now, like processors for payments, SDK or SDK or solutions related for tap on phone or payments with the cell phone and all the things. Because it's part of of what I know. I also invest in the internet. It's not only my job, it's— I put money on that to make it work.

So yeah, that's great.

Yes, those are my main investments. Good.

Well, I'm wishing all the success for both your company and your investments. I just have a couple last questions for you. You're obviously a global person, and I think last time I talked, you were in Vegas or somewhere at a conference. And especially for people that you meet, say, in the US, and the US has been trending looking at Latin America a lot more, and I think a lot of people are curious of many things. What advice would you give to someone who is maybe new to Peru, but they're looking at investing in Peru or starting a business in Peru, but they're from the States? What advice would you give them?

I think that knowledge It's something that is missing in Peru. We can have here people that have like the best attitude, they will kill for their startups, but they need more knowledge, growth methodologies, or how to work with AI, or how to think big. That's very, very important, how to think big. People from U.S. can share that information, can share that knowledge or that way of thinking with Peruvian people. That will be like very, very important.

That's great. That's great. And obviously you speak English fluently, but it's not your first language. So, you know, one question I always have is your What's your favorite English word?

My favorite English word? Yes. Always positive. Always positive. Yes, I like it.

That's a great attitude to have. It's an entrepreneurial word too. Like, say yes, you know, and things will happen, right?

Exactly.

I like it. Well, that's all the time we have today. Amparo, it was amazing having you. I learned a lot about Peru and entrepreneurship and just things that I can take anywhere, and I'm sure our audience will too. Another thanks to our sponsor, Plug Technologies, plugg.tech, a great place to find software developers in LATAM to help US companies. Amparo, thanks again for your time today.

No, thank you very much, and I hope that people can, can hear this and enjoy.