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Crossing Borders with Nathan Lustig


Hello and welcome to Crossing Borders with Nathan Lustig, where I interview entrepreneurs doing startups across borders and the investors who support them, with a focus on companies that have some relationship to Latin America.

Sep 4, 2018

After growing up in the Bay Area, Diego Caicedo left Popayán, a small town in Colombia, at age fifteen to go to university in Bogota, then dropped out two semesters before finishing his degree in engineering. Why? He had a plan to build a massive, vertically-integrated coffee company that bridged the US and his native Colombia. Three years later, a strong La Niña year wiped out the coffee industry and he was back at square one.

Diego has never been one to give up after his first failure, though. In this episode, we talk about how he rebounded after closing his first business, how Diego became an entrepreneur in Chile’s mining industry, then how he realized the opportunities in Latin American Fintech and started Portal Finance to help small businesses get liquidity when they need it. Diego is a lifelong entrepreneur with a lot of lessons to share with people just getting started, so check out this episode of Crossing Borders to learn more about how Diego does business across Colombia, Chile, and the United States.

Portal Finance recently closed a $200M deal with one of Latin America's largest investment banks, BTG Pactual, to provide financing to small and medium businesses across Latin America. They were also winners of Magma Partners' Latin America wide Fintech competition in 2016.

You can take your company to the grave, but you don’t stay in the hole with it

That was the advice Diego received from his father’s friend after his first company failed. Diego was quick to bounce back, finding opportunities to enter the booming Colombian mining industry alongside a Texan WWII veteran, and pushing back against the idea that failure has to mean losing face in Latin America.

After working his way through the boom and bust economy of Chile and Colombia’s commodities sectors, Diego was inspired to help companies avoid being short-financed in times of crisis. Find out how Diego’s time in the mining industry helped him get involved in the Latin American fintech movement in this episode of Crossing Borders.

Latin America is miles ahead of the US in e-invoicing

Chile was the first country in Latin America to pioneer e-invoicing, where companies had to turn in standardized invoices in XML format that could be processed at scale. The system allows governments to accurately calculate value-added taxes (VAT) based on companies’ spending and revenue, and incentivizes companies to be honest so they don’t pay extra taxes. That information also gives governments and companies like Portal Finance a leg-up in analyzing businesses, their taxes, and their creditworthiness.

Learn more about how Diego found out about the gap in the market for B2B financing in Latin America - while working in Miami! - and how Portal Finance convinced market leaders to change the way they do business.

Tips for Latin American founders raising capital

Focus on your primary source of funding: your clients. If you have something of value, somebody will pay for it, says Diego. Portal Finance has raised three rounds so far, however, Diego has always stuck with the mantra of raising the least amount of capital Portal Finance needs to reach the next milestone.

Diego found out the hard way in the mining industry that having too much capital too early is dangerous; you build less efficiently when you have money to throw around. Instead, he encourages founders to focus on networks, which are much more important than money when you are working in Latin America. Listen to the rest of this episode to learn how Diego leveraged his network to build a US$200M partnership with BTG Pactual, Latin America’s finance leader.

Diego is a passionate, experienced entrepreneur who embodies doing business across borders. He is confident that the US will soon look to Latin America as an example for how to provide financing to businesses when banks just aren’t sufficient. Portal Finance is one of Magma Partners’ most dynamic companies, so listen to this episode to learn more about how the business works and how Diego plans on taking Portal Finance across the region.

Show Notes

[2:10] - What does Portal Finance do?

[2:31]- How does invoice-backed financing work? Why is it so important in Latin America?

[5:13] - Diego’s childhood: from Colombia to the US and back

[6:43] - Did you have culture shock coming back to Colombia from San Francisco?

[8:12] - Diego enters university at age 15

[9:12] - Did you always know that you were going to start businesses?

[13:45] - Lessons learned in three years in the coffee business

[15:02] - Why should Latin Americans stop fearing failure

[19:07] - After getting over the first business not working, what did you do next?

[24:25] - Tell me more about the boom and bust cycle in the mining industry

[26:18] - What happened after the market downturn?

[38:42] - Why is Latin America so far ahead on electronic invoicing?

[47:37] - From your expertise in the coffee business, how did you take those lessons into Portal Finance?

[53:29] - How did you approach raising capital for Portal Finance?

[56:32] - What advice would you give to other entrepreneurs that are looking to raise capital?

[58:17] - Partnership with BTG Pactual

[1:01:32] - Why should US investors look to LatAm for Fintech?

[1:03:31] - Diego’s advice to his younger self

[1:06:50] -  What's next for Portal Finance?

 

Resources Mentioned