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The 17th episode in our special series of episodes that we’re recording in partnership with the European PR Agency Tyto, and their own ‘Without Borders’ podcast, where we’re interviewing leaders of unicorn companies to find out about the key issues, pain points and challenges that start-ups face and how they can address them with a strategic approach to marketing and communications.
Russell Goldsmith and Tyto’s founder, Brendon Craigie were joined online from New York by Mariano Gomide de Faria, Co-founder and Co-CEO of VTEX, a company that provides fully integrated end to end omnichannel commerce platforms to major global brands. VTEX reached unicorn status in September 2020 after it raised $225 Million in Series D funding, with a $1.7 billion valuation.
Mariano explained that VTEX is originally a Brazilian company. He and co-founder Geraldo Thomaz were colleagues from university, having studied mechanical engineering together. As soon as they finished university, they created VTEX as a software company for Brazilian industries in the textile industry. After 7 years in Brazil, they needed to make themselves fully bootstrapped, financing themselves with a side business- financing for high-risk entrepreneurs in Brazil is not the same as Europe or in the US. Mariano said one of the side businesses that did really well was e-commerce, so, any time they needed money, they just opened the door and did another e-commerce project. He added that some of them became very famous in Brazil and in 2007, they were approached by Wal-Mart, asking them to develop a platform for them in Brazil. The Wal-Mart project was deployed within one year and it was a big success and Mariano said VTEX was then born to the world as one of the organisations that could do amazing things with code. VTEX then grew from 10 clients in 2009 to around 232 clients in 2012 and started to open to other countries in Latin America, Chile, Mexico, Colombia, Argentina and in 2016, they were clear leaders in Latin America.
VTEX now have presence in Europe, Asia and the US and they continue to grow. Mariano said they offer what they call the ‘fourth wave’ of digital commerce platforms to the market which is composable software. He thinks this will ramp up in 3 to 4 years. They can deliver complex scenarios of digital commerce in a very fast pace, working with companies like Samsung, Motorola, Whirlpool – fully integrated with ERP and all the legacy systems. That is what makes them a unique offer, and that’s why they are having good momentum in the market.
Secret to a long-lasting success
Mariano said they realised in 2011, from the Wal-Mart project, that software cannot just be an automation of processes, it should have knowledge inside. He said normally when a provider comes to a client, they ask the client what they want to do, but actually, the knowledge of digital commerce came too fast in the world and there is a lack of talent inside the organisations because there is no university course that forms digital commerce operators, we are far away from the maturity of this market. He said it’s not an industry that a young person would typically wish to work for which means there are more than 10,000 or 20,000 jobs in the industry they can’t fill. Clients wait for process and talents to come, the only way for them to thrive is to have access knowledge directly from the code. Mariano said digital commerce is an empirical science, it’s like riding a bike, you cannot teach how to ride a bike by books. Mariano said they were fighting companies like SAP, Oracle, IBM, with hundreds of billion dollars valuation, so they needed to do something different to be unique. So, since 2011, they’ve been using an architecture, that is a multi-tenant SaaS for all their clients, one unique set of code with one unique infrastructure, that gave them the ability of evolving the software in a fast pace. Today at VTEX they can allow enterprises to go to market in very complex scenarios with an easy way of configuration. Mariano said when the scenario is simple, they are competing regularly, but when you have a global operation, multiple fulfilments, then it’s their playing field. When you have a complex demand, they are unique.
Perception of the company since reaching unicorn status
Mariano explained that they have 21 years of history and raised $7 million dollars on a first round for the first time in 2019. From 2019 to 2021 they raised $365million dollars in two rounds, they brought good investors to the table. He said it hasn’t really changed anything inside the company but may have slightly changed the minds of their partners and clients.
How the Brazilian tech ecosystem compares to Europe and North America
Mariano said today, to grow up and create a company that reaches this kind of valuation, it’s much more what the valuation represents to the ecosystem of Latin America than the valuation itself. He said in the world, creative engineering is made in five big regions, China, Russia, India, Eastern Europe, and Latin America, so if we can arbitrate the creative engineering of those, the emerging markets and translate these into knowledge to the companies in the mature countries to buy software at a good price point, it’s a self-fulfilling prophecy. He said if the retailers in the UK need an e-commerce project, they would need to pay £5million pounds of implementation for the front end for example and with the exact same quality, you can implement these for £50k. So, he said this is the old way of making money, it means a lot for a region to have not only use VTEX, but several other companies coming on that valuation. He said for the last 15 years in Brazil they didn’t have any unicorns but in the last two years, they have more than 10. Mariano said it’s a reaffirmation and the revolution that’s happening, not only in the emerging markets of Latin America, but also all the emerging markets in the world, they are creating hundreds of unicorns. He said he would easily say that Brazil has more than 80 unicorns to come for the next three years, they are becoming a region of the digital commerce industry.
Dealing with investors
Mariano explained that the level of risk and the way you communicate what you have as a value changes the more you learn. He said 2 years ago they had 350 people, now they have more than 1500 all over the world and 32 countries with active operational VTEX. Until 4 years ago, they could manage the entire operation of VTEX in 2 time zones, now they need to manage people in California and Singapore too. Mariano said they used to call internally and work out how to sustainably attract talent to VTEX, but for a digital commerce expert, creating a LinkedIn vacancy is not effective, so they created other ways of approaching talent e.g., from universities. They built a program called Tetrix, it’s the biggest university challenge in the world and last year they had 75,000 students competing for one prize. The prize is a trip around the world visiting the best digital commerce. They create and sponsor it because they want these 75,000 students from engineering, economics, business administration to understand that there’s a massive industry waiting for them that pays well, that has a huge impact and is future proof.
Changing headquarters to New York
Mariano said they believe a global company is actually the sum of local cultures, culture is something you’re born with, it’s in your people, your home country, you won’t have the same culture, but you can have the same principles. What they discovered is if they have headquarters around the world, they will be more local, they created one in Europe, one in Brazil, one in Latin America and the United States. He said in the US they have three offices – Fort Lauderdale, Philadelphia, and New York, which is the main one but there’s no such thing as a headquarters operation in VTEX. The main two offices for sales and operations are in London and New York, but the main product head office it is in Rio de Janeiro, Brazil. Mariano said himself and Geraldo are field operators but need to transform themselves into a bigger role of CEO management and they are learning how to do it fast.
Mariano said it’s not the manager that receives more salary at VTEX, it’s the one that aggregates more value in front of the client. He said you need to put your best team in front of your clients, they want to be guided. He said they reacted faster than their competitors and that’s why they have the recognition and are very optimistic for the future.
How Coronavirus impacted the business
Mariano said companies had to learn things which should’ve taken months or years, in weeks and it will change the retail environment all over the world. He said across companies there were changes in management, the way you understand what was meant by omnichannel, how you manage merchandising and supply chain. He said the industry, brand manufacturers and retailers, evolved 5 to 10 years in their mindset approaching digital. He said they were impacted by a huge wave of demand and are proud that they were there for their clients, clients that from absolutely nothing had to change 500 physical stores. Mariano said he is proud of what they did in the last year and a half and believes if it was not for the e-commerce industry, the world would face Covid in a different perspective, if Covid had happened 20 years ago, the outcome would be completely different. He said he is very proud of the logistics, as consumers, retailers and brands always complain against the logistic teams, companies, and carriers, but actually they made their show, they hold the world economy in their hands without all the risk and the world should recognise what they did. He said we will see 10, 15 years of impact in the digital economy because of Covid, Covid was a catalyst in terms of the digital economy.
What do retailers need to look out for?
Mariano said the conversational commerce will hit really heavily, in countries like Brazil, all the conversational platforms are evolving such as WhatsApp and they’ll take a more predominant role in the navigation. Mariano said the United States, a massive market, but just have one message platform, IMessage and the country has not been prepared for this new wave. He said countries from the East part of the world will show the way of what’s going to be the next waves of technology – live commerce, it’s booming in Asia, now it’s starting to come to Europe, the UK, Latin America, and the United States. He said if you’re going to buy through WhatsApp, it’s going to be a big wave, this is the real omni channel.
Mariano explained they just bought a company called Suiteshare.com that make a very specific app, they link the website of your physical store to WhatsApp with salespeople. He said the role they play in VTEX is they take responsibility to guide their clients in this futureproof category because sometimes they’re not able to do it by themselves as they don’t have access to information or talent. Mariano said these are the two big trends that he’s seeing. They are also understanding that global trade with a unique layer of inventory is a big trend. He said it’s a reality, and some countries just don’t realise it yet, if digital commerce was a human being, it would be born right now.
Building awareness and differentiating VTEX.
Mariano explained that they’ve created a playbook of attracting and evolving talent to the company and although they hired digital commerce experts, the first phase is only soft skills, so they have an attribute they call the ‘go to person’. Today, he said, if you do not communicate as well as you think, you will not be as efficient as you can be, sometimes the best way of communication is to be a committed listener. He said really understand the perspective of others and try not to protect yourself. Mariano explained that normally, when you hire people from big companies they come with layers of protection, but the past actually doesn’t matter, it’s your expression on a daily basis that will show what you did. Therefore, communicating with precision is the secret for any company in digital commerce, because 22-year-old incredible developers and 40-year-old merchandisers, marketeers, should talk the same language. Mariano said they have a group in VTEX that works directly with the C level that only takes care of the conversation level of the company, it’s very important to them that once they grow with a multicultural environment to have the same level of conversation, and he believes they are one of the standards in the world right now on that and are very proud of it.
Mariano said they don’t have a big human resources department, they split the responsibility to all the leaders in the company because evolving people, is a daily job. He said they have their rituals:
He said he recently spoke for 30 minutes with a new intern who was surprised he didn’t have more important things to do, but he believes if he’s not there for the team to guide them, they will not spread the message.
Mariano said he probably does 50% of final interviews of all employees in the growth area of VTEX. He said it’s time consuming, but that’s how you keep the culture, and they can learn from the founder what to expect. So, he said there is no other word than hard work to keep communication happening. They have a lot of rituals, playbooks and write a lot of letters to each other. Mariano said sometimes when you communicate verbally, integrities are not 100% there, there is miscommunication. Mariano always says that two intelligent people, unrelated from culture, if they have the right dimensions in timing and the category they’re discussing, they will agree. He said sometimes it is just a matter of finding the right dimensions, for example, in terms of discussing tactics, if one person is talking about 5 years and you’re talking about 30 days, when you stop and ask the dimensions, a lot of things become clearer.
Olga Loffredi, CEO, Vanto Group was who taught VTEX this level of conversation. Mariano believes they are ready for this chaotic environment and if you control the chaos, you will lose, it’s impossible to control and chaotic environments are very productive.
Mariano said they do a lot of public speeches, and they own their own Institute of Education in Cambridge, inside Churchill College. They have more than 100 events all over the world that they sponsor or are the owners of. He said they don’t just talk to investors; they talk to partners and clients too. Last week, Mariano was in Austin talking to an SI, he didn’t speak about VTEX, he was there to tell them his vision of the next 5, 10 years in the SI industry, and if they agree on that, they can be partners. He said public communication is something that they train and guide in, the c-level and high-level management of VTEX are all ready to talk on behalf of the company to attract talent and guide their partners and clients. Mariano said VTEX is becoming big enough, they have a central PR area that now is under Astha Malik, the first woman in the c-level of VTEX and they are very proud of it. Astha is joining from five years at Zendesk and will be running as a COO of growth, she will be one of the people who control this communication to the exterior of VTEX.
Biggest communications challenge
Mariano said that diversity is a big challenge, it’s a big topic all over and finding the right level of communication is hard. He said he was discussing with a marketing guy from a specific country where at VTEX, for three months, they only hired women. He said the challenge with that was whether they should go public with it or not. He said you are proud of promoting diversity but maybe it’s not the right way to approach it, maybe they should just commit to doing it without the willingness or proudness of announcing it, but on the other hand if you do, you’re going to inspire other companies to do it. Mariano said he struggles with communication failure as well, he hired a vice president of a big retailer to be one of their success managers in Brazil and she was so afraid that she was not tech oriented. He told her that 99% of the things she’s going to do for the next 6 months will fail, but she’s a fast learner and he’s fully convinced that in a year, she’ll become a giant because you learn to fail. She came, she spent six months, it was terrible, then she started to catch up and guide IT departments of big retailers that she thought was never possible before and it’s amazing how you can really put yourself at risk as a company to create great individuals. They will be loyal to you; they will be passionate to your cause and that’s how you create a company.
Digital transformation course, EICOM and European Institute of E-commerce Management, Moller Centre, Cambridge University
Mariano explained that one thing they realised they need to engage was how to transfer knowledge, not how to sell it. He said retailers all over the world want to access knowledge and the consulting companies are selling knowledge at a very expensive price, not only in terms of money, but time. He said they sell knowledge through 1, 2-year projects which is not sufficient to allow them to survive. So, in 2016 when Mariano arrived in the UK, he went to Cambridge to look for good courses, to indicate to his partners and clients, however he didn’t find one. He said the courses were made by professors, not by field operators which is a big difference, it is an empirical science, and you should bring people from the ground to be there. So, Mariano called some professors that he knew were good, for example Ian Jindal, Chief Editor of Internet Retailing, Zia Daniell, Chief Content Officer for Shoptalk, now in The Insider, Brian McBride, Former CEO for Amazon UK. He invited them to teach what the field was teaching them, and they accepted promptly. The institute is called Eicom.org, he said the rule he put there is a class can be maximum 20 people and each country can have only three people, which forces cultural diversity. Mariano believes they can create a layer of very pragmatic, field-oriented leaders that can come back to their companies and make real transformation. He said this is nothing related to VTEX, if they create better leaders and they believe VTEX has a good product, they will naturally find them. Mariano said this is the way they can impact the world by education, Eicom launched a certification for the digital commerce world, the first and only certification for global digital commerce operators. They get tested on P&L, marketing, logistics, merchandising, and the approval rates are under 10 percent. One of the programs Mariano is most proud of is called Women in Digital. It’s a program specifically to train women for the Digital Commerce Industry and he believes all the other companies should do the same because, the world is running faster than ever, and the government and public sector of education cannot follow the velocity.
Digital commerce in Latin America
Mariano said Marcos Peuyrredon, the VP of VTEX and a shareholder started this institute in Latin America and it became huge, now controlling all the events and it’s a very central piece of the content for Latin America, and they are very proud to be supporting them financially. Mariano said you need to have a culture of giving back, if you don’t, you are not ready for the next wave of demanding of leaders in the world. They decided in VTEX to put all their effort into education because it’s the instrument that they believe can make a difference. Mariano said with the institute, he dedicates at least one or two weeks a year, being on stage, to talking to small audiences, they need to make the knowledge available if they want digital to become huge. He said currently they have it at 12% penetration, some countries have 18%, some have 5%. He said when the industry arrives in a 30, 40% level, then the party will start. And until then, we should put all our effort to transforming countries from the bottom up.