When starting a venture, the most important thing is to find fertile ground. Knowing how to choose the right place to lay the foundation can be more significant than the project itself. From there, let the ideas flow based on the needs of the local market.In the case of David Vélez, his promised land was far from his native Medellin, more precisely in Brazil. His work took him several times to the South American giant and from those trips he knew what he defined as the "banking nightmare" of Brazil.
This forced him in 2013 to leave the investing world to go to the other side of the counter, this time as an entrepreneur. Together with two partners he founded Nubank, a digital bank that seeks to "strip" the bureaucracy of that country's financial system and democratize access to loans and loans.
Just over six years after its birth, fintech reached 15 million customers in Brazil and in 2019 it faced its regional expansion with opening of subsidiaries in Mexico and Argentina.
Velez had the entrepreneurial gene in his blood. Especially for his 11 uncles, who had launched into the business world independently. But, for a long time, this facet remained in a state of hibernation. He left Colombia as a boy to move with his family to Costa Rica, until he finished school. Then he decided to go for the big leagues.
He studied engineering at Stanford University, where he later also completed an MBA. The first steps of his professional life were in the world of investment banking: first, as an analyst at Goldman Sachs; and then, in Morgan Stanley.
Finally, his path would cross with Brazil during his time as senior associate of the General Atlantic private equity fund. The company sought to open an office in Brazilian lands and the Colombian was the most South American they had among their ranks, so it was chosen to carry out the procedures.
"Opening an account at a bank in Brazil was a complete nightmare. I went to the branch and was caught between the doors, alarms sounded and armed guards arrived. Then I had to make a line of 20 minutes. I could not believe how horrible it was the banking experience in that country, "said the entrepreneur.Something similar happened to him as a partner in the Sequoia Capital fund, which sent him to that country to seek investment opportunities. However, the fund decided that there was not enough business volume to justify a landing in that market so they abandoned the plan, although Vélez had already decided not to return.
"At that time I got tired of having the investor hat and wanted to be on the other side of the table, make things work, create, build. I saw many opportunities in Brazil, so I decided to stay," he said.Titans fights
His experience with the system and the large number of Brazilians who were not banked led him to consider the idea of kicking the board and changing the rules of the game.
In turn, the financing business was highly concentrated in five players that handled more than 80% of the loans: Itaú Unibanco, Banco do Brasil, Bradesco, Santander Brasil and Caixa Econômica Federal.
The land had been hostile to other giants in the sector such as HSBC, which sold its operation to Bradesco in July 2016, or Citigroup, which did the same with its retail unit to Itaú for US $ 220 million.
Starting a business was not easy and even faced the resistance of several local investors whom he consulted to obtain seed capital. "You're crazy, being a foreigner is going to be impossible," he remembers being told.According to the latest Doing Business ranking prepared by the World Bank, Brazil is in 139th place among 190 countries in the item referred to starting a company from scratch.
If he could not get national investors, then he set his eyes abroad. Sequoia Capital and Kaszek Ventures, founded by former Argentine Free Market Nicolás Szekasy and Hernán Kazah, contributed $ 2 million in March 2013 so that Vélez could begin his adventure.
To start the project, he summoned someone who knew the local market, the Brazilian Cristina Junqueira (current VP). An engineer graduated from the University of San Pablo, she had completed an MBA at the Kellogg School of Management at Northwestern University. His career had developed almost exclusively in the banking sector, especially in Itaú Unibanco, where he was Itaucard's portfolio manager.
Likewise, he also joined the American Edward Wible (CTO of the company), who had been Junqueira's partner in The Boston Consulting Group, to contribute the technological vein, since he had studied computing at Princeton University.
"'Nu', in Portuguese, means 'naked' and that represents values such as simplicity and transparency. We are the enemies of great difficulties. We also liked the part 'New' ('new', in English) that has the sound of the word, "said Velez.This is how fintech started with an office in São Paulo, 12 employees and a first product in mind: a credit card, in partnership with Mastercard, at no cost and with lower interest rates than those in the market. The model, they explained, was possible due to cost savings by not having physical branches.How to undress the system
Nubank began making its first weapons in 2014. After a few months of development, in April it made its first transaction with its credit card, and after receiving an injection of US $ 15 million, in September it carried out its official launch to the public.
The plastic had two versions: the physical card, to make transactions in shops, and the virtual one, created for online operations, such as apps, marketplace and streaming services. In May 2015, it reached 50,000 customers and months later sixfold its numbers. In 2016, it had overcome the barrier of one million cards issued.
Vélez took sheet metal from stealing a slice of the industry giants. The entrepreneur detailed that 80% of his clients canceled their accounts with other banks to go to his path, while the rest had never had a card in his possession.
At the rate that was growing in popularity and his violet card was viralized, particularly among the young public, it also captured the attention of investors. He raised more than US $ 800 million in seven rounds of funding, the last one for US $ 400 million.In 2018, it became the second Brazilian unicorn and, according to The Wall Street Journal, its value exceeds $ 10 billion. It took three years to get the license to operate as a bank in Brazil. From this, it went on the market with NuConta, a savings account without maintenance fee.
He later launched his debit card to carry out operations and withdraw cash, as well as the unit of personal loans for individuals and small and medium enterprises. Its main income support comes from the commission of about 1% that it charges for each operation that is carried out with its plastics.The customer is always rightThe consumer is the core of the digital bank founded by Vélez. Not only for their product, but also for the importance they give to the analysis of user data.
"We look at where the customer lives, how he moves, who his friends are, who he invited Nubank to. If he reads the credit card contract or not, the transactions he makes, if he buys groceries or goes to a bar. It's a lots of behavioral information to try to create a more holistic image of him, "reveals the Colombian.
Therefore, he first looked at Europe, but not to arrive with his brand: he opened an office in Berlin to install his data engineering team in charge of creating tools for Nubank analysts to have the necessary information to develop banking products. He also created a benefits program called Nubank Rewards.
Despite the rapid growth, the firm continues in red since it is in full investment stage. According to the information disseminated by the company, in 2018 it invoiced US $ 323 million with a red of US $ 25 million, while the previous year its revenue had been US $ 150 million with a loss of almost US $ 30 million.
During the first half of 2019, its revenues were $ 245 million. Last year, his app had 18 million downloads and exceeded 15 million customers in Brazil, with double-digit growth month by month. Now it is the turn of the regional landing.From America to the worldMexico was the first destination chosen. The firm landed in Aztec lands in May 2019 and within a few months launched its credit card, both physical and virtual, as the first flagship product of the portfolio.
In Argentina, after a meeting with former president Mauricio Macri, he announced his arrival on the market under the name of Nu. The businessman points out that the company will invest $ 2 billion in two years not only for the local banking operation, but also to develop a technology and data science hub.
Rafael Soto, former Wenance CFO, was appointed to take over the celestial and white subsidiary. Although the emphasis of the company is placed in Latin America, with more than 1,400 employees in its workforce, the executive does not rule out opening the range to other places.
On the future of the banking business, Vélez has a very clear idea: "I think technology companies are going to be the ones that provide financial services. A model more similar to Amazon than to a traditional bank."
And sentence, without hesitation: "Having a network of branches as it exists today makes less and less sense, it is an absurd cost and it is the customers who pay the security, water and energy bill. We see it as what happened to Blockbuster with Netflix. "