High-Impact Entrepreneurship

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Turkey’s Iyzico Raises Series B Round of Funding with Participation from Endeavor Catalyst

The Istanbul-based Iyzico, founded by Endeavor Entrepreneurs Barbaros Özbugutu and Tahsin Isın, raised a  $6.2 million Series B round of funding led by IFC, 212 and Speedinvest, with participation from Endeavor Catalyst.  The payments company provides a platform to […]

May 28th, 2015 — by admin

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Endeavor Insight Report Spotlights Growing Entrepreneurship in Bogotá’s Tech Sector

Bogotá’s tech entrepreneurs have built over 100 companies and created thousands of jobs over the past two decades, according to a recent study by Endeavor Insight. With the support of Endeavor Colombia and the Omidyar Network, the research team […]

February 17th, 2014 — by admin

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Endeavor Entrepreneur Marcos Galperin on MercadoLibre (World Economic Forum report)

In collaboration with Endeavor Global and Stanford University, the World Economic Forum recently released a new report, “Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies.” Click here to learn more.

The report, which demonstrates the importance of High-Impact Entrepreneurship in driving economies forward, includes interviews and insights from eight Endeavor Entrepreneur companies: DocSolutions, Globant, MercadoLibre, Petfor, Pharmacy 1, Refinancia, Technisys, and Yola.

In this special series on Endeavor’s blog, we are reprinting the published interviews with each Endeavor firm. Below is the section on MercadoLibre.

MercadoLibre, Inc. is Latin America’s leading e-commerce technology company. Through its primary forms, MercadoLibre.com and MercadoPago.com, it provides online solutions to individuals and companies buying, selling, paying and advertising on the Internet. MercadoLibre.com serves millions of users and creates a market for a wide variety of goods and services in an easy, safe and efficient way. The site is among the top 50 in the world for number of page views and is the leading retail platform in unique visitors in each country where it operates, according to metrics provided by comScore Networks. MercadoLibre maintains market leadership in 12 Latin American countries and has recently launched operations in Portugal. The company, listed on NASDAQ following its initial public offering in 2007, was named one of the “30 World’s Hottest Brands” by Ad Age magazine and one of 27 “Great Brands of Tomorrow” by the Credit Suisse Research Institute. MercadoLibre became an Endeavor company in 1999.

MercadoLibre’s management today is very similar to that of day one. Founder Marcos Galperin continues in the role of chief executive officer, while CFO Hernán Kazah and COO Stelleo Tolda lead a group of executives that also composed the original management team. Galperin has an MBA from Stanford University and an undergraduate degree from Wharton. While taking a Finance class at Stanford, Galperin asked one of the guest speakers (John Muse of the private equity firm Hicks Muse Tate & Furst) if he could drive him to the airport. After some “fast talking and slow driving,” Muse expressed an interest to invest (and did invest) in what became MercadoLibre before boarding the plane. Galperin is the winner of multiple awards for entrepreneurship.

What was the source of the initial idea, and how did that idea evolve into a viable high-growth business venture? How did it change over time?

Galperin: “While I was studying at Stanford University, I researched several business models related to the Internet and I decided to build a company which could offer an Internet auctions platform to try to solve retail inefficiencies in Latin America. This is a continent where only large cities have good retail alternatives, while other regions remain isolated in this sense. When I returned to Argentina after receiving my MBA, I bought the necessary start-up technology and immediately launched MercadoLibre in all major Latin American countries. The company first offered an auctions marketplace, but quickly converted to an e-commerce platform as users showed their preference for a ‘fixed-price’ model. Through the years we developed new and complementary business units that allow the company to address a wide range of different user needs through an online payments platform, advertising solutions and a new website-building service geared towards our more developed sellers.”

What was the initial growth vision or aspiration of the founding team? Was there a sizeable change in this growth vision or aspiration over time? If a change, please describe.

Galperin: “During the first years, we focused on building a successful company by offering an auctions service through our website. Our main goal was to create a long-term company operating with an innovative philosophy, and relying on technology to change the lives of millions of buyers and sellers in Latin America. However, growth took longer than expected to materialize. In 1999, the Internet only reached 2% of the general population in Latin America, and only 10% of those engaged in some form of e-commerce. With the region undergoing an economic crisis, secular Internet trends grew at a slower pace than originally forecast.
Tracking Trends: Over time, secular trends began to reflect the serious growth potential we had anticipated from the start. In the meantime, the business matured into a wide range of e-commerce services and ever- improving technologies for the use of our clients. The goal was to capture an increasingly larger share of all e-commerce activity occurring in the region. This meant improving MercadoLibre, our online marketplace, as well as the MercadoPago payments business unit, MercadoClics advertising group, and MercadoShops e-building solutions, respectively.”

Describe the strategy or business model that enabled your company to achieve its high rate of growth.

Galperin: “MercadoLibre Inc. is an e-commerce enabler whose mission is to build the necessary online and technology tools to allow practically anyone to efficiently trade almost anything in the Latin American market. The company operates in several reporting segments. The MercadoLibre online marketplace segments include Brazil, Argentina, Mexico, Venezuela and other countries (Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Panama, Peru, Portugal and Uruguay). The MercadoPago regional online payments platform is available in Brazil, Argentina, Mexico and other countries (Chile, Colombia, and Venezuela). The company attracts buyers by offering choice, value, convenience and entertainment. Sellers are drawn by access to broad markets and efficient marketing and distribution costs that help increase sales and maximize profits.

Integrated IT Platform: The company pioneered regional online commerce by developing a web-based marketplace in which buyers and sellers are brought together to browse, buy and sell items such as computers, electronics, collectibles, automobiles, clothing and a host of practical and miscellaneous items. The trading platform is a fully automated, topically arranged, intuitive, and easy-to-use online service that is available 24 hours a day, seven days a week. The platform supports a fixed-price format where sellers and buyers trade items at a cost established by sellers, and an auction format in which sellers list items for sale and buyers bid on them. Providing more efficient and effective payment methods from buyers to sellers is essential to create a faster, easier and safer online commerce experience. Traditional payment methods such as bank deposits and cash-on-delivery present various obstacles to the online commerce experience, including lengthy processing time, inconvenience and high costs. The company addressed this problem through the introduction in 2004 of MercadoPago, an integrated online payments solution that has enjoyed consistent growth. MercadoPago was designed to facilitate transactions on the MercadoLibre marketplace site by providing an escrow mechanism that enables users to securely, easily and promptly send and receive online payments.

Payment Flexibility: An online classifieds service was also launched in 2004 for sale and purchase of motor vehicles, vessels and aircrafts. Buyers can search by make, model, year and price, and sellers can list their phone numbers and receive prospective buyers’ e-mail addresses on a platform that allows instant and direct communication between sellers and potential buyers. During 2007, the company launched a newand improved version of its MercadoPago payments platform in Chile and Colombia, and expanded it to Argentina during 2008. The new MercadoPago, in addition to improving the ease of use and efficiency of marketplace purchases, also allows for payments outside of a region. Users are able to transfer money to other MercadoPago accounts and to incorporate the technology in their independent commerce websites.

System Updates: MercadoPago 3.0 is designed to meet the growing demand for Internet-based payment systems in Latin America. In December 2009, the company started beta testing processing off-MercadoLibre transactions at selected sites in Brazil using its new direct payments product while maintaining the escrow product for on-MercadoLibre transactions. On 30 March 2010, the company started processing off-MercadoLibre transactions through its new direct payments product to any site in Brazil that wants to adopt it, and on 16 July 2010, MercadoPago 3.0 was launched in Brazil for all its marketplace transactions.”

What were the major growth accelerators for your company in its high-growth years?

Galperin: “The culture and philosophy of the company that enables MercadoLibre to build and maintain a world class team over time results from these major factors:
1. Consistently solid execution of our business plan.
2. The acquisition of several e-commerce companies in Brazil during the first years of MercadoLibre.
3. The launch of MercadoPago that enabled payments through MercadoLibre and other channels. 4. Internet secular trends (broadband penetration, PCs per household and mobile penetration) growing at double-digit rates. 5. Constant focus on upgrading the online platform to improve user experience.”

Briefly describe the financing of your company and how this financing impacted the growth of your company.

Galperin: “We received two rounds of financing in addition to our initial seed funding. The first round, carried out in November of 1999, raised US$ 7.6 million from investors that included J.P. Morgan Partners BHCA L.P., Flatiron Fund entities and Hicks Muse Tate & Furst. The second round of financing was in May of 2000 and raised US$ 46.7 million from, among others, Goldman Sachs entities (GS Capital Partners III, L.P., GS Capital Partners III Offshore, L.P. and Goldman Sachs & Co. Verwaltungs GmbH), Capital Riesgo Internet SCR S.A. (CRI Banco Santander Central Hispano) and GE Capital Equity Investments, Inc.
Strategic Alliances: In September of 2001, we entered into a strategic alliance with eBay, which became one of our stockholders and started working with us to better serve the Latin American online trading community. As part of this pact, we acquired eBay’s Brazilian subsidiary at the time, iBazar, and eBay agreed not to compete with us in the region during the term of the agreement. This agreement also gave us access to certain know how and experience that accelerated aspects of our development. In August 2007, the company successfully completed its initial public offering, resulting in net proceeds of approximately US$ 49 million. With these proceeds, the company acquired TuCarro in January 2008 and the remainder of DeRemate in September 2008.”

What were the major challenges your company had to handle in its high-growth years, and how were they managed?

Galperin: “I would highlight the following steps for handling growth:
1. Build a team and retain talent: We’ve been able to do this by seeking out gifted people motivated by technology and by the enormous growth opportunity we offer. Their commitment is a key element driving our growth, which in turn translates to career advancement and opportunities going forward.
2. Obtain financing: Obviously, we’ve been greatly favoured by the depth and long-term vision of our investors as previously discussed.
3. Develop the technology: Constantly update and improve user- friendly IT tools for speed and capacity to retain customers and grow the company.
4. Face competition. A first mover advantage is obviously huge in this market and we continue to move first into new and subsidiary businesses deals by carefully observing changing trends and their impact on our product. We offer the best service available and then improve it constantly. This obviously implies monitoring competition and being critical of our marketplace by constantly
testing the user experience.
5. Launch new sources of income.
6. Improve the online products and user experience.”

Give examples of dark moments or negative periods that your company or you faced as part of your journey as an executive with this company.

Galperin: “The darkest moment we had to face was when the NASDAQ crashed while we were negotiating our second round of financing. They were moments of great concern and tension because we needed capital to continue operating and many investors wanted to close the company. Fortunately, we were able to convince them about the business potential of the region and this business model, and we could finally close a very successful second round.”

What are the key lessons about entrepreneurship and successful growth strategies you’ve taken from your company experience?

Galperin: “The key takeaways from my entrepreneurial experience would be:
1. Stay focused on the long term and practice patience
2. Deliver the best possible experience and product to your customers
3. Include local managers in each country
4. Select thoughtful investors and business partners
5. Think big and execute.”

23 new High-Impact Entrepreneurs selected at London International Selection Panel

Endeavor invited 23 High-Impact Entrepreneurs representing 13 companies from Argentina, Brazil, Egypt, Jordan, Lebanon, Mexico, Turkey and Uruguay to join the organization at our 39th International Selection Panel, which was held from May 17th-19th in London, England. Endeavor now supports 603 High-Impact Entrepreneurs from 385 companies in 11 emerging market countries.

“Bringing these events to London and Europe was a major step towards increasing the profile of Endeavor and our High-Impact model in the world’s global financial center,” said Endeavor Co-founder and CEO Linda Rottenberg. “The High-Impact Entrepreneurs we selected are the role models who are creating high-value jobs and building sustained support for entrepreneurship in their home countries from Latin America to the MENA region. I’m particularly encouraged by the selection of Endeavor’s first two companies from our new affiliate in Lebanon.”

The International Selection Panel is the culmination of a rigorous multi-step Search & Selection process in which top local and international business leaders interview and offer guidance to entrepreneur candidates. At the International Panel in London, participating panelists came from Brazil, Chile, Jordan, Switzerland, the United Arab Emirates, the UK, and the US. The Panel was supported by a number of corporate sponsors including Abraai Capital, Barclays Capital, Citi Private bank EMEA and Ernst & Young. Endeavor Entrepreneurs were also showcased at two public events immediately before and after the Panel, one at London’s Canning House, the other at the Atelier of BNP Paribas in Paris, France.

Entrepreneur(s)/Companies selected:


Entrepreneurs: Gaston Lejtman and German Dyzenchauz
Description: Integro provides loyalty marketing programs to more than 250 corporations in 10 countries throughout Latin America – including Citibank, Hewlett Packard, HSBC, IBM, P&G and Walmart – reaching 700,000 employees and 20 million customers.


Akiyama Solucoes Tecnologicas
Entrepreneur: Ismael Akiyama
Description: Akiyama is the fastest growing Brazilian biometrics company and the exclusive distributor for three of Brazil’s leading suppliers of electronic components. The company provides solutions for civil identification, manufacturers and integrators, industrial and logistics automation, printers and programmable modules.

Aorta Entretenimento Ltda
Entrepreneurs: Antonio Carlos Soares, Patrick Lisbona, Gustavo Ziller
Description: Aorta is the leading supplier of apps and mobile marketing solutions for businesses in Brazil seeking to reach customers through smartphones and tablets.

Integra Medical
Entrepreneurs: Luciana Guimaraes and Vanessa Vazquez
Description: Integra helps over 40,000 patients manage treatments for chronic diseases through print and digital resources as well as personal guidance from health care practitioners (doctors, nurses and psychologists) who monitor their treatment.


Delicious Bakery (The Bakery Shop)
Entrepreneurs: Tarek El Nazer, Basel Mashhour, Sameh El Sadat
Description: DB is the first commercial baker in Egypt to target retail stores, supermarkets and restaurant chains using a par-baking and frozen delivery system.


Amman Pharmaceutical Industries (API)
Entrepreneur: Fadi Al-Atrash
Description: API is a leading regional manufacturer of niche branded generics, including eye drops, ointments, nasal sprays and topical preparations.


East & East (Nada Debs)
Entrepreneur: Nada Debs
Description: Manufactured by a network of 150 artisans in Lebanon, Nada Debs’ furniture is displayed in top stores worldwide, including in London, New York, Dubai and Cairo. Custom clients have included the World Economic Forum, the Jordanian royal family and the Ritz-Carlton in Bahrain.

Eastline Marketing (ELM)
Entrepreneurs: Marc Dfouni and Nemr Nicolas Badine
Description: ELM provides digital marketing services to regional clients in the Middle East (including Bank Audi, DHL, Kimberly-Clark and Toyota) using a proprietary database of insights into customer segments that cuts across regional geographies and industries.


Entrepreneur: Patrick Struebi
Description: Fairtrasa is a fair trade and organic produce company that works with over 300 small, marginalized farmers in Mexico and additional 700 in other emerging economies to produce and distribute high-quality fruits, vegetables, wine and spices.

Entrepreneurs: Pedro Zarur and Armando Tortoledo Uriarte
Description: Gruindag is a Mexican company that develops and manufactures specialized agro-chemicals and other chemical products for Mexico’s export-oriented farmers and water, paper and leather treatment facilities.


Entrepreneur: Emre Aydin
Description: Already Turkey’s largest online flower store, Ciceksepeti is expanding into a category leader covering all types of gifts and gourmet food packages. They have added high-quality chocolates, and edible fruit arrangements to their offerings.

Entrepreneurs: Hasan Obuz, Mehtap Obuz
Description: The brother/sister team behind Ilio has moved from earlier success in the interior design business (Demirden) into a scalable design brand (Ilio) that focuses on innovative housewares and tabletop products sold worldwide through outlets including Gilt Groupe, Amazon and New York’s Museum of Modern Art.


Salado Media
Entrepreneurs: Andres Ameglio, Carlos Ameglio
Description: Brothers Andres and Carlos Ameglio have become leaders in producing award-winning TV commercials across the Spanish-speaking world for leading global clients including Coca Cola, TNT and Toyota. Their business is at the heart of an emerging AV production eco-system based in Uruguay but that extends throughout Latin America.

Endeavor Entrepreneur Semih Yuzen on Petfor (World Economic Forum report)

In collaboration with Endeavor Global and Stanford University, the World Economic Forum recently released a new report, “Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies.” Click here to learn more.

The report, which demonstrates the importance of High-Impact Entrepreneurship in driving economies forward, includes interviews and insights from eight Endeavor Entrepreneur companies: DocSolutions, Globant, MercadoLibre, Petfor, Pharmacy 1, Refinancia, Technisys, and Yola.

In this special series on Endeavor’s blog, we are reprinting the published interviews with each Endeavor firm. Below is the section on Petfor.

Petfor is a Turkish recycling company whose major activity is the recycling of PET, a commonly used consumer plastic. Semih Yuzen, who had worked at his family business (Yalteks) where he experienced shortages of polyester raw material, started Petfor in 2004. Recycled post-consumed PET bottles can be used to produce polyester. Yuzen spent time in Italy studying the recycling business prior to establishing Petfor. Operations began in 2004 with a state-of-the-art plant that recycles plastic bottles and produces high-grade PET flakes. The PET flakes are cleaned and the recovered material used to produce plastic bottles. Yuzen became an Endeavor entrepreneur in 2006.

Semih Yuzen was born in Istanbul in 1970. He was 16 years old when he entered Istanbul University, and was one of the youngest graduates when he received his degree in business administration in 1990. He graduated from Pepperdine University in 1994, and worked at Yalteks between 1994 and 2001 as export and import manager. He took a year off in 2002 and travelled to Italy, and decided to establish Petfor in 2003. Money was raised through a bank. His father was the guarantor and all of the US$ 4 million loan was paid back 100% by 2009. Both his father and brother are chemical engineers. His brother lives in New York and his father has an asphalt processing business that supplies modified asphalt to the major road contractors in Turkey.

What was the source of the initial idea, and how did that idea evolve into a viable high-growth business venture? How did it change over time?

Yuzen: “I came back to Turkey after getting my MBA in the US in 1994 to work for the family company, Yalteks, which was already being run by my brother for three years. Although I was a 50% owner of Yalteks, I never thought it was mine and had to work as export/import manager for seven years. We had different ideas about running the company. Since he was the older and the more experienced one, I had to respect and continue working under him. We had to fight during the day and went out for drinking after work since we were (and still are) also best friends. It was really a strange and very difficult process. At that time, I was 24 years old and he was 30. We also had to fight against our father over business matters. He also had different ideas about how to run the business. We always managed to unite against him and that also brought us closer. The cash flow was always the issue. I was responsible for getting the raw material ready on time for production. I had to practice and learn the just-in-time concept. That helped me a lot, being able to run a business without money. At that time Yalteks had to import over 70% of its raw material from abroad and the most critical one was polyester felt, which was used as reinforcement in our products. Polyester felt is produced by 100% recycled post-consumed PET bottles and we were importing it from Italy, France and Holland. In 2001, we decided to run Yalteks differently and we let our production manager run the business. I took a year off and went to Italy to study Italian and recycling, and my brother decided to move to New York to open up a restaurant. In 2004, Petfor was up and running. The idea was to export PET flakes, which eventually would come back to Yalteks as polyester felt. At that time, we always dreamed about producing polyester felt one day using 100% Petfor’s flakes.”

What was the initial growth vision or aspiration of the founding team? Was there a sizeable change in this growth vision or aspiration over time? If a change, please describe.

Yuzen: “I always tried to keep it small and simple and looked for the talent inside Petfor. When this was not possible I brought in people. Pushing people to the limit and empowering them at the same time ensured loyalty. There has not been a sizeable change. Keep it small, efficient and under control. That is, I believe, the best method available. We are facing fierce competition and the learning curve is much shorter for them. As I previously mentioned, selling is not an issue. However, supplying enough PET and maintaining the quality is. For this reason we are bringing people from outside and increasing the number of people in production and quality control. We now concentrate on using existing personnel for getting enough bottles. We are opening new collection centres in various parts of the country; otherwise we will face a PET bottle shortage once we install the new line and double the capacity.”

Describe the strategy or business model that enabled your company to achieve its high rate of growth.

Yuzen: “Quality was the key to our success and still is. During the crisis, we were able to keep our customers with a higher rate of profitability. The margins were almost doubled because of the lower cost of input (PET bottles). We kept investing in new technology and that saved us during difficult times. We had an edge over our competition and Petfor remained as the benchmark for our industry. We also responded promptly to the claims of our clients. We always tried to come up with a solution that is the most convenient for them and they kept coming back.”

What were the major growth accelerators for your company in its high growth years?

Yuzen: “Again, quality, new technology and availability. We are always available and reachable not only by our clients but also by our suppliers. That is very important during difficult times.
“Other than quality, it was the freedom to make mistakes and learn from them. My father helped me a lot and gave me breathing space. Although I was only six months behind my initial business plan and break-even point, his support enabled me to concentrate on quality and establishing good relationships with my clients.”

Briefly describe the financing of your company and how this financing impacted the growth of your company.

Yuzen: “Family and the banks. Thanks to the family financing we were able to maintain high growth and profitability initially. That helped me taking risks.
“My cash flow was never in place despite the profitability. We were making enough money to pay the bills, however we had no bottles in stock. There were days when we were not able to produce due to bottle shortages. We were utilizing only 20% of our capacity. It was enough to keep going but not enough to grow. Because in recycling, you have to scale it to make it meaningful and really profitable.”

What were the major challenges your company had to handle in its high-growth years, and how were they managed?

Yuzen: “Recycling is a very difficult industry and requires a lot of working capital especially at the beginning. The answer to that is hands-on management. I still have my book open and I calculate the cost every single day (the price of what people eat, etc.) In the first three years, I was the first one to arrive in the factory and the last one to leave at night. I paid the salaries after shaking hands and thanking my workers personally during the first three years. That was also the case for our suppliers.

“Becoming a dependable supplier to the major European packing companies was also a big challenge. Getting the foot in the door and keeping it inside was difficult. I even learnt Spanish and Italian so that I could discuss the business and challenge them in their language (especially with their technical staff). But it has always been the quality that matters the most.

“In 2007, we started Ekosistem and invested heavily (both money and time) in this new business. In times it was frustrating because money and time was never enough. Instead we should have invested in Petfor and then in Ekosistem.”

Give examples of dark moments or negative periods that your PETFOR company or you as an executive faced as part of your journey with this company.
Yuzen: “Trying to run a company with limited cash was (and sometimes still is) the most difficult part. You have a million things in your mind and no cash in your hand. You have to wait, and when you wait too long there is always someone else who does what you were supposed to do. You lose the opportunity. That is really frustrating.”

What are the key lessons about entrepreneurship and successful growth strategies you take from your company experience?

Yuzen: “I would say success is dangerous. Once you start thinking ‘I am invincible’, that is the time when you are most vulnerable and you start making wrong judgments and mistakes. However, there is no better way to learn other than failing. You keep failing and making fewer mistakes. If you are clever, you don’t repeat the same mistakes but you make new mistakes, which I think it is acceptable. The key is to not repeat the same mistakes.”

Following LinkedIn’s lead: TechCrunch highlights Endeavor Global board member Reid Hoffman as an entrepreneurial role model

As LinkedIn becomes the first social network to go public, journalist Sarah Lacy in TechCrunch describes how Endeavor Global Board member Reid Hoffman‘s method of building a sustainable, profitable company over a number of years should be the paradigm for entrepreneurs in her article “Attn: Entrepreneurs: Mark Zuckerberg Isn’t the Role Model. Reid Hoffman Is.”

Lacy, who has interviewed Reid consistently over the last ten years, articulates how new entrepreneurs often look at the exploding Internet power plays — the Groupons and Facebooks and even the Foursquares — as role models on which to base their companies. However, Lacy argues that these companies often flame out (e.g., Friendster, MySpace) while slightly less flashy operations that get less hype end up persisting and some, such as LinkedIn, become the first multi-billion-dollar Web 2.0 IPOs.

In considering why LinkedIn has been so successful, she writes, “One of the reasons LinkedIn outlasted that early generation of social networks was that it was boring and practical.” It wasn’t a dating site, she says, where people only use the site for a while and then leave either because they were successful or frustrated. LinkedIn is a resource that people rely on throughout their entire career, and it’s especially useful during times of “professional distress.” LinkedIn has also arrived at its IPO moment through Reid’s considerable personal investment and hard work over the last decade.

In considering whether LinkedIn’s IPO represents a 1990s-style bubble, Lacy notes that spending a decade building a business that has attracted over 100 million users without much fanfare does not qualify as overly inflated. She calls it “one of the few large-scale working examples of a freemium business model” like Google or YouTube. She concludes her argument by noting that it is easy to start a business these days, but sustaining it, as Reid did, is more challenging.

Three Endeavor companies in Latin America spotlighted by The Next Web

The Next Web, a top blog for tech news and business, has named three Endeavor-supported companies as part of their new list of “10 Latin American Startups You Should Watch Out For.” Excerpts from the article are reprinted below:

PagosOnline launched in 2002 as “the Colombian PayPal” with headquarters in Bogota. BuscaPé acquired 75% of this Colombian payment processing and aggregating company in 2010, which means that it is also part of the Naspers group. It integrates different payment solutions including local credit cards, but also bank transfers and cash payments – which is crucial since most Latin Americans don’t have a credit card. BuscaPé itself is now using PagosOnline’s services for its platforms, and the company claims to have over 5,000 clients, including e-commerce websites, retailers and airlines (40% of transactions are related to plane tickets). Though online payments are booming in Colombia (+45% in 2010, i.e. US$600 million), PagosOnline’s business is not limited to its home country: it is currently expanding through the region and started operations in Mexico, Brazil, Peru, Chile, Panama and Argentina via its division LatinAmericanPayments.

Smowtion was founded in Argentina in 2008 and has been supported by Endeavor since 2010. It is a tech company focusing on online advertising and helping publishers to monetize their content. It has offices in Buenos Aires, Mexico City and Miami and is also represented in Spain. The platform itself is available in 8 languages (Russian, German and Dutch being the latest additions). The company claims to connect advertisers (from Adidas to Unilever) to 217 million unique users per month thanks to a network of over 120,000 publishers around the world. It officially launched in the US in April this year during ad:tech San Francisco.

Movile is a mobile services company headquarted in Sao Paulo with offices in Argentina, Colombia, Mexico, Venezuela and Uruguay. It provides mobile entertainment content, m-payments for virtual goods, marketing services and HTML5 applications distribution (with Zeewe app store) to “more than 100 million active users worldwide” (B2B and B2C). The company was launched 10 years ago as n-Time; the name Movile replaced “Compera n-Time” after the company merged with Yavox and Cyclelogic. Part of Naspers group since 2008, it is also an Endeavor company since 2003. According to the company’s CEO Fabricio Bloisi, the company is focusing on Latin America where opportunities are huge since “mobile Internet will be larger than the conventional Internet, particularly in emerging countries.”

Endeavor Entrepreneur Guillermo Oropeza on DocSolutions (World Economic Forum report)

In collaboration with Endeavor Global and Stanford University, the World Economic Forum recently released a new report, “Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies.” Click here to learn more.

The report, which demonstrates the importance of High-Impact Entrepreneurship in driving economies forward, includes interviews and insights from eight Endeavor Entrepreneur companies: DocSolutions, Globant, MercadoLibre, Petfor, Pharmacy 1, Refinancia, Technisys, and Yola.

In this special series on Endeavor’s blog, we are reprinting the published interviews with each Endeavor firm. Below is the section on DocSolutions.

DocSolutions specializes in the design and operation of customized solutions for document management and information processing. Founded in 2001 by brothers Guillermo and Gabriel Oropeza Ibáñez, their father, Gabriel Oropeza Griffith, and their sister, Estela, the company is family held with 100% Mexican capital. Currently, DocSolutions operates seven document centres covering over 10,000 square metres (107,000 square feet), located in two industrial parks in the northern area of Mexico City (Cuautitlán). The company employs over 300 full-time workers, and the yearly average for project-based personnel is typically between 500 and 1,000 employees. The company has evolved its strategy over time to become a more forward-looking information management company. It aims to cover the whole document life cycle, including the front end of the document production process as well as the back end storage of physical and digital documents. In 2008, DocSolutions was announced as an Endeavor company.

What was the source of the initial idea, and how did that idea evolve into a viable high-growth business venture? How did it change over time?

Guillermo Oropeza: “All we knew from the start was that we wanted to build a business, but we didn’t know what type, so we defined a set of principles and criteria around which our business would be based. We wanted a business-to-business model with the biggest market possible, with the ability to penetrate into many different companies and industries, while adding value to our clients. We wanted something that was not capital-intensive – a business that would finance itself upon gaining some momentum. And we wanted to make it big. Luckily, someone knocked on our door offering us record storage services, and we said, ‘This could work with our requirements’. So we did a study of the market and founded the company in 2001. However, the business model we had chosen came up short. While it required low investment levels allowing us to step in, these low barriers of entry quickly allowed others to do the same, so it gradually started to fill up with competitors. We realized our business then could be described and understood as a real estate business, in which companies rented storage space for their documents. Market opportunities and pressure at the same time allowed us to change our paradigm. We began to understand that those boxes we were storing at our facilities had information and that this information once had a lot of value sometime upstream. With this subtle emphasis shift, we began to realize that there was a lot of value to be delivered and captured by managing information at the earliest stages, rather than stepping in late only to store old documents. We understood the value of information at its earliest stages, and developed a complete set of services to manage it all throughout its life cycle. So we changed from a real-estate company to a technology company in which we connect directly with the information flows and the processes supported by documents, offering a far more efficient, integrated and sophisticated service than our competitors.”

What was the initial growth vision or aspiration of the founding team? Was there a sizeable change in this growth vision or aspiration over time? If a change, please describe.

Guillermo Oropeza: “We knew from the outset that we wanted to create a scalable business that we could make big and continue to grow. But we didn’t even think as a joke that nine years later we would have the goals that we have today. Our goals are now highly ambitious and would have seemed completely unattainable when we were starting up. We now see our goals as high, but reachable. We have grown 100 times from year two to year nine, and our goal is to grow 10 times more in the next five years. When we look back, we now have the satisfaction and confidence that things can be done. We’ve taken the bar very high, and we need to keep up with our self-created aspirations, but we know we should not be frustrated and that we should have the patience to get there – it’s important to think towards the future and not forget that entrepreneurs are long-distance runners more than sprinters. We are endurance athletes and, consequently, our goals are long-term.”

Describe the strategy or business model that enabled your company to achieve its high rate of growth.

Guillermo Oropeza: “Staying true to our initial vision around document management, we began complementing our services and participating in different but related industries – first in storage of hard copy of documents, then we began moving backward to document-based business process outsourcing, then one more step backward to develop the technology for Enterprise Content Management (ECM). That integration of operating and technological capacity put us in a ‘sweet spot’ that made a lot of sense to clients. The integration of these three industries, both on the physical and digital planes, really integrates a business’ entire model. But that’s only the theoretical element. The practical element is our proven capacity for execution. This capability has provided us with great references and increased our contracts exponentially through reputation. We began to gain prestige based upon our execution. Having a great idea is essential to any good business, but it means nothing without being able to efficiently put your idea into practice. Execution assures a business’ future. This is the combination that has given us our success, our high growth rate. “If the business grows, everyone that forms part of the business grows with it. To get the best results you have to get your sleeves dirty, get down in the trenches. This is fundamental because you can’t have a winning team if it doesn’t feel like it is part of something bigger. You must make your collaborators think like you, maximize risks, reduce costs, deliver on time, exceed the client’s expectations and generate long-term relationships. This type of execution allowed us to win our first big contract and take the business, in our second year of operations, from 20 to 500 employees in one month.”

What were the major growth accelerators for your company in its high-growth years?

Guillermo Oropeza: “What has given us our accelerated growth has been successfully and repeatedly implementing our business model. That is, we have hit home runs over and over again, while we have built enduring and long-lasting relationships with our clients. The experience and reputation that this has given us, directed intelligently towards each subsequent project, is a great takeoff point for our next big step. The sum of these steps is what gives you accelerated growth. The key has been not to hit a home run and then be happy with it. If we stay in our comfort zone then the motivation to grow is lost, and growth is the principal objective of the company. That allows us to create a company with ever higher standards and capacities. Each year, we have at least one big project, and a huge reason as to why we are continually able to hit home runs is due to the credentials that the previous home runs have given us. More credentials lead to more projects, which lead to more credentials. It’s a virtuous cycle.”

Briefly describe the financing of your company and how this financing impacted the growth of your company.

Guillermo Oropeza: “We began with a relatively low investment. When we identified the type of business we wanted to have, we drew up a business plan, which laid out the required initial investment and what kind of costs we would confront over X period of time. So we knew, more or less, what was needed to start up. Our father handed us a living inheritance so that we would have a boost to begin our lives, telling us, ‘Here is your inheritance, do with it what you will’. We decided to join forces and used it as the seed capital for our business and that’s what gave life to DocSolutions. In the beginning, the business was financed with this money, and since it was not a capital-intensive business, it quickly began to finance itself with the income. Today, the company is totally solvent, profitable and debt-free. We are in a fairly enviable financial position at the moment.”

What were the major challenges your company had to handle in its high-growth years, and how were they managed?

Guillermo Oropeza: “At the beginning there were some moments where it seemed like it would take forever to reach the break-even point. There was a lot of anguish initially with our family having to put in more and more money, but we knew we would come out on top. You have to be an optimist and try to believe that the business will succeed, although that can be the most difficult part. Among the most difficult challenges was to land the first big project, but more importantly was actually executing. That was a mega challenge. I think that maintaining a steady rhythm of growth has been, in itself, our greatest challenge. That has translated into many sub-challenges: to go from losses to profits, to get through that negative period. Then, to continue betting on the company with process-oriented people, new technologies and new process continues to make the company more efficient and increases its growth capacity. Investing your resources drains you, but it’s a bet for the future. It’s also quite difficult to attract good people to come on board and then inspire and incentivize them to stay on board. Since you’re betting on a project that is just being born, those people must also bet on the future of the company as much as you. Because the projects are won by people, they must be motivated to look beyond the obstacles, which are innumerable. “Now that we have a more significant size and have gone international, we have new kinds of challenges: communication, cultural issues, wanting to be there face-to-face with a client but not being able to, and having to trust and delegate to your people. We also need to be more alert about what is going on in the world and continuously improving and polishing our business model. That is, we must maintain a certain degree of constant anxiety and unconformity about the way the business is going in order to stay motivated to innovate and grow the company. This is the engine that allows us to move the organization forward and make it better at every level.”

Give examples of dark moments or negative periods that you company or you faced as part of your journey as an executive with this company.

Guillermo Oropeza: “Losing a project that you’ve worked hard for really hurts. It is tough to put forth all your efforts and resources and know you are among the finalists and then not win a project despite displaying your best practices and principles. But after accepting the loss, we must look up, and keep on going.”

What are the key lessons about entrepreneurship and successful growth strategies you’ve taken from your company experience?

Guillermo Oropeza: “These are the key takeaways for me:

• Diversify the client base; don’t service only one industry or sector of the economy. Always have many fronts.

• Don’t be afraid to take the first step and become an entrepreneur. And by this I mean the continual process of entrepreneurship, to create a new project or expand to a new region. Be cautious, of course, but you must be ever more daring than shy. Trust your feelings, and even without having performed all the analytical work, bring the right people around you and you’ll have a winning strategy.

• Bring together a team of people that share your vision, and have an attitude of winners. Especially those that are at the top, responsible for the operations and development of the business.

• Understand your business from the outside. Extracting yourself from the day-to-day and looking at it from the outside in can be extremely difficult, but ultimately a game changer.

• Look towards the whole industry to be aware of what’s going on and constantly compare your business to find new areas of opportunities.

• Develop key strategic alliances with partners that naturally complement you. Treat your partners fair.

• The last would be to look at every corner for the possibility to innovate, and never pass up a business opportunity, regardless of how challenging you might think it will be.”

Endeavor Entrepreneur Kenneth Mendiwelson on Refinancia (World Economic Forum report)

In collaboration with Endeavor Global and Stanford University, the World Economic Forum recently released a new report, “Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies.” Click here to learn more.

The report, which demonstrates the importance of High-Impact Entrepreneurship in driving economies forward, includes interviews and insights from eight Endeavor Entrepreneur companies: DocSolutions, Globant, MercadoLibre, Petfor, Pharmacy 1, Refinancia, Technisys, and Yola.

In this special series on Endeavor’s blog, we are reprinting the published interviews with each Endeavor firm. Below is the section on Refinancia.

Launched in December 2005, Refinancia has its roots in a business plan concept developed by Kenneth Mendiwelson while he was a MBA student at Harvard Business School from 2000 to 2002. Refinancia purchases and services consumer and mortgage Non Performing Loans (NPLs). The company uses proprietary databases and modelling experience to assess loan quality, probability of recovery, costs and risks with portfolios of NPLs that it can purchase. Finance pools to invest in the NPLs are packaged by Refinancia and offered to sophisticated investors. Refinancia assumes and manages the relationship with each individual whose loan has been labelled NPL. A key differentiator is the humane way people with financial difficulties are engaged by Refinancia. The aim is to change the conversation from one about ‘defaulted loans’ to one which centres on ‘specialized credit products for special clients’. Refinancia’s initial focus was on NPLs in Colombia. In August 2010, it opened operations in Peru. In 2008, the founders were selected as Endeavor entrepreneurs by the Endeavor non-profit organization.

Kenneth Mendiwelson is a specialist in the financial arena. After obtaining his BA in Business Administration and Financial Law at Los Andes University in Bogotá, he worked in corporate financial positions in Scotland, Colombia, and the US. He enrolled at Harvard Business School (HBS) in the fall of 2000, and went on to develop an ambitious business plan for his thesis that would later become the founding concept of Refinancia Post HBS, he first worked as a consultant for McKinsey & Company, focusing on the financial services sector in the Andean region of Latin America. He moved back to Colombia in 2004 and saw that he could have higher impact on the nascent NPL market in Colombia if he struck out on his own. Mendiwelson took the plunge and launched Refinancia in December 2005.

What was the source of the initial idea, and how did that idea evolve into a viable high-growth business venture? How did it change over time?

Mendiwelson: “While doing my MBA at Harvard Business School, I researched the idea of buying and managing Non-Performing Loans (NPLs) in Latin America and eventually wrote a business plan with a friend from school. The interest came from my original background as an executive in new product development in the financial industry. With our business plan, we understood that this industry had evolved in developed markets and had some relevant players. However, it was still nascent at emerging markets. Colombia, in particular, had lived through an important financial crisis that generated a substantial inventory of NPLs. However, when I finished school I thought the banks were not ready to sell. Thus, I went to work at McKinsey & Co., especially focusing on financial services and risk engagements for regional banks in Latin America. A couple of years later it became evident that some banks were considering selling their NPL inventory in Colombia. That is when it became noticeable that this was a viable business venture and I decided to start Refinancia S.A. We became the local ‘pioneers’ as buyers of bad debt in Colombia, and banks in general started to follow a trend of selling NPL portfolios recurrently.

“As time passed we became very focused in developing very strong loan servicing company based on analytical capabilities that allowed for adequate predictions of credit behaviour and product development.”

What was the initial growth vision or aspiration of the founding team? Was there a sizeable change in this growth vision or aspiration over time? If a change, please describe.

Mendiwelson: “Originally, we were seeking to be the leader in the Andean region – especially Colombia and Peru – in the business of offering financial solutions to individuals with bad credit history. This is still the key focus, but we have understood that our business is also about offering alternative investment products to institutional and private wealth investors seeking attractive returns – it is through this funding that we are able to buy and originate assets (debt portfolios) for us to manage and service. Therefore, an important change in our focus has been in developing the right channels to access the required funding. Additionally, we have understood that our business is replicable outside of the Andean region, expanding our potential to other geographic markets.”

Describe the strategy or business model that enabled your company to achieve its high rate of growth.

Mendiwelson: “We have focused on building world-class capabilities in four elements:
1. Access to top executives at banks with high level relationships
2. Top-notch analytical capabilities (statistics and portfolio analysis) for
adequate pricing and product development
3. Reliable funding partners
4. Best-in-class sales force (collections group) that differentiate our
servicing capabilities.

For each of these four elements, we have made important adjustments over time ensuring that all are at the adequate sophistication level. As growth has been achieved and cash flow allows it, we have made sure that we bring on-board the right management team members that add the right experience and reputation. We have been aggressive in pursuing sophistication in a market that is traditionally very basic. This has allowed us to redefine the playing field and achieve adequate differentiation from our competition.”

What were the major growth accelerators for your company in its high-growth years?

Mendiwelson: “Our aspiration has always been to be recognized as a world-class business case. This simple idea has permitted us to make decisions that are somewhat advanced for the entrepreneurial stage we are at. Making these decisions slightly before they were required has been an important accelerator in the sophistication level that allows for our differentiation. In emerging markets, sophistication is something difficult to achieve and replicate. I believe that this sophistication is especially driven by the talent that is recruited and retained within our team, as well as by the deeply thought out processes that we are able to construct and execute on.”

Briefly describe the financing of your company and how this financing impacted the growth of your company.

Mendiwelson: “Financing is core to our business and to our growth. We originally started our effort through friends and family finance, but quickly designed financing mechanisms that were scalable, such as building special purpose vehicles that allowed for sophisticated financiers to share upside of each of the projects and portfolios that we originated. As these initial projects were successful, additional finance from overseas and institutional investors started to come in, providing the basis for aggressive growth.

“Bank lending has also been critical to our growth as some of our portfolios were structured via project finance with local banking institutions.

“Currently, we are working on going directly to the capital markets to fund our growth, making sure that we are able to be held accountable to the way we are marketing our capabilities to investors.

“We have made sure that our payment behaviour goes unquestioned and is always reliable. Managing our reputation with our financial partners is critical and is what allows for them to be willing to accompany us in new portfolios and new avenues of growth.”

What were the major challenges your company had to handle in its high- growth years, and how were they managed?

1. “Talent: Recruiting and managing world-class talent and allowing it to flourish require an important effort by a founding CEO. There is a balance that needs to be in place to provide direction and execute through the team, while choosing the right initiatives to be involved in with a hands-on approach.
2. Cash commitments: Committing to important recurring cash out flows destined to build the right capabilities and creating new income models without having complete certainty of how future revenue stream will evolve is an important challenge. Management needs to be prepared to take important controlled risks and bets that assume that current expensive capabilities can build and sustain the expected income stream for the future.
3. Operational capabilities: As growth takes place, the operational structure is stretched to new levels. This creates stress in the organization and requires management to re-think and re-vamp many of the original operating procedures in order to take them to new standards. This involves new technology, new organizational structure, new procedures and new control mechanisms, among others. Implementing each one of these novelties is challenging, and in many cases, frustrating for the original team.
4. Reputation management: As the company becomes successful and grows, greater recognition in the business community is achieved. Managing our reputation needs to be thought out and a careful approach is a must, as our credibility is a critical element in the continuity of our business. Thus, living up to the required standard is more challenging as growth is achieved.”

Give examples of dark moments or negative periods that your company or you faced as part of your journey as an executive with this company.

Mendiwelson: “Fortunately, it is hard to identify specific dark moments throughout this journey. Of course, there are constant challenges, but all contribute to the exhilarating feeling resulting from building something that is relevant and that has potential for high-impact. The most frustrating elements that can bring ‘darkness’ to the picture involve competitors and regulatory initiatives that affect our business. For example, on competition, we have found that as our business has been recognized, other players have come into the market. We believe that in some cases, the behavior of competitors is irrational, in terms of the prices that they are willing to offer to the market. This can cause contagion that can, in turn affect the business model, as it has been conceived. This is frustrating because a business opportunity that has been difficult to build can be deteriorated by the short-term irrationality of competitors that will not survive at these price levels.

“In terms of regulatory initiatives, we have been exposed to changes in the laws that affect our business model. Access to credit has so much impact in the way people live, thus it is exposed to populist regulation. It is difficult to control the outcome of regulation, notwithstanding the efforts that we make as an industry. Having sudden changes is frustrating, as important adjustments need to be made to our business model, and sometimes this regulation does not benefit the market as a whole.

“Although we seek to be active in both of these fronts, having limited influence and control over how these elements evolve bring uncertainty and anxiety.”

What are the key lessons about entrepreneurship and successful growth strategies you’ve taken from you company experience?

1. “Sophistication is expensive but pays back.
2. Having the aspiration to be world class breaks many barriers and allows us to think big.
3. Top talent adds exponentially, but make sure that they have their space to shine and that they can come in at the right time.
4. Including reality checks in management routines is a must, especially related to cash availability. It is all about execution and control-the devil is in the details.”

Endeavor alum wins MIT100K Business Plan Competition

David Auerbach, the author of the following post ran Partnerships, Policy and Outreach at Endeavor from 2006-2009. Inspired by Endeavor Entrepreneurs, he decided to go to business school two years ago and just won the MIT100K Business Plan Competition for his new initiative, Sanergy. Also be sure to check out Elmira Bayrasli’s profile of Sanergy on the Forbes blog.

I left Endeavor two years ago to go to business school at MIT-Sloan. Endeavor Entrepreneurs have inspired me more than they could possibly know. Some of them are people who just knew that they could do their specific expertise better than the status quo. They got fed up with convention and so they re-wrote the rules. Others are dreamers who have the craziest ideas. And others basically saw an idea in one country and said, “Hey, I can make that idea work in my country.” I’d like to think that all three of those “types” played a part in shaping what I’m up to now.

With a new venture, Sanergy, we are trying to tackle the sanitation crisis in urban slums. We are doing this by building low-cost toilets (made of thin cement), then collecting the waste, and converting it into fertilizer (which we can sell to flower farms) and electricity (which we can sell to the grid). We are also creating local jobs because each toilet is owned by a local resident, who can operate it as a viable business charging people to use the toilet (which is commonplace). We are starting with the slums of Kenya, where 8 million people lack access to a good toilet and resort instead to undignified experiences.

We’ve got a great team. There are three of us from MIT’s business school and then, over the last two years, we’ve found engineers and designers across the MIT campus (and now the University of Nairobi, Chicago and Georgetown), who share our passion for sanitation and have helped us design and deploy the toilet. So far, we have two toilets that are operating in the slums and 150 people are using them every day. We’re headed there in June to scale our enterprise up and start producing fertilizer. Within five years, we aim to be serving 500,000 people with high-quality sanitation.

Last week, my team won the MIT100K Business Plan competition. This is a prestigious competition and, much like becoming an Endeavor Entrepreneur, gives us new credibility with investors and partners. It’s great step for us and we are thrilled. Winning the MIT100K is a big deal to us for a number of reasons. Of course, the money doesn’t hurt. But more importantly, in the grand scheme of things, I am hoping that this is a big win for business with purpose. This competition is traditionally won by companies that have the next great idea in software, on the web, or in pharma. The idea that a business can be profitable and have an expressed social mission and win this competition gives me so much hope for the future!

You can learn more about Sanergy by following us on our blog.

The growth of Synaq: a video interview with Endeavor Entrepreneurs Yossi Hasson and David Jacobson

The Old Mutual Entrepreneurs’ Guide, a Cape Town-based website that focuses on successful innovators, recently interviewed Endeavor Entrepreneurs Yossi Hasson and David Jacobson. The two discussed how they started their email and internet securities business, Synaq, how it has developed over the last few years and what they have learned along the way.

Watch the full 15-minute interview here or download the official transcript [PDF]. The transcript is also reprinted below.

Question: Who are you?

My name is Yossi Hasson and I’m the managing director of Synaq.

I’m David Jacobson and I’m the technical director.

Synaq is a company which started in 2004. We specialise in managed services on the Linux system. We also build email services for corporate companies in South Africa.

Our business is now based around this system. I am an inquisitive guy and Linux-based systems, break into many big corporate and government agencies. I did it for fun and learnt through this process. I then took all that knowledge and used it to build a successful business.

David and I were at school together. I’d heard of David’s Linux shenanigans, if you want to call them that. Since that time I have always been interested in this open source platform, what it means, how it evolves and what it does. David was a front runner or thought leader at the time. He was above everyone else. While I was using the Linuxbased system, I became friends with David. We spoke about what he was doing and what his plans were for this system. When we were in school, we spoke about starting various businesses in the IT space and security space but David wasn’t interested in either. David played hard to get and after we left school we continued our conversations, regarding the starting of a business. We were now older and had work for other businesses and companies. When we found what we were passionate about, that’s when we began Synaq.

Question: What do you think of the Do Great Things campaign?

It is important to share knowledge with people across all sectors and in all businesses. Being passionate about what you do is very important and I think that’s a huge step in doing great things. You’re hopefully changing the world in some small way.

The campaign is an unbelievable cause in trying to inspire people to follow their passions. It tries to educate people and help them to move forward. So, from a campaign point of view, it’s unbelievable. What’s important to note, however, is that building rock star status around entrepreneurs is sending the wrong message. My message would be that there are no such entrepreneurs. There’s no person who has a specific set of character traits that result in building successful businesses. The people who go out and build businesses had an idea, a passion, and they happened to be starting a business. They could have been running a marathon, by comparison. What they did is they took the necessary steps to move forward and get out there. And if that’s the result that you get from this type of campaign, then I think it’s an unbelievable effort, and that’s what I’d like to see people doing. I’d like to see them saying, “I can do this!” and then taking that step.


Question (Yossi): How can you use open source software and cloud technology to keep costs down?

Using open source technologies
When starting a business, your cash flow and your start-up capital is limited. If you use technology in a low-cost way, then you’re already ahead of other start-up companies. For us, open source software and cloud computing represented a significant opportunity to do just that. Open source software is freely available for you to use, commercialise or modify for your business environment. The premise of cloud computing is technology you can use on a pay-as-you-go model. From that point of view, the old premise of building your own infrastructure, scaling it and then investing in applications you may not need to a great extent, is an old and outdated model. We liken it in our minds to the early 1900s when you built your own power station to give electricity capacity to your business. Today, when you look back at that, it’s a ridiculous statement. You plug your computer into a wall socket and you pay the utility provider. And that’s the way computing is moving. At Synaq, from the day we started, we had CRM applications, email applications, accounting packages… We never paid anything for those applications, either because we were using open source software, or we were using some kind of cloud provider to give us those services.

• If you can leverage open source technology to keep your costs low, then you’re already a step ahead of the other start-ups out there.
• Many key business applications, including CRM, email and accounting packages, are free if you are prepared to use open source software.

Question (David): How is knowledge shared throughout your company?

Capturing your knowledge as you go

At Synaq we believe in knowledge sharing, which is similar to how open source software works. One of the first things we introduced into our business, which has been invaluable, is a wiki system. The wiki system is a collaboration system where everyone enters all their information about the customers, about the projects that we’ve done, marketing ideas, operations, birthdays… It’s been absolutely fundamental in building this business. We don’t have to tell every new person we hire what we’ve done with each customer, what our principles are or how our culture works. When new people enter the business they have many questions. Since we are a technical company we can say, “Look at the wiki – if the answer to your question is not there, find out what the answer is and put it there.”

• A wiki system is very effective as a knowledge-sharing tool.
• One of the advantages of recording all your information in a wiki is that new employees can find out a lot of information without having to take time from other staff members by asking them questions.


Question (Yossi): How do you design a model that scales?

Designing a model that scales
When we started the company, the basic premise of the business model was to provide managed services on the Linux platform for our customers, that is, offering support and services around the Linux operating system. When we started the company, we thought that was unique. We teased other companies that did everything in the IT space. We went to the market with that and got many customers saying, “Can you do this for us?”, “Can you do that for us?”, and because Linux is such a flexible platform, we could do everything for a company. Three years into the business, we realised we’d implemented about 100 to 150 projects. And when we looked back, not one of them was the same. We were left with a business that was growing and making money but it became difficult to scale beyond that point, since everything was different. We needed a person who could enter the organisation and be a jack-of-all-trades. We needed a person who understood CRM databases, could customise applications and move forward using all of this knowledge.

At that point we made an expensive decision – and it was the right one. We knew we couldn’t scale a business where we provided niche services around a technology stack. The organisation wasn’t being focused and we took the decision to standardise on a number of products – four products to be exact. We decided to build these products, invest in them and offer them to the market instead of the bespoke services we had offered up to that point. It took us about two years to do it and get those products into the marketplace. We’ve been doing it for about 12 months now and the business has grown much quicker. And the human resources we need to be able to scale the business is a tenth of what we needed before. So our decision was that we need to now scale the business, to grow it. To do that you need to be able to say, “What are we really good at?” and focus just on that.

• Identify at an early stage what your business is good at and focus your attention on that.


Question (Yossi): How did having a short, flexible business plan help you to pivot your business?

Staying flexible but on strategy
The one-page business plan, in principle, allows you to say, “What are the key things we’re going to try and do over a short period of time?”, and will help you to execute that. What you’ll find when starting a business is that nine times out of 10, you think something is going to happen, but something completely different happens instead. And if you get married to a well-thought-out, well-planned idea that takes you 12 months to put together, then you don’t allow the feedback you’re getting to modify your behaviour, and you carry on with a rigid approach. When we started Synaq, we wrote a business plan. It wasn’t a 24-page document that was researched in depth, but it had a fair amount of structure to it. We followed through with that, but realised very soon that what we had assumed in our plan turned out not to be what we needed to do to build the business. But we are flexible and so we changed our business model probably three times to get to where we are today. If we didn’t have the ability to say, “Well, that’s just another thing that isn’t going to work”, then we wouldn’t be in the position we are today. So my encouragement is that rather than having an elaborate plan, instead say, “This is what we’re going to try and achieve over the next six months, this is what the business needs” and execute that. Reiterate as often as possible and don’t get married to a bigger, more rigid plan.

• Create a one-page business plan to set out what you aim to achieve over a six-month period.
• Your initial business objectives probably won’t pan out as you first imagined.
• As your business progresses, you will probably see that your preconceived plans, assumptions and objectives
don’t fit where the business is headed.
• Your business plan needs to remain flexible and you need to continuously redesign and review it.
• Don’t get married to a plan.
• Instead of creating an elaborate plan, rather adopt a more flexible view and say, “This is what we’re going to
try and achieve over the next six months”.


Question (Yossi): How do you enforce contracts?

Drawing up contracts
At Synaq, we’ve spent a lot of time putting contracts together. We do this to make sure that, from a legal point of view, we are protecting ourselves and our customers, regarding the engagement we are entering into. But time and again we’d find that a customer with whom we had a really good relationship would say to us, “Look, the business has changed and we can’t continue with you”, and they’d want to exit the contract. Most of the time we’d feel sorry and we’d understand. We’d say, “No problem, we’ll see you again in two years time.” We would be quite laissez-faire about the situation. More recently, we’ve taken a different approach. The principle of a contract is more than words written on paper. The whole foundation of commerce is built on the premise that a selling party is receiving from a buying party and they know the terms they are entering into, which are governed by contracts. Now we have been a lot more firm when entering into contracts with our suppliers and customers. The result is that we have customers who have really appreciated the service and the value we offer them. And we put more thought into the agreements that we have entered into. Now we say, “This is what we’re doing for you, this is the agreement, this is the value we’re offering, and this is what you’re signing up for.” We make sure we each meet that commitment going forward. So we’re being a little bit more harsh, if you want to call it that, or a little bit more firm, but it comes from the principle that a contract is what governs commerce and if we’re going into this relationship we know what we’re doing and we should stick by that, otherwise there’s really no point in entering into a contract at all.

• Spend time carefully putting together contracts, making sure from a legal point of view you and your customers are protected in the engagement.
• Include an exit clause or strategy in the contract.
• The principle of a contract is more than just the words written in it.
• The contract needs to be clearly understood by both parties.


Question (Yossi): How do you work out if you have the funds for your strategy?

Managing cash flow
We decided to standardise our products and develop our product offerings, rather than offering bespoke services. So we employed a management team to manage our developers as well as execute that strategy. We thought the project would take six months or so but soon realised it was going to take 12 to 18 months to complete. By stopping the bespoke development we were not getting in the type of revenue we got before. We were spending money to build these products so we could make a go of our new strategy. When you’re thinking about growing your business, you’re not thinking of the cost of growth or what it will take to achieve that growth. As a business person, you’re probably only seeing the opportunity you want to exploit. And while it may be the best opportunity out there, if you don’t have resources to execute it, you’re going to cripple your business. Understanding what you have available to you and what you can do with those resources is the best way to look at the equation. It took us six months to decide that our new strategy couldn’t be executed with the resources we had. We were either going to have to get funding, scale down or apply a more focused approach.

• When you’re thinking of growth, remember to consider the costs of achieving that growth.
• Remember to consider the resources you have before you commit to a strategy for growth..
• You may have the best idea or opportunity but without the necessary resources available, you will be unable to execute it.

Question (David): How do you monitor cash flow?
I’m not an accountant and I know very little about accounts. In the early days, I found this aspect of the business difficult. It is worrying to be a co-founder of a business and not be able to understand the financials. We were sent income statements and reams of emails that I tried to understand but couldn’t. So one of the things we introduced as a management team is a one-page dashboard, which has everything on it relating to the company financially. With graphs and other visuals on the page, I’m able to understand things such as month-to-month sales, GP, cash flow and certain metrics. This has made a big difference to my understanding of the business and it’s helped the business to move forward financially.

• If your understanding of finance is limited, you can introduce a very simple one-page dashboard relating to the company financial situation.
• A one-page financial dashboard could include graphs, month-to-month sales, GP, cash flow and relevant key metrics.


Question (Yossi): What recruitment process do you follow?

Finding the best people
At Synaq, it is important that we hire the right personality type for the job and for the company. To pick up on a person’s personality in an one-hour interview is a difficult task, so we ask open-ended questions and try to get the interviewees to tell us a story about themselves. Some of the questions are:
• Who were you as a kid?
• Who was your favourite parent?
• Who was your best boss and why?
• Who was your most irritating colleague and why?
We ask the interviewee what gets them ticking and how they structure their day. All these questions have no right or wrong answer but they give us a very clear picture of the type of personality of that individual and the type of environment where they are going to succeed. If these two things are aligned with the job, then we know we have a candidate. We would then test for aptitude and skills and give them the relevant aptitude tests and a technical test they would need to pass. If it’s a sales position, they will have to do a sales pitch or we’ll test whatever the functions of the job are. We need to make sure the candidate has the right personality for the job function and that they will thrive within the environment of the company. This person could be a genius and be brilliant but if they are not the right fit for the job and the environment, then he/she won’t be happy and won’t shine within the organisation.

• You should always hire the right personality type for the job as well as the company.
• It’s difficult to get a clear picture of a person’s personality in a one-hour interview.
• Use open-ended questions during the recruitment interview to help you build up a story of what the interviewee is like.
• Once you’re happy with the personality of the applicant, you can do the relevant aptitude and technical tests as another screening process.
• You may be interviewing a genius, but if their personality doesn’t fit the company culture, it may not work out.

Question (David): What do you look for when hiring new team members?

Finding the best people
We are a technical company. When we hire new members we want to know, “How good are these guys technically? How good are they with Linux? How good are they with networking?”. Over the years, we asked all the wrong questions in our interviews. We would say, “Are you a good team leader? Can you work well under pressure? Can you do this? Can you do that?” but these are all questions where you’re leading them to the right answer. They’re going to say, “Yeah, I work great under pressure.” In an hour interview, it’s difficult to understand the type of person you’re hiring. We have been through many courses with various individuals and now our interview process is somewhat weird. We ask them very weird and strange questions, such as the things that freak them out. That seems irrelevant. One of the questions we ask is, “Who are you closer to, your mother or your father, and why?”. We find out some problems they’ve had at their company and how they dealt with that situation. We ask if they brought this situation forward to the manager or if they bottled it up inside. We are interested in how they dealt with the situation. So some advice I could give is, make sure you’ve got your interview process sussed out very well. The main aspect to look for is attitude. We found you can teach anyone anything if they’ve got the ability to learn but you cannot teach someone to have a good attitude.

What we’ve found is that one exceptional person can do ten times more than hiring five average people. And that’s what we look for in our interview process.

• Very often during the interview process, you ask the wrong questions.
• Asking different and somewhat weird questions invokes an unplanned response or highlights problems/issues that normally would not be exposed.
• The ability to learn and a positive attitude are crucial when hiring new team members.


Question (Yossi): How can you use equity for later-stage finance?

Using Equity to Finance Your Business
When we started the business, David and I were young. We were 21 years old and we raised about R1 million. This was six years ago and, to us, R1 million was a large sum of money. It was unbelievable that we were getting that type of backing. We managed to execute a lot on that R1 million – it got us to this point today. But when I look back I often ask, “What did we require to be able to start this business? How much money did we really need? Could we have been more flexible or innovative in how we started the business and approached it? And if we could have been more innovative and flexible, how much equity would we have had to give up back then?” These questions are important because at a certain point in your business you may want to grow it further. In growing your business, you may need funding or you may need some capitalisation of the business. But if you decide to give away a large chunk of equity when the cost of building your business is actually quite low, then you are decreasing your chances of later taking it from a R10-million business to a R100-million business. Because what R10 million three years later could do for your business versus R1 million when you started it, is the difference between building a highly scalable, high growth type of company versus a company that’s restricted to a few people. So try and reduce the equity you’re giving away and, if you can, don’t give away any. Suppose you’ve given away 60% of your equity for that initial seed capital to start your business. It becomes a difficult exercise when the business has reached a point where you need to capitalise and fund the growth, but there is very little money left. Firstly, from the point of view of a potential investor who is going to provide the funding, because they have to pay out a large chunk and, secondly, from your own point of view, because if you want to profit out of this business and if you want to have an exit for yourself, the less equity you have at the end is going to make your exit strategy all the more expensive. So try and give up less equity at the beginning when you don’t need that much money.

• Be flexible and innovative when you work out how much money you need to start the business.
• Try not to give up too much equity at an early stage – try not to give up any, if possible.
• If you resist taking money from investors in the early stages, you will be able to use your equity as a way to fund growth later on. The advantage of this is that you’ll be giving up less equity for more money.


Question (Yossi): How do you build systems for your staff?

Systems that make it easier for your staff to function
If you want to build a business that can scale beyond yourself, you need to make sure that you’re processifying and systematising the business so that you can employ the least qualified person to do that job expertly. When business people start their business, they’re dealing with so many different things and they want to hire brilliant people who can take everything off their plate and be able to do it for them.They start hiring many of these brilliant people and eventually the business becomes dependent on the mood and the personalities of those brilliant people rather than being focused on creating a franchise, which can be scaled and grown. You as the entrepreneur will be doing everything, so take the time to document what you do and turn it into processes. Each process should explain how you want a specific task and function to be done to the finest level of detail. So when you are employing the next person who needs to take over that role you can say to them, “This is exactly how I want you to perform this job function”, rather than leaving it up to them. That way, you don’t have to rely purely on brilliant people, and because of that you’re now building a business.

• You want to build a business that can scale beyond yourself, where you’re not tied into having to control the way the business operates.
• You need to put processes and systems in place that allow the business to continue functioning effectively without specific people in place.
• If you fail to put systems in place and instead become too dependent on brilliant people, you risk not being able to scale your business.


Question (David): What should you look out for when developing large systems?

Managing product iterations
We’ve been through many challenges over the years. We maintain hundreds of Linux-based systems across Africa and one of the biggest challenges we had was accountability – auditing and logging – with many engineers performing many different tasks. When someone leaves who had 200 systems they managed that aren’t linked to your organisation because they’ve all got their own access information and are integrated in access control, then you have a problem! We’ve learnt to make sure that when someone leaves, all these systems get configured to either remove or add access for that particular person. In the past, we built systems that were built only as well as the person building them. Nowadays, we’ve taken all the knowledge we’ve learnt and put it into automated systems.
We automate absolutely every aspect of an installation and we only do the bare minimum in a manual kind of way.

• When you manage many large systems, you need to try automate the installation of each to whatever extent is possible.
• Make sure that when engineers leave your company, others can access their systems and all the knowledge of how to deal with those systems is recorded for others to follow.


Question (Yossi): How do you align your development with real needs?

Launch, get feedback then iterate
The principle we have tried to follow, is to make sure we’re focusing our resources in a way that is going to differentiate us for our customers. We spent about 18 months developing an application we’re extremely proud of. For all intents and purposes it is a market leader from an interface design point of view, from a functionality point of view and from its ability to simplify the management of an anti-spam solution. We are proud of it and it cost us a fortune. What we found after developing the solution is that 95% of our customers never logged on to the interface or saw what we developed. So, we spent a fortune on something that only 5% of our customers were using. But we’ve learnt a lot from it and we’ve been able to gain a fortune in learnings as well as the ability to commercialise a product. We’ve learnt to build unbelievable interfaces and we use it as a sale tool when we’re in a presentation to promote the product as well as to differentiate ourselves. What we possibly could have done is spent 12 months on it, getting it to 80% where it was standing on its own and then released it. The difference in taking it from that 80% to 99% – to being the best product in the market – wasn’t only a one- or a two-month difference in time, energy and resources, it was an extra 12 months in development! So you only need to ask yourself the first question: “Where am I spending my resources and is that giving additional value to my customer and is that going to differentiate us?” The second question is, “Is that extra 20% worth the extra 12 months in development and the doubled expense?”

• You should focus your resources on areas that differentiate you in the eyes of your customer.
• You should focus your resources on giving additional value to your customers.


Question (David): How do you support your customers?

Customer support
The main reason we started this company was that we were irritated with the customer support from other companies.
We took all our problems that we had with those companies and said, “How can we change that paradigm?” So one of the things we wanted to do at Synaq was to build a world-class help desk. Now that might sound easy, but it isn’t. We wanted to give a customer a consistent experience, no matter if they chat to me or to anyone else. It’s merely to get a consistent experience and have people who are knowledgeable chatting to the customers. Often companies will hire call-loggers to log calls and that’s very irritating to a customer. There’s nothing better than picking up the phone and having someone extremely competent to resolve your issue in a friendly manner. Further to that, I was the help desk for the first few years and I found there’s a big disconnect between CEOs, CTOs and the help desk, which is often seen as a small, relatively unimportant part of the business. Running the help desk myself for the first few years gave us a lot of insight into this problem.

• A world-class help desk has huge benefits for your interactions with customers and clients.
• Supporting and helping customers with knowledgeable, competent people insures a consistent experience.


Question (Yossi): How do you create a marketing strategy?

Crafting a marketing mix
For about four years Synaq delivered services to a wide range of clients, and for a long time we contemplated the question of who our customer really was. Then one day we actually sat down and focused on that question and we spent a significant amount of time deciding who our ideal customer was. The point of that exercise was that once we had answered the question it was so clear in our mind who we were targeting, we could walk into a meeting and within the first two or three minutes we’d know if the customer was right for us. From that point on we could tailor our marketing mix and our communications in a much more precise fashion than the generic shotgun approach we applied before, where we’d put an ad here and then maybe we’d do a press release there. When we did those things, we weren’t speaking to our clients and saying, “We understand you – this is the need that you have and this is why we are the people to be able to fulfill that need.” So by spending time focusing on and answering that question, the rest of the marketing questions became so much easier to answer in terms of which channels to use, how to use them and how frequently, and what message to put out. And so I’d suggest that before you spend money on marketing, you should spend time answering the question of who your ideal customer is. Otherwise you’ll just be putting out a campaign where you don’t really know who you’re talking to.

• It is very important to understand who your real customer is before you spend money on marketing.
• Once you have identified your target audience it becomes clearer and easier to tailor your marketing mix.
• Once you have a focused target audience, your communication to your customer becomes so much more precise than a generic shotgun approach.
• Once you have identified your target audience, you’ll have a better understanding of what your customers needs really are.

Three Endeavor staff members participate in American Express Leadership Academy at Thunderbird

In early May, three Endeavor staff members, Rhett Morris, Daniela Terminel, and Bianca Martinelli participated in this year’s American Express Leadership Academy at Thunderbird, School of Global Management. In bringing together rising stars in the social sector, Thunderbird Associate Vice President Joy Lubeck explains, “The program helps participants from across the sector broaden their perspectives. They are able to learn from one another and see things through a different lens.” Twenty-seven participants gathered, representing ten organizations: Action Against Hunger, UNICEF, Endeavor, CGI, FARM-Africa, Save the Children, Un Techo Para Mi País,Women for Women, Global Giving, and IFRC. Highlights included classes about interpersonal communication skills, power and politics, and exercises in self-assessment.

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