Marco is a company that has a goal of improving economic conditions in developing places by providing reliable working capital to SME exporters that are underserved by banks. Pulse 2.0 interviewed Marco CEO and co-founder Jacob Shoihet and COO and co-founder Peter Spradling to learn more about the company.
Background Of The Founders
Pulse 2.0 (Amit): Could you tell me more about your backgrounds?
Marco (Jacob): I come from an unconventional background for a FinTech founder, having initially studied classical music. However, I always had an entrepreneurial edge and excelled in sales, hence most of my professional experience before Marco has been in Enterprise Sales/BD/Management. I have more than 10 years of experience in these areas. I started working in sales in Web 2.0 Companies like Yelp and Groupon and then my career evolved to more growth-stage tech companies – I led sales at a North American/Latin American Publisher and drove more than $80M of revenue at Series C computer vision technology company. I have always been very passionate about helping define go-to-market and partnership strategies and build sales teams.
Marco (Peter): I have more than ten years of experience in international trade, coming from a family business that was the largest exporter in Uruguay for more than a decade. As a business owner, I secured contracts with brands such as Newman’s Own, Kraft Heinz, and General Mills. I built and successfully grew my business Organic Food Solutions to nearly $10 million GMV before selling in 2019.
Formation Of Marco
Pulse 2.0 (Amit): How did the idea for the company come together?
Marco (Jacob): Marco was born out of a conversation between Peter and I at the Antler incubator in NYC in September 2019. Peter experienced the SME financing gap in Latin America first hand while trying to scale his exporting businesses. His main pain point was financing – he spent over 50% of his time trying to resolve the pain point, and eventually that constriction on growth led him to sell his business and join Antler. When we met, I mentioned I was working on a federated learning banking software to improve loan approvals and default rates for regional banks. Peter talked about his struggle accessing financing as a LatAm exporter, and we decided to join forces to tackle the problem.
Favorite Memory
Pulse 2.0 (Amit): What has been your favorite memory working for the company so far?
Marco (Peter): After our first year of operations we decided to have an offsite in Montevideo, Uruguay, where now our largest office is located. Back then we were around 30 people, and with Marco being born in the Covid era this was the first time most of the team met in person. One night in particular we had a team dinner, and with Jacob we could see for the first time the scale we had achieved. It was truly inspiring to see the amazing team and culture that we had built.
Core Products
Pulse 2.0 (Amit): What are the company’s core products and features?
Marco (Jacob): Marco is building an ecosystem for SMEs in international trade, with the goal to address all the main pain points exporters face while operating their business and support their growth and expansion to other markets. Our suite of products includes financing tools such as invoice factoring and asset-based lending to improve cash flow and support rapid growth, assistance incorporating LLCs in the US and a total compliance package to cover the compliance requirements such as tax obligations, bookkeeping, etc., and a multi-currency business account with features tailored to international businesses such as favorable FX, cards with no foreign transaction fees, etc.
Challenges Faced
Pulse 2.0 (Amit): What challenges have you and the team faced in building the company?
Marco (Jacob): One of the greatest challenges we have faced is the perception that offering financing to Latin American businesses, especially SMBs, is very risky. This perception stems from historical economic volatility, political instability, and varying regulatory environments across the region. However, this view is often outdated, overlooking significant strides in economic reforms, political stability, and regulatory improvements. Advances in open finance and data availability have also enhanced the ability of fintechs like Marco to accurately assess and manage risk.
We found that the best way to gradually start changing the perception is to take that risk and let our track record speak for itself. Now that we have over $650 million of cumulative volume funded with minimal losses in the single digits bps, and we were able to obtain a facility from large US institutional investors such as MidCap Financial and Castlelake, we are starting to see the fruits of our work.
We are proving that our asset class is high yielding yet low risk, and is uncorrelated with the general market, so more and more credit investors are starting to express interest and looking to gain exposure.
Evolution Of Marco’s Technology
Pulse 2.0 (Amit): How has the company’s technology evolved since launching?
Marco (Jacob): Marco has experienced a remarkable technological evolution from its origins as a purely operational entity. We have successfully transitioned into a technology-driven organization, leveraging innovative solutions to streamline our operational processes and enhance efficiency. A key milestone in this journey has been the development of a robust platform and application tailored specifically for our operations, both for clients and internal use. These technological advancements have significantly improved our ability to ship improvements and new products rapidly, enabling us to stay agile and responsive to market demands. Our platform has become the foundation upon which we build and incorporate new technologies, empowering us to drive continuous innovation and maintain a competitive edge in the industry.
We have embarked on a new phase of innovation focused on expanding our product offerings. In particular, we are leveraging our technological capabilities to develop and launch new financial products. This strategic expansion allows us to diversify our portfolio and cater to a broader range of customer needs, while also tapping into new revenue streams. By integrating banking functionalities into our platform, we aim to provide a seamless and comprehensive experience for our clients. This evolution underscores our commitment to leveraging technology not only for operational efficiency but also for driving strategic growth and delivering exceptional value to our customers.
Significant Milestones
Pulse 2.0 (Amit): What have been some of the company’s most significant milestones?
Marco (Jacob): Obtaining our first credit facility from Arcadia Funds was our first milestone. It provided material validation of our thesis, and of the year we spent developing our underwriting procedures and models. Shortly afterwards, we funded our first client and began rapidly scaling our portfolio, reaching $100 million of volume funded in the first year of operations. Refinancing our credit facility with Midcap Financial and Castlelake in Fall 2022 has been another extremely significant stepping stone and testament to our underwriting track record which by then boasted over $200 million of volume funded.
Launching our first non-financing product, LLC incorporation, in Q2 of last year marked the beginning of our transformation to become an ecosystem for SMEs in trade and offer a full suite of products that address all key needs that exporters have. Finally, closing our Series A at the beginning of this year led by IDC Ventures and with investors such as the Inter-American Development Bank Lab, Barn Invest, SquareOne Capital, Florida Funders, Arcadia Funds, among others, validated our 4 years of work, the amazing team we managed to build and our vision for the future of Marco.
Customer Success Stories
Pulse 2.0 (Amit): Can you share any specific customer success stories?
Marco (Jacob): We have helped various small and medium exporters in LatAm access financing and grow their businesses. For example, one of our clients is a Colombian women-led fresh fruit and vegetable exporter. She initially received a $250,000 line from Marco in 2020 and later increased it to $450,000 in 2022 to start their own vegetable food production, her main customer is Walmart and she would not have been able to fulfill such large orders without advances on her receivables given the long payment terms they demand.
Another interesting example of a client in a sustainable industry is a family business from Colima, Mexico, specializing in producing and exporting Kosher-certified sea salt and salt flower. They obtained a $100k credit line in under 15 days to be able to fulfill larger client orders and keep growing with Marco.
Finally, our largest success story is a Mexican client that was able to grow over 10-fold thanks to Marco’s financing. They approached us as they needed financing to be able to take on a large project from one of their buyers, and we were able to quickly approve a $800k credit line to support them. After the successful completion of the project, the buyer placed bigger and bigger orders, which led us to increase the client’s line to $11 million in under a year!
Total Addressable Market
Pulse 2.0 (Amit): What total addressable market (TAM) size is the company pursuing?
Marco (Jacob): Our innovative approach to trade finance is addressing the $350 billion trade financing gap in Latin America. To give you a frame of reference, in 2021 LatAm exports exceeded $1.2 trillion, ~30% of which were underserved, equating to a $344 billion opportunity. In addition we see that LatAm has strong tailwinds that make the opportunity massive:
— Credit spreads – LatAm credit spreads average ~5%, some of the largest in the world and continue to widen
— e-Invoicing + Open Banking – E-invoice infrastructure and Open Banking are maturing in LatAm, allowing for API integrations that drive automation
— Nearshoring – Given heightened tensions in US-Asia trade war and lower labor costs in Latam, US-LatAm exports are increasing: Mexico to US exports grew 23% from 2017-2021, while China’s have stagnated
Differentiation From The Competition
Pulse 2.0 (Amit): What differentiates the company from its competition?
Marco (Jacob): Our credit first mentality is one of our biggest differentiators against our fintech competitors. Our first hire was our Chief Credit Officer, who has 40+ years of experience in underwriting and brought a wealth of experience that allowed us to develop risk-scoring models and extremely solid underwriting practices which allowed us to close our first credit facility before having any track record.
Another significant advantage we have is our ability to borrow in USD while lending in Latin America, allowing us to benefit from the wide credit spreads in the region. These advantages compound. Our superior underwriting and higher capital efficiency empower us to grow our portfolio faster and while maintaining a great track record, which in turns allows us to obtain lower cost of capital creating a positive flywheel.
It is important to take into account that the market is vast and there is a large software gap, resulting in a substantial unmet demand with many SMEs not even being aware that there is a solution for them to be able to request and obtain financing (many smaller businesses simply assume that banks are the only options). So, most players that are not addressing the same exact segment are collaborating on educating the market and making the pie bigger for everyone, as opposed to competing.
Future Company Goals
Pulse 2.0 (Amit): What are some of the company’s future company goals?
Marco (Jacob): Our vision is to become the operating system for SMEs in trade, so this is just the beginning. We have now digitized and streamlined the entire financing journey for our clients, as well as our LLC Incorporation product, and we just launched our multicurrency business account. We plan on continuing to improve these products based on our clients’ feedback, as well as leverage the great amount of proprietary data we are collecting to enrich our underwriting models and de-risk our financing products even more.
We want to onboard exporters in our ecosystem as they are just starting, for instance by helping them open an LLC in the US and providing them with a USD bank account, so they can start transacting with US buyers. As they use the account, we will be able to collect data that allows us to offer more products with much lower risk. As exporters grow in our ecosystem, we plan on offering more non-financing products such as cargo or credit insurances, cash flow analytics, etc. to address more and more of their pain points, allowing them to focus solely on growing their business.
