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.
Click here to read Victor’s Medium article, “How To Create and Sustain Company Values That Are Conducive To Success”