Inventa | Supplying Connections

So, hey, everyone, welcome to Gray Matter. Excited today to have Marcos Salama, CEO of Inventa. Marcos is an old friend and someone who we've been fortunate to work with at Greylock, you know, for the better part of a year. As context. Inventa is the leading B2B marketplace in Brazil focused on connecting small retailers with suppliers in Latin America more broadly. Marcos previously was an exec at Rappi and prior to that was at McKinsey. Marcos and I first got to know each other when we were students about a decade ago. So I've had a long journey and it's been a real honor to kind of watch you grow over the years, Marcos. So thanks for having this conversation. Welcome.

Super happy to be here. Mike, thanks for inviting me.

Yeah. So, you know, just jumping into it, I think, you know, we want to spend a lot of time today on Inventa, but kind of more broadly on kind of B2B marketplaces, as well as kind of the nuances of building, you know, a high growth startup in Latam. I think to get started, to kind of set the foundation here. Tell us a bit about the founding story behind Inventa and maybe the broader vision around the company for sure.

So I come from a family of entrepreneurs, and I always had a dream to start a business and to have an impact. And that was what kind of fueled that idea of like, finding something to solve, finding an idea. You know, I lived in my past before we met. I actually lived in Europe, I lived in Asia. And then we, we met in San Francisco while at Stanford. But I had a unique view of different places around the world. Europe, Asia and San Francisco. And when I traveled to Latam, I saw that a lot of things that were supposed to happen in the US were not happening in Latam. About Inventa now, I think we set up Fernando and I, not even two years ago, and we had the dream of helping millions of entrepreneurs through ice. And when we went to talk to Franz and raise some money, we had a position that was very special. We were told we were the seventh company in Brazil trying to do this. And now looking back, this was a blessing in disguise. Because of that, we had to be super scrappy, super fast. And we built a culture around fast execution, built a culture around getting out to the client first. And that was what bred that fire of, of Invent at the beginning.

Maybe if you could go back to your time at Rappi, and by now it's pretty widely regarded as like, you know, a great success story in Latam. What were Some of the insights there or even like operating disciplines that you wanted to bring over to Inventa and I guess essentially like, what did you learn and want to take from that?

I joined rappi. You know, 2017 still was a small startup in Colombia. I think Mexico had just opened, and the culture there and the values on executing, on. On putting the customer first, on really speed of execution was what really mattered as a company was amazing and contagious. Every senior leader there understood perfectly what they needed to do and why it mattered. We weren't working to sell mo. We were working because we thought hundreds of thousands or even millions of people could have a second income. And that was a clear sense of mission. And you put that together with an obsessive execution or pace of implementation, then you get something wonderful. That's something I tried to bring over to Inventa because this speed to execution allows you to be wrong really fast and correct. And that's something we learned at Rappi. We did a lot of experiments with a lot of mistakes, but because we were always pushing to be faster, pushing to try things out, we also did a lot of things right because we were able to test a lot. And when I think about inventories, one of the best things I bring over from my time at Rappi is that obsessive and relentless speed of execution, putting a customer first and trying to iterate on what's best for them.

So going back to one of the points you made on Latam, on kind of you realizing that the opportunity here was incredibly unique. And as you've kind of hinted on, there's also challenges of building a company out there. I guess when you were weighing those, what gave you that kind of conviction on Latam and maybe more specifically on this opportunity. But like, what were some of the. When did you know that this was the concept you wanted to build down there?

I spent my time at Rappi working with retailers. I used to lead groceries there. And from an early on, a big part of my role was talking, negotiating, getting terms out of mid small and large retailers. And I understood that typically they got various problems. One is assortment, one is access to working capital, the other one is logistics. So like my experience in Rappi helped me understand better what problems retailer stores had. The more specialized, the harder it was to find products, the more boutique or small, the harder it was to negotiate products. So I think I had a unique opportunity or unique spot to understand a problem that wasn't that obvious, at least for me back then. And when you put that together and you Think about the economy, how is it structured in LATAM, B2C or small stores. Small retail represent a much, much bigger portion of the economy. That would do in developing countries in the US or Europe. So that sets an opportunity, right? Millions of small entrepreneurs, no clear access to discoverability of parts, no clear access to great prices, hard to define how to optimize logistics. And that creates a big problem and we saw it as a huge opportunity.

Maybe you could talk a little bit more about the status quo of how for listeners who are are not familiar with how local retailers there are actually discovering and buying products. Like how does it actually work today?

Yeah, great point. If you're a small store and you typically buy cosmetics, home decor, small jewelry, clothing, you have a couple options. One, you can go to antiqued, I would say fair, where you see what's happening and you did one, two, three times a year and you see kind of the trends. Second is you rely on distributors or smaller distributors who buy from bigger distributors and what they propose is their portfolio of products and that's the options you have to buy. And finally you can talk to sales reps. And sales reps are typically try to sell you the highest margin product. So if you're a small store, it's really hard for you to try something new. There's no data, there's very, very little possibility of discovery because it's a risk on you. And furthermore, because the suppliers are not willing to risk a new relationship on credit and many, many of our retailers don't have a credit card. It's risky, right? So think about it this way. You're a small store, you have a commercial relationship with a distributor, a sales rep, you don't have any data on what products are selling somewhere else. And if you want to try something, you need to pay upfront and you're not sure what price you're paying. So you put that together. It's a complex problem to solve and it's a complex operation to be in as a small entrepreneur.

And so you've looked at models that have worked in other geographies. I mean, I think FAIR obviously is one example of one that's doing well in the US and in parts of Europe where it feels like to some extent kind of the potential margin structure of these businesses and the financing and credit options kind of proven out. And that's kind of a canonical example of what people go to is like a leading B2B market leading wholesale marketplace. Latam is different and you kind of hinted at a couple of these reasons.

Yeah, 100%. When you think about Latam, you have to think it this way. It's a more complex setup. Okay. In many ways, you know, I think about credit. You know, most retailers in Latam don't have a credit card, particularly in Brazil. Think about logistics. You know, Brazil is a huge country and you don't have a single player that can cover the whole country. You know, it's dozens of transportation logistics companies that have specialized in different routes or different sections or even different smaller geographies. So the last one is many of the suppliers or the retailers today are managing their business with quote unquote pen and paper, right? So they're not as used to buying or selling digitally. And you put that together, you need to solve the more problems. So you mentioned fair. I think it's an amazing business they built in Europe and in the US and Europe. I think anchor store in Europe is also doing really well and there's a couple in Asia. But Latam, I think it's much more similar to what would be Asia, that would be the US because of the infrastructure flaws that the economy has. So as such, when we think about building a solution for Latam, we need to build more things. We need to build a credit, a model credit engine that helps us serve our customers. We would have loved to work with any buy now, pay later for Latam, but at the time we didn't have anybody who's suited for this. We had to build commercial relationships with dozens of logistics companies and we had to work with small brands that were not digitized by Google to help them start selling online. So I guess the problems are more basic, but the opportunity is bigger because proportionally this part of the economy represents a much, much larger percentage than what would be, you know, in the US or Europe.

You look at kind of the assortment on products like Avento right now where maybe you're dealing with a much higher volume of lower margin products. How do you actually work around that? How do you make the business kind of like work, work with a dynamic like that?

So discoverability is the key problem we're trying to solve. And you know, when retailers buy different products every time or discover new products with you every time, then the value you generate as a marketplace is incremental. And that's the key. Even though, you know, we might not sell expensive candles, we might be selling, you know, cheaper cosmetics because it's like either boutique or specialized or regionalized. When we open that up to to all of Brazil or to all of Latam, then we create an incremental sale. And this is all about how we think our marketplace scales and why we think the opportunity is unique. Because breaching those connections between smaller suppliers and smaller retailers adds a tremendous amount of value to the system. We are, I would say, greasing those transactions with credit, with better operations, with better customer service. For us, for small retailers, customer service is key. And we believe it's part of our nature to be able to help our retailers in whatever problems they have today.

Well, let's shift gears a little bit and talk about growth and the story of how things have grown so quickly there. I think one of the things that makes marketplaces really challenging is the typical kind of chicken egg problem. Getting one of these things off the ground and then going and building kind of initial liquidity either within a category or kind of across multiple categories.

Yeah. So in the early days of Inventa, we closed our series seed with great local funds. As I told you before, we were late and we were the seventh company out of seven trying to build this. So we understood that speed was essential. What we used was like, you know, off the shelf, I guess, platforms to launch really, really fast. And in terms of supply and demand, because of my experience or team's experience in, in actually building salesforces, we were able to bring on board a very strong team really quickly and we focused on supply. We understood that there's a chicken egg problem, but initially we were supply constrained. So we built a team really fast. People who had worked with in the past at Rappi in the commercial side and we were really aggressive at closing contracts with I guess dozens or hundreds of suppliers in the first month or two. And because we used a third party platform, we're kind of ready to sell in three weeks. And that gives us huge advantage because the moment we started selling, we started understanding what pain points our customers had versus what we thought they had. And to your question, that gives us a lot of speed. We were iterating while selling in the first couple of months. But the hypothesis we had about discoverability, about trying new brands, about credit or were correct things we weren't right about. You know, Brazil doesn't buy that many candles. It's not a country which is particularly cold. And there are other categories which are more relevant, I would say.

Yeah, well, the focus on supply is an interesting one and I think like, let's spend a little bit more time on that because I think one of the dynamics that makes some of these businesses very powerful from a growth standpoint, or sorry I should say efficient, is that you know, supply onboarding, supply can be an avenue to kind of onboard all of their demand nodes. Given that it's just more efficient to be selling through a digital kind of channel like this versus sending out sales reps. There's also incentives you could do there, which I know Inventa has implemented. Was it obvious early on that you wanted to focus on supply here?

So initially we started experimenting with like paid media and CO2 grow and like that wasn't as effective as we thought it would be. And particularly it wasn't bringing quality retailers. Right, Retailers who want to stay here in the platform for long term. The rationale behind that we understood is that typically if you could credit online to people who are looking for credit online, you're not going to get the best, the best retailers. But in the next couple of months we discovered a way to grow via suppliers. That was why our growth was strong and very powerful. Because what we typically see is a kind of referral loop where we give incentive to suppliers to bring in their retailers to the platform. And this is very powerful because we bring those retailers to the platform. We, we understand what those retailers are buying and we can also recommend similar brands to those retailers. So bringing in supply, you know, brings in demand because they bring in their retailers, we understand what kind of product they are looking for. We close those brands and we bring more retailers. So supply driven acquisition was a way for us to acquire at a low cac, a high quantity and high quality of retailers.

So I think we talked about acquisition. Obviously there's other kind of downstream behaviors you will want to see to kind of make sure your marketplace has a healthy kind of dynamic. And we talked a little bit about liquidity earlier. But I think overall how do you assess health of growth?

Couple of things we're looking for, for example in the retailer perspective, the number of brands that retailer buys. This covers. It's really important for us because it shows that the marketplace is bringing incrementality to the system and that we're creating new nodes. As you mentioned before, you know, it's of operation and where the retailer is discovering brands. And typically those brands are high margin. It's a brand that they sell pretty well and they keep on discovering more. On the other perspective is on the supplier perspective, how many new connections do we make? Every brand that comes into a platform, what percentage of those products or those brands are selling in the next 90 days? So if we think about increasing share of wallet for the retailer and we think about bringing in quality suppliers to the platform, that's how we think about kind of growth quality.

Inventa has depth in certain categories, but is definitely cross category. Like how do you think about that tension?

So we initially defined two or three categories. To start with, it was home decor, cosmetics and jewelry. We saw that cosmetics was pulling off a lot faster than the others. So we kind of try to narrow it down to a Persona of retailers. So we think about within the cosmetics categories, what Personas of retailer can we better serve? We identified type of retailer and we made sure that we had 100 or 300 or 500 brands those type of retailers served. The beauty is that every time we ask a retailer what other brands would he want to pay with these payment terms or these logistics operations, those customer service, we got referred to new brands. So that gave us a pipeline of new brands. And once we had enough critical mass, we were able to launch, I would say, subcategories seamlessly that would serve our existing base. So we weren't really changing bases because there's some overlap between subcategories in home decor, cosmetics, healthy food and things like that. So we believe it's going deep into categories where we can add more value, but also believe that, you know, the power of those signals that retailers give us to define which category should be next, which are very, very indicative of how do we should be scaling.

We've had a number of podcasts over the years on this topic and now where we are sitting kind of, you know, end of 2022, it's become more obvious that these models can can work in a very big way. And I think some of it is due to enablement from, you know, new fintech revenue streams as we've discussed. And also just kind of, you know, maybe generational change in terms of buyers just expecting a more digitally native like solution. But where you're sitting in, you know, Brazil in 2022, like, you know, what's your point of view on broader B2B marketplaces outside of Inventa? Kind of what, what categories do and don't they make sense for kind of how might a new entrepreneur is thinking about building in this space? Think about approaching it?

Yeah, I think, you know, when you think about trade in terms of B2B, you know, us maybe 5 to 10x more in terms of percentage than what happens in Brazil. So 1 to 2% of trade in B2B happens online somewhere around, I guess it's 10 to 12% happens in the US so that simply tells us that this is going to happen, it's here to stay. So There are going to be B2B marketplaces in Latin America that really help small entrepreneurs or small retailers, small stores, you know, discover, buy and operate. The question is, you know, where do we focus on? We believe that the categories that work for us are the ones that have more discoverability, the ones that have, you know, smaller brands, that they have different kind of transactions every time and that, you know, the customer is looking for different products and so the retailer has to follow suit. We believe those are the where the opportunities of B2B Marketplace will be created. And that's why we stand there.

Got it. And your market is uniquely fragmented and you mentioned the discoverability point and I guess you naturally as a founder you're probably not spending too much time thinking about other verticals, but I guess maybe if we have a broader set of insights on. One of the things that I think Inventa has done very well is kind of establishing data science very early as a key strategic asset and investing in this function as a real core pillar of the company and the model, I guess. Well, there's a broader question on how does that apply to other B2B marketplaces and is that kind of broad general.

Advice you would give on the data perspective? Even though from the start we knew data was going to be key, we need for various reasons. One, we wanted to solve the discoverability problem and second, we knew we had to build a core solution around credit. So even though we launched off with, I would say pre made platform solutions, we always defined and internalized the data infrastructure and we're really thoughtful and worked very hard around that to the point that very early on we hired senior data scientists from the U.S. daniel joined the team a couple months ago and has led a large data science team. Make sure that we're thinking about data the right way, we're thinking about our infrastructure in the right way and that I think that over time creates a significant competitive advantage because we are digitizing offline transactions. That's data doesn't exist. That's not public data, it's private data. And that allows us to give better recommendations, allows us to give credit where other people wouldn't be able to. So we think that data's core capability of the company, we've invested in talent both in Brazil and abroad and bringing in world class quality talent there has always been a priority for us.

Yeah, essentially it feels that the dynamic you just described, which is a lot of these verticals are just operating in a very offline way where a lot of this data has not yet been brought online. And so I guess the question for other kind of founders looking to build in B2B marketplaces or just kind of with curiosity around B2B commerce, how should they think about the criticality of data science versus other functions?

Your clients have pretty much no data. If you're building a B2B marketplace, they have either a notebook or a digitized notebook, an Excel, a worksheet, and that's what they use to run their business. If you can build something that's much better than that, which you probably can, you can fix a huge pain point of what they should be buying, when they should be buying, how they should be selling, how much should they be selling? So I think for founders who are looking to build B2B marketplaces, making sure you can gather that information, gather that data, making sure you can understand it and making sure you can present it in an actionable and reasonable way to your suppliers or retailers will add a tremendous amount of value because there's no way for them to access it. Now. You're going to be probably the only one who has that kind of access. So I think it's powerful for you to think of data from the beginning.

Yep. Going back to the talent point, Marcos, I mean you've been able to build quite a strong team on inventa across different GEOs and I think have been very deliberate on the type of culture and operating rigor that you want to build. What lessons might you have for founders that are looking to build teams in Latam that are working specifically on like technology software marketplace businesses that are thinking of whether they need to base the company entirely down there across geos.

For us, Remote has been a blessing. Because of that. We've been able to hire talent we couldn't get otherwise. We think about a multicultural, multilingual company where hyper growth execution is kind of the name of the game. We speak in English and we want to hire talent from across the world who has the ambition, the willingness and I guess the intent of building a business that matters. What we've seen is that we can get great local talent, mid level, junior level, and we've gone to the US or Europe to hire senior talent because not only culture but also expertise mattered here. So we're building a team where we have a very, very strong local talent and we're cherry picking a couple of great executives from across the world to lead functions where they have to have expertise, where they won't have an impact and not necessarily live in Sao Pablo full time, right? Yep.

When you think about having this rapid execution and kind of just like quick experimentation and kind of, you know, essentially just like really high operating rigor. At Inventa, in my experience that can be tougher when the team is based kind of across different time zones. How do you work around that point specifically? Because I have this notion of early stage, kind of scrappy, growth oriented product teams that are just like experimenting on a pretty rapid cadence. I imagine that's harder if you're distributed and maybe that's just a trade off you make, but how do you work through that point?

There's a balance there. As a company, we're 18 months old and for sure we're a very young company and part of our team or part of our energy devoted to experimenting, testing, iterating, talking to our customers and trying to figure out what exactly do they want. But because we were very fortunate to fundraise when we did and support of Greylock and other great teams, we also can think long term. We also can think about building the foundations technically in terms of people or what are the capabilities we want to build in house. And that gives us an amazing opportunity because we have this relentless goal.

So I guess wrapping up here, Marcos, I mean as you mentioned it is a young company, but the growth has definitely been incredibly fast. And I think it feels like you are reinventing the team every six months or so, which is true of many hyper growth startups. And so what plugs would you give right now as you're looking to build the team? Any specific roles you're recruiting for? Anything that people out there interested in Inventa should know.

We think we have the opportunity to build once in lifetime opportunity business. Right now there's millions of small and time entrepreneurs who struggle to discover products, who struggle to buy them and we think we're positioned to help them and fix those issues. So if you work in product, you work in data, you work in technology, and you feel that you want to have an impact on millions of entrepreneurs across Latin America, I think you should reach out because we're definitely poised to try to solve a large problem nobody ever has and to have a big impact along the way.

Well, Marcos, thanks for the time today. It's definitely been fun chatting and a reminder. It's really an honor to work with you and I think there's definitely a lot more to unpack here on kind of the dynamics of Latam in future conversations. But this has been a great conversation and congrats on all the success at Inventa thus far. And I'm sure everyone listening has gratitude, too, so thanks for taking the time. Marcos.

Thank you, Mike. It's been a pleasure.

That concludes this episode of Gray Matter. If you enjoyed this interview and would like to hear more like it, please subscribe to gray matter at SoundCloud, Spotify, or wherever you get your podcasts. For more content, you can also check out our website, greylock. Com blog, and you can follow us on our YouTube channel or on Twitter at greylockvc. I'm Heather Mack, and thanks for listening.