Marathon Series: What happens after a mission-driven company closes?

I came to Mexico because I want to understand entrepreneurship in this country. And for some freaking reason, even though I’ve been doing interviews for over 10 years now, I don’t think I’ve interviewed a single entrepreneur from Mexico. So if they’re not coming to me, I’m coming to them.

And the person sitting at the table with me he is Santiago Cepeda. He is a founder of a company that was called Lokald. They did online retail, a range of products, clothes, furniture, jewelry, that kind of thing. And unfortunately, the company is no longer.

I came here to understand what happened, how he built it up, why it closed down, what we could understand about entrepreneurship in general from this experience, and maybe a little bit of color about what entrepreneurship is like in Mexico City.

 

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Santiago Cepeda

Santiago Cepeda

Lokald

Santiago Cepeda was the founder of a company called Lokald, which sold a range of products online, including clothes, furniture, and jewelry.

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Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. And I’m here in Mexico City. If my voice sounds a little bit different, it’s because I ran 26.2 miles from Texas into Mexico because my goal is to run a marathon on every continent.

And I specifically came to Mexico because I want to understand entrepreneurship here. And for some freaking reason, even though I’ve been doing interviews for over 10 years now, I don’t think I’ve interviewed a single entrepreneur from Mexico. So if they’re not coming to me, I’m coming to them.

And the person sitting at the table with me he is Santiago Cepeda. He is a founder of a company called or was called Locald. They did online retail, a range of products, clothes, furniture, jewelry, that kind of thing. And unfortunately, the company is no longer.

I came here to understand what happened, how he built it up, what happened that let it to close down, what we could understand about entrepreneurship in general from this experience, and maybe a little bit of color about what entrepreneurship is like in Mexico City. Is my voice a little bit harsh for you?

Santiago: No.

Andrew: No? Okay. In my head it sounded like, “Andrew, this is awful.” I should say there are two sponsors who made this interview happen. The first is Toptal, which Santiago has had some experience with, and HostGator, which I’m going to introduce him to here today. But first, Santiago, good to have you here.

Santiago: Thank you.

Andrew: Thanks for coming.

Santiago: No, thank you for having me.

Andrew: Tell me about your shirt. I love it. For people who are listening, it is a silhouette of Mexico. I love that so much. I want to go home with one of these shirts because it’s such a good design.

Santiago: This is made from a Mexican designer. Actually, we sold this in Locald. She’s called Jpeg, like the photograph file.

Andrew: Okay. Oh, like a GIF.

Santiago: Yes. Like .jpeg.

Andrew: Yeah, JPEG, not GIF. Yeah, of course.

Santiago: And they do all kind of clothing with Mexico silhouettes. It’s very cool. It’s an emerging designer in Mexico.

Andrew: And that is what inspired you to create Locald. You wanted to give designers like them an opportunity to do what?

Santiago: To thrive. Actually I wanted to . . . my idea was Mexican designers are really cool. They had really cool products and I wanted them to thrive and grow their businesses and maybe one day sell internationally their products.

Andrew: Don’t take this the wrong way, but who cares? Like, why are you trying to make other entrepreneurs more successful when you’re just starting out a business? Why do you care?

Santiago: Because my idea, it was like I want my community to thrive, as an entrepreneur here in Mexico, and I was educated this way. We want our community, our people around us thrive as I thrive. So the idea was I can make a business that makes me rich, the idea, and make other people rich at the same time.

Andrew: So get your business to be successful by getting them successful. And you recognized something in the Mexican design that you were starting to tell me. I love your design, by the way. I don’t think this is showing it enough. But as we’re coming up the elevator here, I was looking at your backpack. There’s no label on it so I couldn’t steal it, like steal the brand and go get it. I was watching your shoes, right? They are New Balance shoes that have like a nice worn look to them, but it’s clearly very cared about, right? Every detail including the tattoo that has the dots. That’s what? Where is the other one?

Santiago: Oh, this? Okay, this “thank you” in Braille.

Andrew: Right. The little details matter to you. What is it about Mexican design that matters to you so much that you thought, “If the rest of the world only knew, we could start here in Mexico, but then bring it to them and blow their minds”?

Santiago: Okay, so Mexican design has something very special and very beautiful that it’s the craftsmanship of the products. We have a broad range of products and a broad range of techniques.

So contemporary Mexican designers have brought these old techniques to new contemporary products. So we have an amazing range of design products in Mexico that I think for foreigners are amazing. Like, when I go to a tourist place and I see foreigners, Europeans, Americans, Canadians see Mexican products, they go crazy. Like discover . . .

Andrew: I find that when my wife and I come to Mexico we always bring back stuff and I hate bringing stuff back, but I get it. The way you described it earlier, something I wrote down for myself because you said, “Look, it looks cool. It’s pretty and it’s a little bit weird. There’s a little bit of a difference.” And so, you said, “That’s what I want to do.”

You then looked around the world and you saw Fab was doing well with e-commerce that was on the high end, the Fancy. What did you pull from them that made you say, “This is what we’re going to bring back to Locald”?

Santiago: What I brought from Fab and Fancy, they were my main inspiration, was excellent, high-quality curation of their products in their sites. When you entered Fab or you entered Fancy, you wanted to buy all the store. Like, “Oh my God, I want to be a billionaire and spend all my money here and I have my incredible home and dress, incredible also.” That feeling, I wanted to translate it to Mexico but with Mexican products.

So people started wearing these T-shirts and be proud of it, and go to their home and see Mexican products and started this, “Oh my God, I can fill my house with Mexican products.”

Andrew: You know, the unexpected thing that you told me before we started was I said, “What was the first step you took?” And I thought you were going to say, “I just created a quick website,” or, “I started selling this one thing online somewhere.” You said, “No.” Do you remember what you said was your first step?

Santiago: Yeah, like solving a problem and making a business plan and . . .

Andrew: A business plan. You sat down. This is what they taught us in college, but college was a little bit out of step with what people were doing. You sat down, and you wrote a business plan, opportunity . . . what was it? It was opportunity, threats, the whole SWOT analysis, the spreadsheet of revenue. Really? Was it useful?

Santiago: Yes and no. Okay, it gave me like . . . it got me started in the business, like what I needed, what was the market, what were my sales’ channels, if it was going to be online, offline. It got me started and gave me an idea of what I want.

Andrew: It forced you to think through some of the questions.

Santiago: Exactly.

Andrew: You know, something similar happened to me with the travel here. I had this idea that was kind of nebulous about, “I’m going to go all over the world. I’ll run marathons. I’ll interview entrepreneurs.” And it was just really unclear until someone on my team sat down with me and we created a spreadsheet. We said, “Okay, here are the different continents. Here are the different places we’re thinking of going. Here are the dates. Let’s organize how we’re going to do this.” And once we did that, it did become a lot clearer. Okay, so I could see how a business plan helps you that way. Then you said, “I got seed funding.” How much did you raise?

Santiago: We raised $150,000.

Andrew: So what is it about your background that allowed you to raise $150,000?

Santiago: It was the idea and the business plan.

Andrew: That’s it?

Santiago: Yeah, that’s it. I think my personality, like I sold myself to the VC fund, and they really thought it was . . . because if you talk to any Mexican, they will tell you the same thing. Mexican products are amazing and they need more exposure everywhere. If you go to a mall here in Mexico, you see very few Mexican brands and there are very few stores for Mexican runs.

Andrew: Here in Mexico?

Santiago: Yeah.

Andrew: I noticed that too. If I go into the city where we’re staying, we’ve got a really nice spot. I was surprised by how many American brands I saw. So you’re saying, “Look, this stuff really looks good, even the Mexicans aren’t aware of it,” and that kind of factors into something that we’ll hear later on.

And they got it too. The investors said, “Okay, we get it. E-commerce is going to be hot.” This was a period when they were really excited about e-commerce too. Mexican products actually are good. They have a good design that the rest of the world and certainly Mexico should be drawn to. We’re in. Second step you took, you hired someone, a CTO.

Santiago: Yeah. I went on a . . . I call it a “witch hunt” because it was very difficult for us. At the time, I didn’t know how to make technology. I sold technology in Oracle but I didn’t know how to make it.

Andrew: Previously you worked in Oracle. Yeah.

Santiago: I didn’t know anything about e-commerce, so I made a witch hunt and I found someone that had 10 years’ experience on Magento, so I hired him and gave him equity.

Andrew: [Inaudible 00:08:48].

Santiago: Yeah,

Andrew: You gave him equity, you hired him, and you said, “Now you create this e-commerce site. I’m going to go.” And he built it all on Magento?

Santiago: Yeah, everything.

Andrew: Okay, how did you find him?

Santiago: It was called a job portal.

Andrew: Really?

Santiago: Yeah, OCC, it’s called.

Andrew: So you went on looking for somebody who was looking for a job and you said, “Hey, look, instead of a job let’s work together.”

Santiago: Exactly.

Andrew: Did he get a salary?

Santiago: Yeah. He was the only one that got a salary.

Andrew: You didn’t get a salary.

Santiago: I didn’t get a salary and my business partner didn’t get a salary.

Andrew: Okay. So while he was building out the Magento site, you went shopping. Your job was to fill a store.

Santiago: Yeah. Here in Mexico we have something called bazaars that are temporary . . . I don’t know how to call it, like temporary markets full of designers. So I did all the bazaars in Mexico City, Guadalajara, Monterrey, several cities on the country, and I went designer shopping. I call it that way. So I went to all the bazaars, told them about online selling, and local deals, and stuff, and I managed to bring them on board.

Andrew: And when I imagine when you first told me about it was people selling maybe used stuff or small one, two pieces. No. We’re looking at more like a farmers market for creative design.

Santiago: Exactly.

Andrew: That’s what these bazaars are. And you went around. You didn’t have enough money. One hundred and fifty thousand dollars is not enough to pay CTO, pay for all the software you need, and to pay for the product. So you made a deal with them. What was the deal you made with them?

Santiago: The deal I made with them was . . . I didn’t have money for marketing and they didn’t know how to market online. They didn’t know how to run Facebook, Google campaign. So I managed to say, “Okay, give me your money and I make . . . ”

Andrew: No, that came later. In the beginning when you go to the bazaars what you’re doing . . . I’m calling them bazaars, which I think puts a different vision in people’s mind. But when you went to these markets, I think you did a consignment agreement with them, where you said, “Look, I’m creating this online store. I love your stuff. Let me take some photos. Let me sell it in my place. It’s Locald. It’s e-commerce. I’ve got funding. I’m good.”

Santiago: Exactly.

Andrew: Okay. And so, you started. By the way, I’m looking over your shoulder. This view is amazing.

Santiago: Yeah, it’s amazing.

Andrew: I had no idea what Mexico City was like until I got here. It’s so far different from the Mexico that I experienced.

Santiago: No, this city is a very vivid city. It has a lot happening all the time. It’s a very vibrant city.

Andrew: It feels very European but also North American in a way that I wasn’t expecting. You were telling me before we started that there’s a lot to do here in Mexico. Some of the things that you do are what? Like for fun.

Santiago: For fun, I like to go outdoors. Mexico City is in the central part of the country, so we have a lot of different climates around. In a very few hours you can go to a desert, you can go hiking a mountain, you can go to woods, you can go to . . .

Andrew: You go to the desert?

Santiago: Yes. I went camping to . . . it’s called Real de Catorce. It’s [inaudible 00:11:55]. It’s a desert and you camp there. And you can do peyote.

Andrew: Really? You’ve done peyote?

Santiago: Yeah.

Andrew: What’s that like?

Santiago: It’s amazing.

Andrew: Really? What is it like?

Santiago: It’s life opening.

Andrew: Okay. Like, it gives you a better realization about your own personal life?

Santiago: Yeah. It’s very cool. You go with a . . .

Andrew: What did you realize about yourself from peyote?

Santiago: I used to think that happiness was a goal, and I realized happiness is a goal like . . .

Andrew: The path.

Santiago: The path. So I’m not pursuing happiness anymore. I’m living in happiness.

Andrew: So the previous you might have said, “This interview is a path towards helping my next business, which will then be big and then I’ll be happy.” Now you’re just saying, “I’m going to enjoy this interview with Andrew.”

Santiago: Exactly. I’m going to enjoy the path.

Andrew: And peyote just gave you that realization instantly?

Santiago: Yeah, it was amazing.

Andrew: Really? Were there any weird effects? Did you throw up? What?

Santiago: No, you hallucinated a lot. It’s really personal. But it’s really cool because you’re walking on the desert for three days with a [marakame 00:12:55]. Marakame is like a shaman. And you go . . . it’s called peyote hunting. So you’re grabbing peyote and . . .

Andrew: Oh, as you’re walking through the desert?

Santiago: Yeah, for three days.

Andrew: What is peyote?

Santiago: Peyote is like a cactus.

Andrew: Oh, got it. So you’re this cactus and you’re eating it?

Santiago: Yeah. You gather it in a bag, and then on the night you make a fire. It’s called fire pit. Then you go in a circle with marakame, start praying, and sing. Then you eat them and you get a very cool effect.

Andrew: Really? Are you Catholic?

Santiago: I was born Catholic, but I don’t . . .

Andrew: So the prayers don’t kind of freak you out. It doesn’t feel a disconnect?

Santiago: No, they’re real Catholic prayers, like more indigenous prayers. Mexican indigenous prayers.

Andrew: Wow. This was recently?

Santiago: Yeah. It was like eight months ago I think.

Andrew: You know what? I can’t believe that we’re not doing something like that. I’m here with Devon Meadows. He’s manning the camera and the mic. He’s got freaking five different mics. Backups on backups. I can’t believe the two of us aren’t doing something fun like that, like sleeping in the desert. I don’t think I could go peyote hunting. Don’t you think I’m a little too intense for it? I think.

Santiago: But it’s not . . . it’s a trip into yourself. So you’re going to see yourself.

Andrew: What if my trip into myself is even more intense and everyone is like, “You’re crushing my buzz”? But I would like to sleep out under the stars.

Santiago: It’s amazing. It’s amazing, amazing, amazing, and I really like it.

Andrew: All right. I do love this country a lot, so I get it. Coming back for people, there some people going, “Dude, I came in for entrepreneurship. Get back on track.” You know what? This is the track. The track is the path of becoming a person, right?

Santiago: Exactly.

Andrew: This is it. If you’re looking for just the facts, go look at Wikipedia. You then got your site, got your product, everything looked good. As a designer or somebody who cares about the details, were you proud of the first version or did you feel like . . .

Santiago: No, I hated it. I destroyed the first version and then reinvented myself.

Andrew: You didn’t even publish it or did you publish it?

Santiago: No, we published it, but I hated it.

Andrew: Were you dating someone and you were a little embarrassed to show?

Santiago: No. At the beginning, it was functional. But as you get more used to e-commerce and do more benchmarking and compare yourself to others, you say, “This is garbage.”

Andrew: You eventually redid it.

Santiago: Yeah, everything. But that’s about technology. When you have an entrepreneurship on technology, and I’ve never been an entrepreneur on anything else, you always start changing it and you never stop developing.

Andrew: I get it. But as a designer, someone who could appreciate design to put something out that’s not up to the level of your tastes has got to be painful. But you’re saying, “Look, maybe it wasn’t painful at first, but it got more painful. And regardless, I grin and bear the first version because we know we need to iterate.”

Santiago: Yes. We needed an MVP. We needed something. So we got something fast. I think it was okay. And then at the time we started making arrangements and evolutionary.

Andrew: Okay, now it’s on you to get PR. When the company does PR, is it you?

Santiago: I did. I did a little commercial part of the company. My business partner did all the financial part of the company.

Andrew: Okay. So you’re out there getting PR. You hired a PR agency. Is it expensive to hire a PR agency?

Santiago: No. It was like $1,000 a month.

Andrew: That’s it? Oh, that’s fantastic. And it worked?

Santiago: Yeah, it worked a lot.

Andrew: It worked a lot. What did you get? What kind of press?

Santiago: A lot of press. You can find it online. Because we had a product at the time was very interesting for the pricing.

Andrew:Because?

Santiago:Mexican design. So we have all this content about Mexican fashion or Mexican furniture. So we had that type of content. Then we were one of the first Mexican e-commerce come to Mexico. So we had all this e-commerce vibe and Mexico was hard on e-commerce at the time. So we had these two worlds combined. So we got published in design magazines and entrepreneurship magazines. So we got the disco mix.

Andrew: Yeah, and I kind of feel like also the fact that you got funding added some credibility.

Santiago: Exactly.

Andrew: Right? It’s not like a dime a dozen whether every entrepreneur has funding and every entrepreneur has as a software company. So you got a lot press. Was there one you were especially proud?

Santiago: Yeah. You can watch it online. We did a launch, like a product launch, and we did like a popup store with boxes. So we didn’t have money, so we did, “How can we do a popup store with the less money I can?” Because I have 100K for my light business, so all the boxes we used to ship the products, we did a . . .

Andrew: You stacked them up.

Santiago: Yeah. I did walls and we mount a full store with boxes and we did an opening. That was very proudly done. TV press and media press.

Andrew: Did it lead to sales?

Santiago: Yeah.

Andrew: It did?

Santiago: Yeah.

Andrew: So people were actually going back to your website?

Santiago: Yeah. And we did it like an [omnichannel 00:17:54] strategy. People went to popup shop. They bought them. We’d send them to their houses with a coupon, with a discount, and they went online and bought something more.

Andrew: All right. Let me talk about the second sponsor and then I want to ask you something that is a little sensitive. I’ve been wondering about it.

First sponsor is a company called Toptal. You’ve had an experience with them. This is the company that if you’re looking to hire developers, you go to them. And since I’ve got a weird voice, I’m going to say toptal.com. Why did you go to Toptal?

Santiago: Okay. So for my second venture, [inaudible 00:18:27], it’s a SaaS system, we were having trouble finding developers in Mexico. So we tried to find somewhere else around the world and we reached Toptal. They had an amazing customer service. We did all the process.

Andrew: The process means they want to understand your business, the software.

Santiago: Yeah. You contact them. They understand what do you want to do. They find you the right people for the project and they make a quotation of more or less . . .

Andrew: How much it would cost to hire them.

Santiago: But it’s personally because it’s an hourly fee.

Andrew: Right. And I think you can even hire from them on a weekly, monthly basis. But you’re right. Ultimately it comes down to how much time do you need from them? And did you end up hiring from Toptal?

Santiago: No, I didn’t hire them because the Latin America costs are three times cheaper than the U.S. and European costs. So for us, it was too expensive and we managed to hire people from Argentina and Colombia.

Andrew: And you guys, you have fund investors in this company?

Santiago: Yes.

Andrew: And your investors said, “We’d like you to go and hire . . . ” Did they want you to hire your own people or did they want you to hire your own agency?

Santiago: No. We started with an agency because they don’t know about technology. So we found an . . .

Andrew: Your investors don’t know about technology?

Santiago: No.

Andrew: Oh, so they said to you, “Look, don’t go to Toptal where you can hire individuals. Hire an agency because they at least will know all the technology.”

Santiago: Exactly.

Andrew: And Toptal actually says that to people all the time too. “If you don’t know the technology you’re better off not hiring us. If you do and you need somebody to come in, hire us.”

Santiago: But if I could go back in time, I will hire Toptal instead of an agency.

Andrew: Why?

Santiago: Because it’s better to control your own . . . so when technology is your core business, you need to control your core business. So an agency, it’s useful when you need a special project or something additional to your main business, but you need to control your development team. So I would do it with the . . .

Andrew: And have the team of people . . .

Santiago: Exactly.

Andrew: Right. Got it. I would say this, for anyone who is listening to me, I talk about Toptal all the time, but I also make sure to say it’s not right for everyone. It is a little bit more expensive than other places where you can go find freelancers. Many people are pleasantly surprised because I talk of how good Toptal is. And so, they say, “Wow, actually, it’s not as expensive as I thought.”

But I don’t ever want to give people the impression this is the low cost option. This is the best of the best developers. You’re going to pay a little bit more for them. You’re going to more than a little bit more, but you’re not going to pay as much as if you lived in San Francisco and hired San Francisco developers. Not anywhere near there.

And there is a process where they get to know you, and you get to know them. And if you don’t want to hire, you don’t have to.

If you decide to hire, you get 80 hours of Toptal developer credit when you pay for your first 80 hours, in addition to a real guarantee that I want you to go check out when you go to the toptal.com/mixergy. That’s where you get the 80 hours. That’s where you get details on that guarantee. That’s where you get to see my pretty face. Toptal.com/mixergy. I’m grateful for them for constantly sponsoring us.

The name, locald.com. I kept pronouncing it as . . . I was I think even talking to you in preparation for this trip . . . as Locald, but no. Was that an issue?

Santiago: Okay. Yeah, that was an issue but the problem is in Spanish, when you pronounce it in Spanish . . . I’m going to do it in Spanish, people. It’s called “Local de.”

Andrew: Local de. Because D is “de.”

Santiago: De, it’s a . . . what is it called when you . . .

Andrew: Contraction.

Santiago: Exactly. So the idea was Local de Zapatos. It was like, you know, Local de . . .

Andrew: Oh, got it. The local shoes.

Santiago: Exactly.

Andrew: Local furniture.

Santiago: So in English, if I translated, it is local of shoes, local of T-shirts, local of furniture. That’s why it’s called Locald.

Andrew: Why did you do Local, and it isn’t de, D-E? But you . . .

Santiago: We did only a D for . . . I don’t remember. We got a naming problem. It was . . .

Andrew: You did?

Santiago: Yeah, we were trying to change the name and all that stuff.

Andrew: Believe me, I got an issue with Mixergy. Everyone says, “I love Mix Energy.” I go, “Wait a minute, Mix Energy maybe is an energy drink.”

Santiago: Naming is so important, but you end up . . . I want to make a parentheses for people. Naming is very important.

Andrew: I would say actually clever names are not as important as clear names. What I would probably do in the future is call up a credit card company and when they asked me what my name is I would just say, “My name is . . . ” and then give the company name and see if they could repeat it back, right?

Santiago: Exactly. Something that sticks to mind.

Andrew: Right. Just do it like a random, call up a credit card company say, “Hey, I’m checking on the application for Mixergy.” “What?” If they say “what” a couple of times then I know it doesn’t make sense.

All right. You are trying to get some customers. You also went in person and you sold.

Santiago: Yeah.

Andrew: How did you do that?

Santiago: Okay. On the first year, we were getting some customers. We didn’t know much about digital campaigns and advertisements. So we started going to the bazaars so we can get new customers and new designers at the same time and start to understand the feeling of the customers towards our product.

Andrew: Because when you watch somebody look at your product, you see when their eyes light up and you see when they’re not interested. Okay.

Santiago: Exactly. And you can know why they wanted the product. So we discovered that mainly they brought our products for gifts. It’s like, “Oh, this pot is so cool,” or, “Look at these rhino shoes for my mom.” Something like that. So we made a gift section.

Andrew: Because you saw that a lot of people want to buy stuff as gifts. Okay. So you starting to pick up on what people are excited about. Were in-person sales significant?

Santiago: Exactly.

Andrew: It was. It was becoming a bigger part of your business than the online part.

Santiago: On the first year, yes, and then it changed all over online.

Andrew: Did any of these people who bought from you in person end up going to the store?

Santiago: Yeah. A lot of them.

Andrew: You did that whole coupon thing?

Santiago: Yes.

Andrew: You did?

Santiago: Yes, a lot of them.

Andrew: How was Magento for you as a platform? Issues?

Santiago: No. Actually, we did quite well with them. We used the free version and then we bought . . . what’s it called?

Andrew: It’s like a support pack. They don’t even need a license, because it’s open source.

Santiago: Exactly. But you can buy like . . . I don’t know if you want to do discounts or something like that. You can buy the extension and then you put it on your Magento store.

Andrew: Right. It’s a wonderful platform that I think in many ways was overshadowed by Shopify. A store like yours might start today on Shopify and then move over to something else, right?

Santiago: It’s because Shopify is cheaper. You don’t need so much development team. So that’s why Shopify is easier if you’re starting an e-commerce site.

Andrew: You know what? I’m about to shift over to Facebook ads, but you’re going to tell me that you weren’t experts at Facebook ads. You didn’t really know it. You were just kind of figuring it out because you heard it was good, which kind of brings me to Mexico.

In the U.S., if I didn’t know whether Facebook ads were right for me, I’d go and find somebody who did Facebook ads and I’d talk to them about it. I would go and talk to someone who’s built their business on Facebook ads. One of the things he told me is a challenge in Mexico is there isn’t that ecosystem.

Santiago: No, the entrepreneur in tech businesses ecosystem is quite new. I think it’s . . . I’m going to throw a number but I think it’s 10 years the most. Okay? So it’s quite new. [Inaudible 00:26:08] was six years ago.

Andrew: So that means it was really fresh. So you are saying four years into this whole startup thing just kicking off in Mexico, you’re starting up. That’s not enough time for unicorns, billion-dollar companies to come up. That’s not enough time for somebody to become the Facebook ad wizard who built a business just on Facebook the way that maybe Wish did and they can now support the ecosystem. You didn’t have any of that.

Santiago: No, it was very few entrepreneurs at the time. Right now is a different story, but at the time there was very few information. There were very few VC funds in Mexico, so it was starting.

Andrew: What’s the difference between having somebody local that you can go and have coffee with and go hangout at their house, which honestly, now that I live in San Francisco, I get to do that. But what’s the difference between that and doing like a Skype video conversation or talking to them on the phone? Is that enough?

Santiago: Yes, it could be enough, but the problem is the access. So how do I access the San Francisco entrepreneurship environment that I think is the most developed in the world?

Andrew: As opposed to you just being in it and when you . . .

Santiago: Exactly. It’s easier. If you go [inaudible 00:27:16], maybe 10 of the 8 people you’re in are entrepreneurs in tech businesses or something like that. It’s easier than approaching them by LinkedIn or like, “Hello, I’m a Mexican entrepreneur. I need your information.”

Andrew: Right. You know what? I did have this interesting experience in San Francisco. I don’t love living in San Francisco. I would move out if my wife let me. I swear I would move out to so many different places. Washington, D.C. is my favorite.

But one of the things that I recognize is, one time Tam Pham was working with us at Mixergy, went out to lunch with me, and as we were walking back into the office I said something about cryptocurrency and I’m not really sure about it. And sure enough, this is no lie, and it’s not like an unusual random experience, the guy was walking right in front of us, looked at us . . . and this is when crypto was really big. And he said, “Funny you guys are talking about cryptocurrency. I love it. I’ve been in it for a while.” And he was like evangelizing it.

Santiago: That doesn’t happen in Mexico.

Andrew: And then he came over scotch a different day. That’s what you’re saying you don’t have. That’s the downside of it. And I’ve always wanted through Mixergy to create an environment where this moved beyond where you don’t have to anymore live in the U.S. to get to watch U.S. television or to even get U.S. food and all that, but you do still have to live in the U.S. to get all kinds of access.

Santiago: Yeah, that would be amazing. If there’s like a community or something that you can reach out to the world . . . because everything you’re doing, most businesses has already been done by someone around the world, right? The problem is reaching out to them.

Andrew: So you’re figuring this stuff out. How did Facebook ads go for you?

Santiago: For me it was amazing. My product was so visual, so Facebook display for me was very good. It was very cheap. I got a . . .

Andrew: And it worked.

Santiago: It worked very well. My customer acquisition was really good.

Andrew: We’re both kind of distracted because, Devon, you’re checking in. Can we get more time to stay in this room?

Devin: We have 10 minutes.

Andrew: Ten minutes? And then is there another conference?

Devin: It’s in an hour. We can move but I’ll need 20 minutes to set up in a new room.

Andrew: Okay. And I’m worried about your time. So let’s see if we can go through just . . .

Devin: She’s going to tell you really quick.

Andrew: Okay, let’s do it.

Devin: Let’s see if you can stretch in.

Damaris: Hi. Hello.

Andrew: Hi. Sorry. We’re going much longer because I wanted to spend time before we started.

Damaris: Yeah, the thing I was telling him is Andrew only told me about one hour. I only could extend this for 30 more minutes. And the room is booked for someone else in the next seven minutes. So I don’t know if we can just re-set up or do something else in a different room.

Andrew: How’s your schedule look, Santiago?

Santiago: I don’t know.

Andrew: You’ve got a meeting, right?

Santiago: Yeah, but I can meet you tomorrow to continue . . .

Andrew: Let’s see if we can go through this in 20 minutes.

Santiago: Okay.

Andrew: Okay. Twenty, would that work for you? Oh, you’re saying no to . . .

Damaris: Yes, but the room is booked by 10:30.

Andrew: Oh, so you’re saying we only have seven minutes here?

Damaris: Yes, in this room. I mean, you can find another one.

Andrew: You know what? If we can, would you be able to do it? No, you’ve got to go to your meeting because it’s a client meeting. Okay, so we’ll do tomorrow.

Santiago: Yeah, I’m free tomorrow, so I don’t have . . .

Andrew: All right. We’ll finish up this part and then we’ll do that. Thank you. All right. I think we should leave that in. You know what? I always take longer because I want to go before and prepare, and I can see that that’s an issue.

Meanwhile, you’re doing all this right. Your business is growing. What was the growth rate?

Santiago: We were growing 50% year by year. But we started . . . I don’t remember the numbers but first year, we sold like to $100K. By the third year we were selling $500K to $600K a year.

Andrew: Okay. That’s actually really good growth rate, but you got venture capital behind you.

Santiago: Exactly. That’s not so good for venture capital.

Andrew: And when you went to them, what did they say?

Santiago: That we needed to expand the track record of sales, that it wasn’t enough because they are investing to the next billion-dollar company. So it wasn’t enough. The growth wasn’t enough for them.

Andrew: Okay. So why don’t we put a pin in the story right now? Because then you had to do something that maybe wasn’t the right move, and it seemed like it at the time. As I was listening to you reading your story, I felt like that’s the right move, but in retrospect, maybe not.

Let me think. We’re going to come back and record tomorrow. We’ll piece this together. The woman who just heard, her name is Damaris. She is with 500 Startups. This whole thing would not have happened if not for 500 Startups. When I was reaching out to people, I had no clue about Mexico City entrepreneurship or any of it. And another Santiago, Santiago who runs 500 Startups here locally, said, “Andrew, we need to do this. We need to support you in doing it.” They got us this space. I asked for an hour, they got me an hour and a half, and even that wasn’t enough, which is why we’re moving. They also put me in touch with a bunch of entrepreneurs. They helped me understand the ecosystem. And I am incredibly indebted to them for being able to do this for us. And that’s why we’re in this space.

Santiago: They are one of the biggest or oldest VC funds in Mexico. So if you want to be someone in Mexico, you need to go through them.

Andrew: Wow, I had no idea that they were that powerful.

Santiago: Yeah, I think they are an accelerator or, you know, like . . .

Andrew: Yeah, I know it. I’m right down the street from them. I invested in one of the companies that they backed and went into their office and it was a cool spot. But frankly, there are tons of them in San Francisco. All of them have cool spots. Here, I didn’t realize how impactful 500 Startups was. And it helps to have that. And this is the kind of thing that you’re saying you could use more of, more places like these that bring up new entrepreneurs, that you can talk to them, you can work with them, you can hire some people.

All right. We’re going to pick this up tomorrow. My voice might sound a little bit better. You think it’s going to sound better?

Santiago: Yeah, I think you need some tequila and you are going to get well.

Andrew: This might be my tequila voice.

Santiago: But here in Mexico we are partying all day long, so welcome to Mexico.

Andrew: I haven’t had tequila yet. All right. Thanks, Santiago.

Santiago: Thank you.

Andrew: We’ll finish this up tomorrow. Thank you.

Santiago: Perfect.

Andrew: Hey, before I get back into the second half of the interview, I am in a cab, just landed back in San Francisco, about to go to the office, and I realized I didn’t tell you about HostGator. They’re the ones who paid the bill and allowed me to fly out to Mexico to do this interview. So I’ll tell you, if you’re looking at your website hosted right, go to hostgator.com/mixergy. They will give you a low price, take good care of you. Wow, my ears haven’t unpopped yet. If you’re looking to change your hosting company, I really urge you to check out HostGator.

And finally, when you’re getting started, start with their inexpensive plan and then build yourself up. Know that they have more options beyond what they show on that webpage, hostgator.com/mixergy. Super inexpensive, works right, and then when you’re ready to grow, they’ll give you other options to grow with them. Always really low price, great service. Hostgator.com/mixergy. Thanks for flying me out to Mexico City. All right. Let’s go back to the interview.

Santiago and I are back for a second day because we didn’t get to finish yesterday. I spent way too much time talking you. I just love talking to you, and I told my wife about that. I said, “I could not stop talking to Santiago. I’m going back.” And she kind of laughed at me for that too. What we didn’t get to yesterday was the pivot. You guys moved from being an e-commerce store to . . .

Santiago: Okay. In order to increase our sales . . . I was telling you about it yesterday. We needed to increase sales fast and in less than a year we needed to triple . . .

Andrew: Triple?

Santiago: Triple our sales. So we pivoted to a marketplace. For that, we go and have a bridge loan of $100k. We spent it all on development.

Andrew: Can I stop you for a second? Do you know how little this is that we’re talking about, considering . . .

Santiago: Yeah, it’s nothing.

Andrew: Like two big punks with nothing but an idea and ended up with $50K from two people and they move on

Santiago: Yeah. We were like magicians with the money. I don’t know how we did it.

Andrew: Yeah. Okay. So you get a bridge loan of $100,000 and with that you’re supposed to do what?

Santiago: I was supposed to do everything. The marketplace, all the . . .

Andrew: You switched to a whole marketplace, meaning no longer you selling your own stuff. Anyone can come on to your platform and sell. We’re thinking like the Etsy of . . .

Santiago: Yeah. The idea was making it Etsy in Latin America, for Latin America product.

Andrew: I like that. Before we recorded yesterday, you said, “Look, I looked around the world and everyone had this crafts marketplace.” In the U.S. it’s Etsy.

Santiago: Yeah, in the U.S. you have Etsy. At the time in Europe you had ASOS Marketplace. ASOS is very big e-commerce site where they opened a fashion marketplace. In Asia we have [inaudible 00:35:43] and in Australia you have [inaudible 00:35:48]. And there was another one in Africa I don’t remember, but every continent had their own crafts marketplace. And I did research in Latin America, and we didn’t have anyone. So that was a spot that we wanted to approach.

Andrew: So you said, “I’m going to do this.” You rebuilt the whole site?

Santiago: Everything.

Andrew: Does Magento allow you to do that? It does, does it?

Santiago: Yeah. It does.

Andrew: Is that what you did?

Santiago: Yes, we did.

Andrew: So you used Magento, this open source software.

Santiago: We bought some plugins and developed some modules by our own and plug it in.

Andrew: I was going to say Magento is really complicated to use. We’re not talking about like WordPress or WooCommerce. But if you know how to use it, it’s powerful.

Santiago: It’s very powerful. You can do everything.

Andrew: And your CTO, the advantage he had was about a decade of creating something like this.

Santiago: All in Magento. He only specializes in Magento. He doesn’t know anything else. He doesn’t know he doesn’t know how to do anything else.

Andrew: And it was up and running?

Santiago: Yeah.

Andrew: How did you get these stores to sell it to you?

Santiago: Okay. So these are two very cool stories. So the first one is I have very few money left, like $5,000 or something, for marketing. So first I needed to gather a lot of designers. So I did an analysis with my current designers and asked them why they weren’t employed in a design company or something. And the common answer for everyone was, “I want to be my own boss”

Andrew: Okay.

Santiago: So with that, we made a campaign that was be your own boss, do your own time, all this stuff. And it was a huge success. We managed in 4 months from having 150 designers to 1,000 designers.

Andrew: Where did you run this campaign?

Santiago: We ran it exclusively on Facebook.

Andrew: Facebook? And you knew that they wanted to be their own bosses because you had private conversations with them.

Santiago: Exactly.

Andrew: You just went to the people who you wanted on your platform. You said, “Why aren’t you doing this? What are you about?” Got it, you understood it. You ran this. You had 1,000 people, 1,000 merchants to set up a store on your platform.

Santiago: Yeah, in four months. No, less. I already had 100 when . . .

Andrew: The 900 in 4 months. Dude, that’s a lot. Okay.

Santiago: It was amazing. It was really good success. But at the time we had another problem. I didn’t have any money to market the product and to grow sales.

Andrew: Right. So now they’re on their platform and they want to get sales. People sell on Etsy because that’s where the customers are.

Santiago: Exactly.

Andrew: They’re not selling on a platform where the customers aren’t. You had to go out and find the customers. What did you do?

Santiago: Okay, so I had a money issue. So I realized, “Okay, right now I have 1,000 designers. How about if I managed something so they can pay for my marketing?” So I designed a product or a scheme where they gave me money. They started with $100 per designer for a month. And with that, we managed to do co-op campaigns. Now I’m going to ship all their brands through my store.

Andrew: They’re paying you every month. You use that money to promote them on your platform, which brings more people into the platform for them and some of them will discover the whole platform. That’s brilliant.

Santiago: Yeah. That kept us going for a year approximately.

Andrew: How many people paid, roughly?

Santiago: Like 40%, I know.

Andrew: Forty percent?

Santiago: Yeah, more or less.

Andrew: Wait, wait, wait. So we’re talking about 1,000 people. That means 400 people paying you $100 a month?

Santiago: No, less. Sorry, like 30%.

Andrew: Thirty percent? That’s still a lot.

Santiago: Yeah, it was a lot.

Andrew: That means 300 people paying you $10 a month.

Santiago: It was $30K a month. Yes.

Andrew: That’s fantastic for this new thing.

Santiago: Yeah. The only problem that we had was . . . because automated platform didn’t cover the marketing platform, so all the reports, all the reporting . . .

Andrew: Oh, right. Magento was not creating software to help you, Santiago, figure out what to pay your merchants or how effective the ads that you run . . . got it. So they just had to take on faith that the ads were working.

Santiago: And so, it worked for a time and then we did some manual reports on the development of the campaigns. But at the end, we couldn’t grow that side of the business and we couldn’t maintain it, so that’s why . . .

Andrew: That’s not promising enough that you could get 1,000 merchants on the platform and 30% of them convert to paying $100 a month? That’s not enough for you to go back to investors and say, “I have something”?

Santiago: No. It was a mix of both things. One thing was the track record. We managed to sell $1 million that year on sales.

Andrew: Which I understand in Mexico is really hard. I was just talking to the founder of Connecto.

Santiago: Yeah, it’s really hard.

Andrew: People who don’t have credit cards . . .

Santiago: Exactly.

Andrew: Were you using them for payment processing?

Santiago: I used it at the beginning, but in Mexico, we have a fraud industry. So I changed from another payment platform that helped me. They have an insurance policy, so if you have the chargebacks . . .

Andrew: Okay. Still, that’s a lot of the payment in a place where people are not super excited without credit cards and buy. Okay.

Santiago: And then also the factor that . . . we did manage to have another Series A. It was two factors. The environment of VC in Mexico changed from e-commerce at the beginning for FinTech. So VCs at the time . . . this was two years ago, one and a half years ago. They weren’t interested anymore in e-commerce unless you got a super hyper-successful platform that . . . we had a successful one, not a hyper-successful one.

Andrew: Right. They went from being excited about e-commerce to going, “Ugh, e-commerce. You have to be a huge windfall for us to care.” Got it. Okay.

Santiago: So I think that got us killed, the timing. I think it was about the timing. So we had to close our . . .

Andrew: I cannot believe that that kind of growth rate wasn’t enough to excite them.

Santiago: Yeah, it wasn’t enough.

Andrew: I asked you what you took away from this. One of the things that I thought you were going to say . . . well, you tell me. Was it worth it?

Santiago: Yeah, for me, chasing your dream and making what it wants is totally worth it. The ride was amazing. The learning of being an entrepreneur, you need to create everything. So I think the skills that you develop . . .

Andrew: Yeah. The skills you develop there as an entrepreneur are better than the ones that you developed in Oracle.

Santiago: Exactly. You don’t get it at a company. So I think I will do it again.

Andrew: You would? And you will, and you are.

Santiago: I did it again.

Andrew: Before we get into what you’re doing next, do you remember the day that you knew, “This is it. I’ve got to close this down”?

Santiago: Yeah.

Andrew: What was that day?

Santiago: It was actually in December.

Andrew: December of what year?

Santiago: 2017.

Andrew: Okay. So about a year and a half ago?

Santiago: Yeah, exactly. We went to all the roadshows, [funds 0:42:49] in Mexico, some funds in Latin America. We didn’t manage . . . we didn’t have any money. My ex-partner and I put some money from our own pocket to maintain it a little more. We couldn’t handle it anymore and we decided we needed to close.

So in December, we decided to close, but the process of closing a company is not from one day to another. So we started the process. That took us like four to five months to pay all the designers, know all our employees. We needed to put all of our money . . .

Andrew: Really?

Santiago: . . . to this process.

Andrew: How much money did you lose on this?

Santiago: I was like $15K.

Andrew: Fifteen thousand U.S.?

Santiago: Yes.

Andrew: Okay. All right. Not that bad.

Santiago: No, because we had very healthy financials. So I didn’t lose a lot of money. It was mainly paying designers because we used the sales money for campaigns. That was . . .

Andrew: Got it. Let’s talk about what you learned from this and then go into what you’re doing next, because you’ve got this new project and you’ve got a beta. What did you take away from it?

Santiago: What I took away and what I think I learned is every time you have a company, regardless of the size of a company, you have limited resources. You have limited money, resources, and limited people resources. So what I learned on this experiences is we pulverized resources. We tried so many verticals. We pivot from one business to another business.

Andrew: You’re saying from fashion to furniture to jewelry, like all these different things, from e-commerce to market. Got it.

Santiago: If you see all the lifespan of the company, we have $250K. That’s nothing.

Andrew: So with limited resources, time, and especially money here, what did you learn about that?

Santiago: That you need to focus on one thing first, one vertical, one product, and you need to perfect it and you need to learn the client journey and know exactly how to commercialize it, what your client needs. And once you understand all the process, you’ve been able to escalate this product, then you can start growing other verticals are byproducts or something like that. You need to stay focused on one thing and be very lean about it.

Andrew: That was the one thing I took . . . I spent a lot of time thinking about yesterday and that’s the one thing that I took back from it too, that there’s this need to just stick with one thing, especially when you have the limited resources, and just build it up and adjust it.

And it did seem really impressive that you were able to handle fashion, furniture, jewelry, explain it on your website clearly, in your tweets, which I saw which were beautiful, find photos that made sense, explain it all to your investors and to your customers, and then shift the marketplace, explain this whole thing. And the ability for you to get the money out of your merchants to get marketing dollars for your business, that was the genius thing that I found amazing about you. You kept pulling these rabbits out of your hat, this extra magic trick. I think I got it.

Santiago: Yeah, it was a lot to process. I think that was our mistake. It was too much for everyone.

Andrew: So this new business, it’s called Yoin App. What is it? I couldn’t find anything about it.

Santiago: Okay, it’s very secret.

Andrew: Can you say anything?

Santiago: Yeah, yeah, yeah. I can say. I can tell about the product, but it’s very secret about the funding and all the stuff. We don’t have much of it. It’s a software for . . . I don’t know how to call it.

Andrew: For condo management?

Santiago: For condo management, exactly. An app for business so they can administrate all the things in a building. It’s for buildings.

Andrew: Got it. By condo, you mean people who own their apartment, own their building? No?

Santiago: Who live in a residential house.

Andrew: Okay, tenants of an apartment.

Santiago: Exactly. In Mexico, it works different than in the U.S. So these are for tenants or people are renting and they’re living in a community.

Andrew: And tenants can do what with this?

Santiago: They can pay their rent. They can pay maintenance. They can book the amenities of the building. They can communicate with administration. They can pay for third-party services. They can order supermarket. They can order dry cleaning. Everything that’s linked to your home.

Andrew: Instead of going through the person. We were actually at a different entrepreneur’s house, his apartment yesterday, and I could see that there were a lot of people who worked there that if he needed to, for example, allow us to shoot video on the outside pool, he had to ask somebody. Who? He wasn’t even sure. Someone with a tie came over and said, “You needed to ask someone.”

Santiago: That’s the problem. We tried to digitalize all of this process. So if that building had joined, it’s only about two clicks.

Andrew: Just opens the app. Says, “I need to do this.” Somebody gets a message. They say yes or no. Got it. And we’re good. And that’s a new thing. Would you continue to build your business here?

Santiago: Yes. I’m planning to move to U.S., so I’m . . .

Andrew: So if the opportunity comes up, you will move to the U.S.?

Santiago: Yes.

Andrew: I also get the sense that if you could build a company in the U.S., you would take that opportunity too.

Santiago: Yeah. For sure, I would.

Andrew: Because?

Santiago: Because I think the U.S . . . I think we have more opportunity in Mexico because it’s . . . I don’t know if it’s right to put this in English, but it’s like a more virgin market.

Andrew: Yeah, white space. It’s just a lot of space to draw.

Santiago: Yeah, you have very blue ocean, you know? We don’t have a lot of technology. It’s a lot of opportunity. But I think in the U.S., it’s a very more mature market.

Andrew: And there is more infrastructure.

Santiago: Exactly. And if you have an idea, you can find so many people that already have done it or have thought about it. And I want to learn about that ecosystem. You know, I think I want to spend some years there learning about their ecosystem and that maturity and then try to bring it to Latin America.

Andrew: You know what? I don’t get political about stuff to the point where it frustrates people, like my wife. I should get into political conversation. I don’t care about it. Here’s one of the few issues that I do care about. I feel like the U.S. is missing a big opportunity by not saying, “Hey, there’s a great entrepreneur here with a track record. We should find a way to kidnap him almost and bring across the border.”

And if not kidnapping, how do we just lure him over? We know if he, hamstrung, was able to do all this in Mexico, if we let him loose, he could do something really amazing. And if he doesn’t, what’s the worst thing? He ends up with a job that then contributes to your economy?

I feel the one country that was doing this in a promising way was Chile. And I’m going to fly to Chile next and I want to understand what happened when Start-Up Chile started to lure entrepreneurs to Chile. Did it work out for them? Did they have the infrastructure to support them?

Santiago: In Mexico, it’s happening a lot. There are a lot of foreigners coming to make startups here in Mexico. So a lot of Mexican startups are from foreigners, from expats from a lot of countries. So I think that’s a common thing happening in Latin America. They’re bringing talents from other countries to build companies here.

Andrew: All right. If people want to connect with you, what’s a good way for them to connect with you?

Santiago: I think my email or my LinkedIn.

Andrew: What’s a good email address for you?

Santiago: It’s cepedares@gmail.com or my LinkedIn is Santiago . . .

Andrew: We’ll put the links to it.

Santiago: Yeah. Exactly.

Andrew: All right. I was wondering about that. You name is Santiago Cepeda, but when I looked you up on LinkedIn, it was Santiago Cepeda Restrepo?

Santiago: Because in Latin American countries we have two . . .

Andrew: Two last names.

Santiago: Yeah, mother name and father.

Andrew: And so, you go by Cepeda. Is that your mother’s name or your . . .

Santiago: That’s my father’s name.

Andrew: Father’s name. So most people go by first name and then their father’s name?

Santiago: No. Yeah. Everyone here in Mexico in your ID you have your first name, your father’s name, and your mother’s name.

Andrew: And then if you have a child, which of your last names do you give them, your father’s name or your mother’s name?

Santiago: Your father’s name and then your wife’s father name.

Andrew: Got it. Okay.

Santiago: But they just approved a law that you can choose.

Andrew: Okay.

Santiago: So that’s cool.

Andrew: Yeah. My wife did that because her parents are hippies and they wanted to honor both sides of the family. They put a hyphen. Confused the hell out of Americans. It was like, “What is going . . . you know what? Never mind. I’ll figure it out later.” All right. Devon, did the camera just heat up on us?

Devin: It’s hot.

Andrew: It is so hot. We’ve been recording so much. I want to thank you, Santiago, for doing this.

Santiago: Thank you for inviting me.

Andrew: We should both thank also Santiago from 500 Startups. I feel like he has got the startup ecosystem of all Latin America on his back.

Santiago: Yeah, he’s a very important guy.

Andrew: He is the guy who’s really helping to invest in the community, create the community. As soon as I said we want to do this, he said, “Come in and use space.” I said, “I will pay for the conference room,” because I know we’re at a WeWork. His people said, “No way. We’re going to pay for it. We want to encourage people in Latin America to build companies. We want to show the rest of the world that we are doing it.” So I want to thank him for doing it.

And I want to thank two sponsors for making this interview happen. The first is HostGator. Oh, I didn’t read the HostGator ad. We will put it in afterwards. I’ll just record it into the mic. HostGator for hosting your websites. Check them out at hostgator.com/mixergy. I’m reading this too fast. Second one is if you want to hire developers, go to toptal.com/mixergy.

I’ve had a runny nose. I’m going to go take some space here before continuing to record. Hit the day hard. And Devon Meadows, thanks for recording this. Bye, everyone.

Santiago: Bye, guys.

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