Supplying Connections

There are millions of entrepreneurs running small retail businesses in Latin America. While they may differ in the types of products sold or specific customers they target, the challenges they face in everyday operations are common. From low credit card penetration to poor visibility into shipping logistics and pricing, the various difficulties often boil down to a singular issue: lack of data.

Brazil-based Inventa has been working to change that. The company’s digital marketplace steps in to fill the gaps left by the outdated modes of phone calls, paper catalogs, and in-person trade shows where much of LatAm retail commerce takes place. Inventa provides a connection point between suppliers and small and medium retailers – creating visibility for both sides –  while also extending credit terms to retailers. Retailers can discover and purchase inventory, and suppliers can easily put up products for sale and monitor sales performance.

“The problems are more basic, but the opportunity is bigger because proportionally this part of the economy represents a much, much larger percentage than would be in the U.S. or Europe,” says Inventa CEO Marcos Salama, who co-founded the company in 2021. Greylock has been partnered with Inventa since their 2022 Series A round, and the firm led the company’s Series B round.

Salama says the company’s strong emphasis on data infrastructure from the outset guided them to focus on suppliers as a mechanism for customer growth. Suppliers bring with them key information about what their retailers are buying, which in turn enables Inventa to recommend similar brands to suppliers to carry. That referral loop has become the digital hub for an ecosystem previously based only on offline transactions, and Inventa has quickly gained traction across Brazil and is expanding into other parts of Latin America.

Salama joined me on the Greymatter podcast to discuss Inventa’s data-driven strategy and its rapid growth, the commerce environment in Latin America, and the broader B2B ecosystem.

You can listen to the interview at the link below or wherever you get your podcasts.

EPISODE TRANSCRIPT

Mike Duboe :

Hi everyone. Welcome to Greymatter. I’m excited today to have Marcos Salama, CEO of Inventa. Marcos is an old friend and someone who we’ve been fortunate to work with at Greylock for the better part of a year.

As context, Inventa is the leading B2B marketplace in Brazil, focused on connecting small retailers with suppliers in Latin America more broadly. Marcos previously was an exec at Rappi and prior to that was at McKinsey. Marco and I first got to know each other when we were students about a decade ago. So I’ve had a long journey and it’s been a real honor to watch you grow over the years, Marcos. So thanks for having this conversation. Welcome.

Marcos Salama:
Super happy to be here, Mike. Thanks for inviting me.

MD:
Yeah. So just jumping into it, we want to spend a lot of time today on Inventa, but more broadly on B2B marketplaces, as well as the nuances of building a high growth startup in LatAm. To get started and set the foundation here, tell us a bit about the founding story behind Inventa and the broader vision around the company.

MS:
For sure. So I come from a family of entrepreneurs and I always had a dream to start a business and to have an impact. And that was what fueled that idea of finding something to solve, finding an idea.

In the past before we met, I actually lived in Europe, I lived in Asia, then we met in San Francisco while at Stanford, but I had a unique view of different places around the world. Europe, Asia, San Francisco. And when I traveled to LatAm I saw that a lot of things that were supposed to happen in the U.S. were not happening in LatAm.

Getting to Inventa now: we set up [co-founder] Fernando [Carrasco] and I, not even two years ago, and we had the dream of helping millions of entrepreneurs thrive. And when we went to talk to friends and raise some money, we had a position that was very special. We were told we were the seventh company in Brazil trying to do this. And now looking back, this was a blessing in disguise. Because of that, we had to be super scrappy, super fast and we built a culture around fast execution, built a culture around getting out to the client first. And that was what kind of bred that fire of Inventa at the beginning.

MD:
Go back to your time at Rappi (and by now it’s pretty widely regarded as a great success story in LatAm). What were some of the insights there or even operating disciplines that you wanted to bring over to Inventa, and I guess essentially what did you learn and want to take from that?

MS:
I mean, I joined Rappi maybe in 2017. It was a small startup in Colombia. I think its Mexico [office] had just opened. And the culture there and the values and execution around putting the customer first, and speed of execution was what really mattered as a company was amazing and contagious. Every senior leader there understood perfectly what they needed to do and why it mattered. We weren’t working to sell more. We were working because we thought hundreds of thousands or even millions of people could have a second income. And that was a clear sense of mission. And you put that together with an obsessive execution or pace of implementation, then you get something wonderful.

That’s something I tried to try to bring over to Inventa because this speed to execution allows you to be wrong really fast and then correct. And that’s something we learned at Rappi. We did a lot of experiments and made a lot of mistakes, but because we were always pushing to be faster, pushing to try things out, we also did a lot of things right because we were able to test a lot.

When I think about Inventa, one of the best things I bring over from my time at Rappi is that obsessive and relentless speed of execution, putting the customer first and trying to iterate and do what’s best for them.

MD:
So, going back to one of the points you made on LatAm and you realizing that the opportunity here was incredibly unique. And as you’ve kind of hinted on, there’s also challenges of building a company out there. When you were weighing those, what gave you that kind of conviction on LatAm (and more specifically, on this opportunity)? When did you know that this was the concept you wanted to build down there?

MS:
So I spent my time at Rappi working with retailers. I used to lead groceries there. And from early on, a big part of my role was talking, negotiating, getting terms out of mid, small and large retailers. And I understood that, typically, they have various problems. One is assortment, one is access to working capital, the other one is logistics.

So my experience in Rappi helped me understand better what problems retail stores had. The more they specialized in, the harder it was to find products. The more boutique or small, the harder it was to negotiate products. So I had a unique opportunity (or I was in a unique spot) to understand a problem that wasn’t obvious, at least for me back then.

And when you put that together and you think about the economy, how it is structured in LatAm: B2C or small stores, small retail represents a much, much bigger portion of the economy that we’re doing in developing countries in the U.S. or Europe. So that sets an opportunity. [There are] millions of small entrepreneurs with no clear access to discoverability of products, no clear access to great prices, and it’s hard to define how to optimize logistics. And that creates a big problem. And we saw it as a huge opportunity.

MD:
Maybe you could talk a little bit more about the status quo for listeners who are not familiar with how local retailers there are actually discovering and buying products. How does it actually work today?

MS:
Yeah, great point. Look, if you’re a small store and you typically buy cosmetics, home decor, small jewelry, clothing, you have a couple options. One, you can go to an antique fair, where you see what’s happening and do it one, two, three times a year and you see the trends. Second is you rely on distributors or smaller distributors who buy from bigger distributors. And typically what they propose is their portfolio of products, and those are the options you have to buy. And finally you can talk to sales reps and sales reps help try to sell you the highest margin product.

So if you’re a small store, it’s really hard for you to try something new. There’s no data, there’s very, very little possibility of discovery because it’s a risk on you. And furthermore, because the suppliers are not willing to risk a new relationship on credit and many of the retailers don’t have a credit card, it’s risky.

So think about it this way, you’re a small store, you have a commercial relationship with a distributor, a sales rep, you don’t have any data on what products are selling somewhere else. And if you want to try something, you need to pay upfront and you’re not sure what prices you are paying. So you put that together, it’s a complex problem to solve and it’s a complex operation to be in as a small entrepreneur.

MD:
And so you’ve looked at models that have worked in other geographies. I think Faire, obviously, is one example of one that’s doing well in the U.S. and in parts of Europe, where it feels like to some extent the potential margin structure in these businesses and the financing and credit options are proven out. And that’s kind of a canonical example of what people go to as a leading wholesale marketplace. LatAm is different, and you kind of hinted at a couple of these reasons.

MS:
Yeah, 100%. Look, when you think about LatAm, you have to think this way. It’s a more complex setup in many ways. I think about credit – most retailers in LatAm don’t have a credit card, particularly in Brazil. Think about logistics. Brazil’s a huge country and you don’t have a single player that can cover the whole country. It’s dozens of transportation logistics companies that specialized in different routes or different sections or even different smaller geographies. And the last one is that many of the suppliers or the retailers today are managing their business with pen and paper. So they’re not as used to buying or selling digitally.

And you put that together, you need to solve more problems. So you mentioned Faire – amazing business they built in Europe and in the US and Europe. I think the Unco store in Europe is also doing really well. And there’s a couple in Asia. But LatAm, I think it’s much more similar to what would be Asia than would be the US because of the infrastructure flaws that the economy has.

So as such, when we think about building a solution for LatAm, we need to build more things. We need to build a credit model grid engine that helps us serve our customers. We would’ve loved to work with any buyer for LatAm, but at the time we didn’t have anybody who was suited for this. We had to build commercial relationships with dozens of logistics companies and we had to work with small brands that were not digitized to help them start selling online. So I guess the problems are more basic, but the opportunity is bigger because proportionally this part of the economy represents a much, much larger percentage than would be in the U.S. or Europe.

MD:
You look at the assortment of products on Inventa right now where maybe you’re dealing with a much higher volume of lower margin products. How do you actually work around that? How do you make the business work with a dynamic like that?

MS:
Yeah, great question. So discoverability is the key problem we’re trying to solve. And when retailers buy different products every time or discover new products with you every time, then the value you generate as a marketplace is increment. And that’s the key. Even though we might not sell expensive candles, we might be selling cheaper cosmetics, because it’s either boutique or specialized or regionalized. When we open that up to all of Brazil or all of LatAm, then we create an an incremental sale.

And this is all about how we think our marketplace scales and why we think there are opportunities in it. Because reaching those connections between smaller suppliers and smaller retailers adds a tremendous amount of value to the system. We are, I would say, greasing those transactions with credit, with better operations, with better customer service. For us, for smaller retailers, customer service is key and we believe it’s part of our nature to be able to help our retailers in whatever problems they have today.

MD:
Yeah. Well, let’s shift gears a little bit and talk about growth and the story of how things have grown so quickly there. I think one of the things that makes marketplaces really challenging is the typical kind of chicken-egg problem and getting one of these things off the ground, and then going and building initial liquidity either within a category or across multiple categories.

MS:
Yeah, so in the early days of Inventa we closed our seed series with great local funds and, as I told you before, we were late and we were the seventh company out of seven trying to build it. So we understood that speed was essential.

What we used was off the shelf platforms to launch really, really fast. And in terms of supply and demand, because of my experience or team’s experience in actually building sales forces, we were able to bring on board a very strong team really quickly. And we focused on supply. We understood that there’s a chicken-egg problem, but initially we were supply constrained. So we built a team really fast, people who had worked with in the past at Rappi in the commercial side and we were really aggressive at closing contracts with I guess dozens or hundreds of suppliers in the first month or two.

And because we used a third party platform, we’re kind of ready to sell in three weeks. And that gives us a huge advantage because the moment we started selling, we started understanding what pain points our customers had versus what we thought they had.

And to your question, that gives us a lot of speed. We were iterating while selling in the first couple of months, but the hypothesis we had about discoverability, about trying new brands, and about credit were correct. Things we weren’t right about were [things like] Brazil doesn’t buy that many candles. It’s not a country which is particularly cold. And there are other categories which are more relevant

MD:
Yeah, well the focus on supply is an interesting one. I think just let’s spend a little bit more time on that because I think one of the dynamics that makes some of these businesses very powerful from a growth standpoint, or sorry, I should say efficient, is that onboarding supply can be an avenue to onboard all of their demand nodes, given that it’s just more efficient to be selling through a digital kind of channel like this versus setting up sales reps. There’s also incentives you could do there, which I know Inventa has implemented. Was it obvious early on that you wanted to focus on supply here?

MS:
So initially we started experimenting with paid media and CO to grow and that wasn’t as effective as we thought it would be. And particularly it wasn’t bringing in quality retailers, right? Retailers who want to stay here in the block for a long term. The rationale behind that we understood is that typically if you could trade it online to people who are looking for credit online, you’re not going to get the best retailers.

But in the next couple of months we discovered a way to grow via suppliers. That was why our growth was strong and very powerful because what we typically see is a kind of referral loop where we give incentives to suppliers to bring in their retailers to the platform. And this is very powerful because we bring those retailers to the platform, we understand what those retailers are buying, and we can also recommend similar brands to those retailers.

So bringing in supply brings in demand because they bring in the retailers, we understand what kind of product are you looking for, we close those brands and we bring more retailers. So supply-driven acquisition was a way for us to acquire at a low cap, a high quantity, and high quality of retailers.

MD:
We talked about acquisition, and obviously there’s other kinds of downstream behaviors you’ll want to see to make sure your marketplace has a healthy kind of dynamic. We talked a little bit about liquidity earlier, but \overall, how do you assess the health of growth?

MS:
Couple of things we’re looking for. For example, in the retailer perspective, the number of brands that retailer buys, discovers, it’s really important for us because it shows that the marketplace is bringing incrementality to the system and that we are creating new notes, as you mentioned before, it’s an operation and where the retailer is discovering brands and typically those brands are high margin. It’s a brand that they sell pretty well and they keep on discovering more.

On the other perspective is the supplier perspective: how many new connections do we make? Every brand that comes into a platform (or a percentage of those products or those brands) are selling in the next 90 days. So if we think about increasing the share of wallets for the retailer and we think about bringing in quality suppliers to the platform, that’s how we think about growth quality.

MD:
Inventa has depth in certain categories, but is definitely cross-category. How do you think about that tension?

MS:
We initially defined two or three categories to start with. It was home decor, cosmetics, and jewelry. We saw that cosmetics were pulling off a lot faster than the others. So we kind of tried to narrow it down to a persona of retailer. So, thinking within the cosmetics categories, what personas of retailers can we better serve? We identified a type of retailer and we made sure that we had the 100 or 300 or 500 brands those types of retailers served.

The beauty is that every time we ask a retailer what other brand he would want to pay with these payment terms or these logistics operations, those customer service, we got referred to new brands. So that gave us a pipeline of new brands. And once we had enough critical mass, we were able to launch, I would say, subcategories, seamlessly, that would serve our existing base. So we weren’t really changing bases because there’s some overlap between subcategories in home decor, cosmetics, healthy food and things like that.

We believe it’s by going deep into categories where we can add more value, but also believe that the power of those signals that retailers give us to define which category should be next, which are very, very indicative of how we should be scaling.

MD:
We’ve had a number of podcasts over the years on this topic and now where we are sitting at the end of 2022, it feels like it’s become more obvious that these models can work in a very big way. And I think some of it is due to enablement from new FinTech revenue streams as we’ve discussed, and also maybe generational change in terms of buyers just expecting more digitally native solutions.

But from where you’re sitting in Brazil in 2022, what’s your point of view on broader B2B marketplaces outside of Inventa? What categories do and don’t they make sense for? How might a new entrepreneur think about building in this space, or think about approaching it?

MS:
Yeah, I think it’s a great question. I think when you think about trade in terms of B2B, the U.S. is going to be 5-10X more in terms of percentage than what happens in Brazil. So 1% to 2% of trade and B2B happens online. Somewhere around, I guess it’s 10.5 to 12% happens in the US. So that simply said, tells us that this is going to happen, it’s here to stay. So they’re all going to be B2B marketplaces in Latin America that really help small entrepreneurs or small retailers, small stores, discovered by and operate. The question is where do we focus on.

We believe that technology that works for us are the ones that have more discoverability. The ones that have smaller brands have different kinds of transactions every time, and that the customer is looking for different products. And so the retailer has to follow suit. We believe those opportunities of B2B marketplaces will be created and that’s why we stand there.

MD:
Yep, got it. And your market is uniquely fragmented. You mentioned the discoverability point (and I guess you, naturally as a founder, are probably not spending too much time thinking about other verticals), but I guess maybe if we have a broader set of insights on one of the things that I think Inventa has done very well is establishing data science very early as a key strategic asset, investing in this function as a real core pillar of the company and the model. I guess, well, there’s a broader question on how that applies to other B2B marketplaces, and is that kind of broad general advice you would give?

MS:
On the data perspective: even from the start we knew data was going to be key. We need it for various reasons. One, we wanted to solve the discoverability problem. And second, we knew we had to build a core solution around credit. So even though we launched off with, I would say, pre-made platform solutions, we always defined an internalized data infrastructure and we’re really thoughtful and worked very hard around that (to the point that very early on, we hired senior data scientists from the U.S.). Danielle joined the team a couple months ago, and later, a large design team made sure that we’re thinking about data the right way. We’re thinking about our infrastructure in the right way. And that I think that over time creates a significant competitive advantage because we are digitizing offline transactions. That data doesn’t exist; that’s not public data, it’s private data. And that allows us to give better recommendations, allows us to give credit where other people wouldn’t be able to. So we think that data’s core capability of the company. We’ve invested in talent both in Brazil and abroad and bringing in world-class quality talent has always been a priority for us.

MD:
Yeah, essentially it feels that the dynamic you just described is that a lot of these verticals are just operating in a very offline way where a lot of this data is not yet been brought online. And so I guess the question for other kinds of founders looking to build B2B marketplaces (or just with curiosity around B2B commerce), how should they think about the criticality of data science versus other functions?

MS:
Your clients have pretty much no data if you’re building a B2B marketplace. So they have digitized, they have either a notebook or a digitized notebook, an excel, a worksheet, and that’s what they used to run their business. If you can build something that’s much better than that – which you probably can – you can fix a huge pain point of what they should be buying, when they should be buying, how they should be selling, how much they should be selling.

So I think for founders who are looking to build B2B marketplaces, making sure you can gather that information, gather that data, making sure you can understand it, and making sure you can present it in an actionable and reasonable way to your suppliers or retailers will add a tremendous amount of value. Because there’s no way for them to access it now and you’re going to be probably the only one who has that kind of access. So I think it’s powerful to think of data from the beginning.

MD:
Yeah. So going back to the talent point, Marcos, I mean, you’ve been able to build quite a strong team on Inventa across different geos and I think you have been very deliberate on the type of culture and operating rigor that you want to build. What lessons might you have for founders that are looking to build teams in LatAm that are working specifically on technology, software marketplace businesses that are thinking of whether they need a based company entirely down there or across geos?

MS:
Yeah, great question. So for us, remote [work] has been a blessing. Because of that, we’ve been able to hire talent we couldn’t get otherwise. We think about a multicultural multilingual company where hyper growth execution is kind of the name of the game. We speak in English and know we want to hire talent from across the world who has the ambition, the willingness, and I guess the intent of building a business that matters.

What we’ve seen is that we can get great local talent, mid-level, junior level, and we’ve gone to the U.S. or Europe to hire senior talent because not only culture, but also expertise matters here. So we’re building a team where we have a very, very strong local talent and we’re cherry picking a couple of great executives from across the world to lead functions where they have their expertise where they would have an impact and not necessarily live in Sao Paulo full-time.

MD:
Yeah. And when you think about having this rapid execution and just quick experimentation and really high operating rigor at Inventa, in my experience, that can be tougher when the team is based across different time zones. How do you work around that point specifically because I have this notion of early stage kind of scrappy, growth-oriented product teams that are just experimenting on a pretty rapid cadence. I imagine that’s harder if you’re distributed and maybe that’s just a trade off you make. How do you work through that point?

MS:
So I think it’s a great question. I think there’s a balance there. As a company, we’re 18 months old and for sure we’re a very young company and part of our team or part of our energy devoted to experimenting, testing, iterating, talking to our customers and trying to figure out what exactly do they want. But because we were very fortunate to fundraise when we did and with the support of Greylock and other great teams, we also can think long term. We also can think about building the foundations technically and to the people or what are the capabilities going to build in house? And that gives us an amazing opportunity because we have this relentless goal.

MD:
Yeah. So I guess wrapping up here, Marcos, I mean as you mentioned, it is a young company, but the growth has definitely been incredibly fast and I think it feels like you are reinventing the team every six months or so, which is true of many hyper growth like startups. And so what plugs me to give right now as you’re looking to build the team, any specific roles you’re recruiting for? Anything that people out there interested in Inventa should know?

MS:
We think we have the opportunity to build once in a lifetime opportunity. Right now there’s millions of small-time entrepreneurs who struggle to discover products, who struggle to buy them. And we think we are positioned to help them and fix that, those issues. So if you work in product, you work in data, you in technology, and you feel that you want to have an impact on millions entrepreneurs across Latin America, I think you should reach out, because we’re definitely poised to try to solve a large problem nobody ever has and to have a big impact along the way.

MD:
Well, Marcos, thanks for the time today. It’s definitely been fun chatting and a reminder that it’s really an honor to work with you. And I think there’s definitely a lot more to unpack here on the dynamics of LatAm in future conversations, but this has been a great conversation and congrats on all the success in Inventa this far. And I’m sure everyone listening has gratitude too. So thanks for taking the time, Marcos.

MS:
Thank you, Mike. It’s been a pleasure.