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DACA recipient, Berkeley grad, and a Googler, Victor Santos is not a typical startup founder. His Boston-based startup, Airfox is addressing a huge problem: access to affordable financing in Latin America. Through a partnership with one of Brazil’s leading retail lenders, Airfox is able to gather data that enables lower-cost lending in a country where consumers routinely pay interest rates of 400% per annum.
Highlights from the interview include:
- Airfox seeks to accelerate financial inclusion in developing markets.
- Focus for next three years is Brazil.
- Imagine your neighborhood bank being a payday lender; 50% of population use only cash.
- Airfox mobile app acts as free banking simplifying user’s life.
- As data builds on app, Airfox creates an alternative credit profile and user can take micro loans.
- Scalable sub-prime lending at more affordable rates.
- Via Varejo, Brazil’s biggest retailer to low-income people, with 1,000 stores gives Airfox great reach.
- Retailers make money from financing. Via Varejo has $1 billion consumer loan portfolio.
- Attractive to Via Varejo because it simplifies their operation which now uses coupon books for payments.
- Brazilian banking system has advanced features but average consumer has limited access.
- Brazil’s world-class central bank has opened up to fintech companies but traction is still limited.
- Victor left Google because he did not want to be working in advertising. Time at Google served to show Victor what it’s like to work at a big company.
- Was COO of failed startup, determined to found his own company where he could control the direction the company took.
- Also wanted to bring some type of utility to the end consumer.
- First instance of Airfox provided software to cellular carriers that made it easy for them to give free data plans to low-income users who opted into receiving ads.
- Three carriers signed up with 2,000,000 users.
- Sal asks listeners to leave a rating or a review on iTunes.
- Victor Santos tells about the major pivots Airfox executed.
- Airfox’s solution created real value for carriers in terms of increased retention of users.
- Carriers were frustrating to work with, slow to adopt system that could address massive user churn of 8 to 12% per month.
- Airfox realized user data could be the key to providing funding to users. Decided to look for way to go direct to consumer.
- Victor saw an opportunity to apply what they had learned in the cell phone business to the Brazilian market that was being de-regulated by the Central Bank.
- Contingent life of middle-class Brazilians.
- Airfox’s digital wallet will be offered through Via Varejo’s 1000 stores.
- Via Varejo sees Airfox as a way to grow their lending and decrease defaults.
- With launch of debit card in Q1 Airfox will become a full digital bank for consumers.
- AirFox brand name will have to change because the name has less than great associations for consumers.
- Via Varejo’s equity stake reassures the retailer that it will continue to benefit as Airfox’s credit business expands.
- Comparison with Amazon Pay in India.
- Advice for fundraising, make sure investors understand how your vision of social change will pay off in terms of profits to the company.
- Via Varejo has a two-year call to buy 80 percent of Airfox. How angels took that.
- A call option is a right to buy at a certain price.
- On cap table have Techstars, Project 11, Launch Capital, Boston Seed and One Way Ventures.
- Victor came to the US at age 12.
- Parents were entrepreneur by necessity not by choice. Primed Victor to think about entrepreneurship.
- Experience with startup in Silicon Valley confirmed in Victor’s mind he wanted to start a company.
- Immigrants have to be scrappy and resourceful, prepares you to be an entrepreneur.
- Brazil’s economic dichotomies.
- Airfox’s consumer loans are 13 to 26 percent per year vs. 400 percent in other places.
- Victor advises founders to determine what are the principals that underlie their company. Handy in difficult time to know what you stand for.
- Company values from the A-Team & Ray Dalio.
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