Today Career Hack has a unique and inspirational feature about two brothers who went from finance to the Latin America startup scene. Let’s take a look at these American entrepreneurs abroad and see if we can take some insights from their journey!
Please give us a rundown of your bios and careers to date.
Jeff: After I graduated from Michigan State University in 2004 with a major in Finance I moved to New York to work for Bank of America Securities in the Healthcare Investment Banking Group. After finishing the 2-year Analyst Program, joined Vestar Capital Partners, a private equity fund with $7 billion of assets under management. After four years in NY, I moved to Latin America to study Spanish and look for work. While in LatAm, the financial crisis began and it became clear no one was doing hiring until there was more clarity as to how the crisis would affect the region.
After 4 months in LatAm, came back to the U.S. to apply to business school. While in the US, I reached out to contacts I´d made in the region and obtained an internship at CAP Venture Capital in Argentina. I was accepted into the Wharton/Lauder MBA/MA program and began in May 2009. While at Wharton, I interned for Leadgate, a private equity fund based in Montevideo, Uruguay that invests throughout the Southern Cone and also wrote my Lauder thesis on private equity investing in Colombia. Upon graduation, I joined Tribeca Asset Management, the largest local private equity fund in Colombia. After spending several months working in Colombia, Michael and I decided to apply to Start-Up Chile to start Edmond, a financial education and personal finance business focused on Latin America (initially in Chile and Colombia).
Mike: I also graduated from Michigan State University with a Finance degree. While I was there I built up my experience in various areas with internships with Morgan Stanley in wealth management (NY), Goldman Sachs in investment banking (Sydney, Australia), Enova Financial, an online lending business (Chicago), and Republic Partners, a boutique investment bank (Chicago) before graduating in December 2009. Towards the end of my university career, I founded Spartan Global Development Fund, a microfinance organization run by students who invest in micro-credit globally both through Kiva and other direct loan agreements. After graduating, I wanted some adventure, so I bought myself a motorcycle and headed off for 7.5 months traveling south from the U.S. to Chile.
Mid-way down, I decided I just couldn’t be convinced to go home to start my career, so while looking for a job, I found a group of Chilean senior bankers who were returning home to Chile to found Hudson Bankers, a boutique investment bank based in Santiago, Chile, and focused on the Andean Region. I learned as much as I could from that experience until getting accepted to Start-Up Chile with Jeff to start Edmond.
What initially attracted you to Latin America? What made you want to stay?
Jeff: My initial interest in Latin America began between working for Bank of America and Vestar in New York. I had six weeks off between jobs and was deciding what to do with my free time. A good friend from MSU, who had taught English in Brazil, told me he was planning to travel to Brazil during this time (July 2006) and that it was during the World Cup and Brazil was a favorite to win. Having a friend that spoke Portuguese and could show me around Brazil was enough to book my first trip to the region. With other friends from Bank of America, we also traveled to Argentina, Colombia and Panama. It was on this trip that I fell in love with Latin America, and decided that someday I would live in the region. Upon returning from this trip, I decided I didn´t want to be the typical gringo that only spoke English, and I began to take Spanish classes on the weekends.
After finishing two years at Vestar, I was ready for a change and returned to Latin America. I spent time in Argentina, Chile and Colombia. Upon graduating from Wharton, I decided to focus my job search on Latin America and Colombia specifically because I felt that opportunities were endless in economies that were changing and evolving as quickly as in Brazil, Chile, Colombia and Peru. Also, on a personal level, I think the lifestyle is much better living in a city like Bogotá or Santiago than returning to working in New York.
Mike: My first experience in the region was going to Guatemala to work in a boys’ orphanage while not remembering a single world of the Spanish I was supposed to have learned in my three years of high school classes. Although the linguistic barrier should have made my life miserable, I had a great time, met some really incredible people, and promised myself I´d be back soon. There´s a tangible sense of excitement in the air when working in developing economies, because the unpredictable and unforeseen happens daily. That can either scare the crap out of you, or it can tempt you to be swing for the fences and see what´s possible. Later, going back to Guatemala to learn Spanish, living in Mexico, and studying in Argentina all cemented my initial sense that when tomorrow doesn’t feel so pre-written, one feels more like the author of his or her own distinctive story.
Opportunities for gringos in Latin America
More so than some regions of the world, speaking Spanish or Portuguese is a must to have a career in the region.
Areas gringos tend to do particularly well finding careers in are:
Finance – investment banking, private equity, asset management, sales
Consulting – many of the LatAm offices of McKinsey, BCG, Bain have lots of work
Multinationals – GE, LG, Samsung
Bars – We’ve met a lot of expats that have come down and opened successful bars and/or restaurants
Local companies expanding abroad
LatAm startups focused on exporting their product or service to the US or other international markets
A creative option that is often overlooked for those that are deadset on jumping in with both feet right away is to come down and use your most natural skill – teaching English. I’ve seen people use this as a buffer to buy themselves the time they need to do a more comprehensive job search the old fashioned way – pounding the pavement.
You spent several summers doing various types of work placements in Latin America, particularly in finance and micro finance. How did these placements affect your career path?
Mike: My work in microfinance was primarily limited to fundraising in the US, and a little bit of due diligence in Central America with the microfinance financial institutions that we´d invested in by visiting with them and some of the borrowers that we funded while on my motorcycle trip. That said, it was during this trip that I began to piece together some of the frustrations that consumers feel with the financial systems in Latin America. You couldn´t keep micro-credit loans much below 40% because the middle-class bank manager that was making that loan couldn´t get a personal loan himself for below 35%. Now, why couldn´t that bank manager get a cheaper loan than that? Well, it turns out that Latin America is one of the most profitable places for a bank to be operating right now, that´s why. There isn’t a lot of competition on price when there are limited market players in the space. Later I spent some time as an investment banker, and these ideas began to mature, but the seed had been planted.
How did you decide to ultimately take the leap into entrepreneurship in Chile/Colombia?
Mike: With the time both of us have spent in the region, dozens of potential business ideas have come up but the consumer financial services space really got us excited for two reasons. First, having finance backgrounds, it was a space we really understand, but it still puzzled us why things were as expensive as they were, and how the financial institutions were so incredibly profitable. Second, we simply couldn´t find any satisfied customers in the space. That was the welcome mat we were waiting for.
So, we decided to put together a business plan focused on a creating a financial education platform and also offering savings/investment products to individuals a model that has yet to be exploited in the region, and then when we got the word that we were accepted into Start-Up Chile, we had all the excuse we needed to quit our jobs and start working on a solution.
What other opportunities do you feel still exist in Latin America for aspiring startups?
There are two areas I see where gringo startups could be successful. Either focus on bringing successful U.S. business models to LatAm (with appropriate local market customization) or the other way around by taking advantage of Latin America’s cost advantage to outsource products or services to U.S./international clients.
A great example of the first option would be the e-commerce space, with things like Davis Smith’s Baby.com.br, which has had phenomenal success since its launch in Brazil.
A good example of a service outsourcing start-up is Jonathan Tarud’s koombea.com, (see here) a powerhouse in Colombia’s IT scene that specializes in helping U.S. and international start-ups get their map designed and to market as quickly as possible.
Other spaces we like and would love to see some innovation in are: financial services, search funds to roll-up of existing industries because markets are much more fragmented than in the U.S. in healthcare and retail, any kind of education using technology given the middle class growth, e-commerce, or anything where good customer service can add value to the organization
Sectors that Colombian government is promoting http://www.investincolombia.com.co/sectors
Along those lines, what specific startups from the US do you think could be replicated very well in Latin America?
Personally, I absolutely hate buying dress clothes down here. For the quality you want, you have to pay double the price you would in the U.S., or for a decent price, you get Wal-Mart off-the-rack quality. Given the cost of local tailors, this just doesn’t make sense. An e-commerce site for good quality men’s dress shirts would be a blessing.
To what extent has your being gringos helped or hampered you from moving forward in your startup so far?
Overall, it’s a tremendous blessing to be different. It’s being a bit of an outsider from the norm that allows us to imagine how things could be different. That said, I do not think we could have starting this business without the two of us previously spending a lot of time in the region and having a lot of local and international contacts. Our business is very local so just having an international perspective / experiences wasn´t enough.
Adjusting to local business culture is a challenge at times. Time, for example, doesn´t have the same meaning, people show up late to meetings. Deliverables even by third parties are not handed over on time and you must ask several times (yes, even banks, law firms etc). In Colombia, it is normal for someone to answer his or her cell phone even in one-on-one meetings. In general, it does require a bit of a readjustment of your attitude and expectations sometimes.
In what ways can aspiring expat entrepreneurs better prepare themselves to get involved in a Colombia-specific startup?
Come visit. It’s not very far away, and it’s not very expensive. Consider it a business (or educational) expense.
What sorts of resources are available for Colombia entrepreneurs, particularly in the tech area?
The Founder Institute (Bogotá and Medellín) a four-month program helping tech entrepreneurs
HubBOG – Co-working space in Bogota that offers many classes on topics such as wordpress, SEO, fundraising and has weekly networking lunches (I highly recommend going to a lunch, it’s a great way to meet local entrepreneurs) – http://hubbog.com/en
Creame is a business incubator in Medellin http://www.creame.com.co/
Start-Up Digest http://startupdigest.com/bogota/
Wayra – Telefonica´s incubator program – http://wayra.org/en/wayra
Red de Angeles Inversionistas Bavaria – angel investment network – http://www.bavaria.com.co/7-11/red_de_angeles_inversionistas_ds/
You started the Start-Up Chile program recently, how has your experience been so far?
Start-Up Chile was what gave us the opportunity to quit our jobs and explore this opportunity full-time. For those of you that don´t know the program, Start-Up Chile is a business incubator created by the Chilean government to promote entrepreneurship in Chile. The program accepts 300 businesses per year and awards them with $40,000, office space for 6 months and a 1-year Chilean visa. In return for the grant, there is a program for adding value to the local entrepreneurial environment, some examples of this include mentoring local entrepreneurs or university students, organizing meetups or conferences or speaking in university classes.
For a prospective entrepreneur, SUP is a great way to get a business off the ground. Having seed capital that isn’t equity or debt, and having free office space that allows you to work alongside other entrepreneurs gives a good runway to launch a business. In Santiago, we have two offices where we can work and we are working beside entrepreneurs from around 30 different countries and everyone has different experiences and skill sets. Our fellow SUP participants have been very helpful; for example, both of us have experience in finance, but not in technology. Many of our SUP friends are tech geniuses, and have helped us think through the way to design and build our website, and how to identify and hire good tech talent. Start-Up Chile has done a lot to create buzz about the start-up environment in Chile, and many VC funds and entrepreneurs are now visiting Santiago ,and many come to speak to the SUP entrepreneurs.