#136 KredFeed: The Next Mexican Unicorn?

Luis: Pitch 3 [clap]

Lending. From the nasty loan shark, to the friendly neighborhood credit union. People have always needed money, and other people have always made money by lending it.

Fun fact: the earliest recorded seed loan was literally … seeds, given to farmers.

These days, you can usually find someone willing to write you a check, unless you happen to be a manufacturing company in Mexico. That’s where today’s founder Luis comes in, with his startup Kredfeed. He wants to solve cash flow issues for SMBs in Mexico. 

But lending isn’t really the kind of thing VCs get excited about. It’s also highly competitive. Will Luís be able to convince investors that he can mint a Mexican unicorn, or is this investment subprime? 

I’m Josh Muccio, welcome to The Pitch. Where real founders pitch real investors for real money. With interest.

Let’s meet the investors.

Elizabeth Yin with Hustle Fund

Elizabeth: Do you love the problem you're working on?

Charles Hudson with Precursor Ventures

Charles: I wish that had been your open. That was so good.

Pascal Unger with Focal VC

Pascal: That’s I think how you have a chance, outside of just raising a boatload of money

Beck Bamberger with Bad Ideas Group

Beck: [slaps table] I gotta start my muffin business.

And Mac Conwell with Rare Breed Ventures

Mac: As a unicorn hunter, I want to see every unicorn. 

The Pitch for Kredfeed is coming up after the break. And if you’re not following the show already, hit that subscribe button and turn on notifications. You can find the uncut version of this pitch at patreon.com/thepitch

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Before we get started, there’s a type of lending called factoring. Where instead of a house or another physical asset, you can use an invoice as collateral. So if you need money now, you don’t have to wait around for customers to pay. All you need is proof that someone is going to pay you. That’s factoring. Got it? Okay. Enter Luis.

Elizabeth: I don't go to any more demo days.

Mac: I mean, I'll speak at an accelerator. … I don’t want to come to demo day. 

Luis: Hey.

Mac: How's it going?

Luis: All good, Mac. How are you?

Beck: Hello.

Mac: Nice to see you.

Charles: Charles. Nice to meet you.

Luis: Nice to meet you.

Elizabeth: Good to see you.

Luis: Good to see you, Elizabeth.

Pascal: Pascal.

Luis: Hey. Nice to meet you, Pascal.

Beck: Hey, Beck. Nice to meet you.

Luis: Nice to meet you, Beck.

Luis: I'm Luis, and I'm the CEO and cofounder of Kredfeed, and at Kredfeed we have already unlocked over 13 and a half million dollars from the cashflows of small and mid-sized businesses. Did you know that 70% of all SMBs in Mexico are actually profitable when they go bankrupt? 

Beck: Hm

Luis: I saw this happen first hand at the last startup that I was a part of, and the reason is because B2B companies have to wait up to six months to get paid by their customers. And 80% of all SMBs in Mexico still do not have access to any kind of credit products, making cash flow issues and the lack of access to financing the reasons why these companies are going out of business. So at Kredfeed we built a platform that enables these companies to unlock their cashflow by turning their receivables into instant cash, allowing them to grow and to prevent cash crunches. So while doing TechStars, we learned that our best customers are actually manufacturing companies, which is amazing! Because this allows us to take advantage of this historic opportunity, which is the global supply decoupling and the rise of near shoring, because 62% of manufacturers have started their efforts to near shore their productions closer to the US. It is expected that $5 trillion from manufacturing trade will shift into Latin America in the next five years. And we're here raising a 1.2 million pre seed round to take advantage of this opportunity, and get us to $4 million in ARR in the next 18 months. So, who wants to benefit from this opportunity as well? 

Mac: Tell us about the product? Where are you in the life cycle of it? Is it developed? Do you have customers? Where are you today?

Luis: Yeah, so we have financed over 3700 invoices to date. Over 150 companies. The product, it's completely developed. All our efforts had been put mainly on the automation of all the onboarding and underwriting process. So our users are able to access financing between four to six hours, because we automated all this process. We don't require our users to upload their financial statements because they're small and mid sized businesses, they don't have them.

Beck: They don't have it.

Luis: They outsource their accounting basically to just declare their taxes. We connect to multiple data sources, We get a clear view about which companies are actually credit worthy and also which receivables are credit worthy as well.

Beck: Mmmm, mmm

Mac: And what's been your default rate to date? 

Luis: The full like write offs that we have done, it's 0.5% today. The industry's, it's 12% in Mexico.

Beck: Yeah. I was gonna say.

Luis: Yeah. That has been like our main focus -

Beck: Yeah.

Luis: - like being really disciplined on who we lend to. Because everybody wants money. 

Pascal: We know that. Yeah.

[laughter]

Beck: Here we are.

Luis: Yeah. The hard thing is to know who to lend to and how to collect. And we nailed it.

Beck: So why have you nailed it? You're saying, okay, we're taking this unstructured data, we’re really sourcing it, we're looking at who owes the money, who is the company. But what else is going on there that's giving you that tremendous rate?

Luis: So something that I really love, and what's really hard to do, is that our users, since they are manufacturing companies, they're not financing their utilities or their payroll. What they're financing is their cost of goods sold. So when we get the data, the hardest part was to tag every single transaction, every single invoice that we scrape. So we understand what's the cost of goods sold, what's an overhead expense, what's a purchase of fixed assets. So we know their margins at every level. And then we have access to every single transaction that they have done over the last four years, and we read it every single day, So that's when we know that, okay, this is a good commercial relationship, so we're able to finance this receivables as well. 

Pascal: So I don't know much about the Mexican manufacturing market -

Luis: Yeah. 

Pascal: In the US, right, during the low-interest years, one, two, three years ago, some of the hottest companies were the revenue-based financing companies. They're all struggling now in this interest rate environment. Can you talk a little bit about why you're different, why Mexico's different, why your target customers are different? 

Luis: Totally. So Mexico and Latin America have always suffered of really high interest rates.

Beck: Yes.

Luis: So, for example, our corporate business card charges 81% -

Beck: What??!!

Luis: Yeah. That's just crazy. So today's -

Beck: What??

Luis: - high interest rate -

Beck: Is nothing!

Luis: - are still a bargain for us.

Beck: - like 8% in America. Deal. 

Luis: And when I was looking for financings, specifically factoring at the last startup, I went out looking for factoring companies, and I saw companies charging 5% monthly. That's 60% annual rate. They ate all my margins. That didn't work. So right now, we're charging our users an average APR of 36%, which is really good for them -

Elizabeth: Yeah.

Luis: - but we really still have good margins within that, with our cost of capital.

Elizabeth: Can you talk about that and any lines of credit you may have or whatnot?

Luis: Yeah. So, our cost of capital today, it's 15.97%. Our average APR, it's 36.14%. So there we have a 20% margin spread. And we got here by raising an angel round of 137k. because of that, we have always only been able to access a debt facility of a million bucks, which has been our main constraint to be more aggressive on user acquisition. So we're raising this round to help us unlock a $10 million debt facility that will allow us to get to those $4 million in ARR in the next six months.

Beck: So when you started, you were talking about just the default rate, companies going under because they just can't get paid.

Luis: Yeah.

Beck: Okay. Is that the main driver of why they come to you? Or is it the rate? What's the pain we're solving here?

Luis: So, mainly it's the access to financing.

Beck: Yeah.

Luis: Because banks in Mexico, they all require real estate as collateral to provide any kind of business loan.

Beck: Yeah. Forget it.

Luis: These companies don't have those assets -

Charles: Don't have any -

Luis: - or the business owner who had to put their personal home. But in many cases, they're still paying their mortgage so they can't. The second one is the speediness, because they are able to access this financing sometimes the same day or most one, two days, after they apply with us. And they need to know if they're going to have access to finance, because they're commissioning large projects that they're going to get paid in 90, 120, 180 days. So if they don't have the financing, they have to scale down, lose business. So that's where we come in and help that main problem. 

Elizabeth: Can you talk about collections? How do you collect?

Luis: [laughs] We send automated reminders. But the way we structure the, the legal component of the contracts, we incentivize our users to pay us first before any other liability. We track every single invoice on real time due to the electronic invoicing being mandatory in Mexico. So we know the status of every invoice on real time. So if they get paid by their customer and they don't pay us, that's considered fraud. So that's a criminal component there. So because of that, they are incentivized to pay us first before any other liability.

Beck: Big time.

Charles: Yeah.

Mac: Yeah.

Beck: Wow. 

Luis: Yeah

Pascal: It's not new that LatAm has very high interest rates and credit financing solutions are also not necessarily new. What is it that you guys have figured out that others that have come before you haven't necessarily? 

Luis: What we did is leverage technology to provide a better user experience and grant access to companies that were completely underserved. We want to take advantage of one industry in specific, which is manufacturing. Focus on that customer, understand all their pain points, which we are doing because we want to go beyond the lending. Automate their accounts receivables process, collections, consolidate all the data in one place which is Kredfeed. And input that into a cashflow forecast that our customers need, which is basically on a weekly basis. They don't need it on a monthly basis; they need it on a weekly - when are they going to get paid. And that's how we start to add more value and help these companies perform better financially. 

Elizabeth: Can you talk a little bit about your background?

Luis: Yeah. Totally.

Elizabeth: And your team, also.

Beck: Yeah.

Luis: Oh yeah, the team is the best. Me, I'm a little bit more boring. But I used to the CFO for another company. We became venture backed with multiple cities across Mexico. And when we started to hit market fit with that company, we started to see to the AB InBevs, to the Pepsis, to the GM Motors, to the Volkswagens. And that's when we suffered the problem of getting paid in net 180 days. I was the one in the room with the accounts payable department and the financial people of these companies. I was way too young so - the first time I got overleveraged there but I learned a lot. And it was a masterclass on that sense. And I'm not a solo founder. So my cofounder, she's a senior software engineer of that other company, because that company went under. We shut down. I had to fire the whole team; that was also my job, so. And she's also my sister. So the way I validated -

[laughter]

Luis: The way I validated her skills here, is because we went through two layoffs on that company and the CTO always kept her. So I was like, okay, she's good. [laughter] That's the two founders, but we are nine people today. We have our head of operations. We have a customer service department and most of our resources have gone into the product team. So yeah.

Pascal: Can you just walk us through the numbers a little bit, about burn, runway, revenue and all the good stuff.

Luis: Oh yeah. Good stuff. We're break even.

Pascal: Amazing.

Elizabeth: Congrats.

Luis: We're break even. We raised a small 127k. Runway, we have today -

Pascal: Infinite, yeah.

Luis: Infinite. But yeah we - we didn't expect to grow. 

Elizabeth: Great.

Beck: Where are you based? Mexico City?

Luis: Guadalajara.

Beck: Oh. Okay.

Elizabeth: Where the manufacturing is.

Beck: That's right. 

Elizabeth: I am always curious how people end up doing an idea. How did you end up doing, you know, factoring for manufacturing, let's call it. Do you have a manufacturing background? You kind of alluded to working with some of these companies, but. 

Luis: Yeah. So a lot of manufacturing companies are in Guadalajara, so at the beginning the MVP wasn't this all automated, signatures were done in paper.

Elizabeth: Yeah.

Luis: So I spent a lot of the time with our customers in the early days of Kredfeed, and that's when I started to learn about their whole pain points, their processes, their workflows, their customers. The way I landed in factoring is because I suffered this problem firsthand. The worst was when I didn't have enough cash in the bank to pay the payroll. That kept me up at night way too many times, to be honest. But I always paid on time. I made it work. So seeing the lack of a solution for this problem, that's what drive me to start this company. But the reason why I did the manufacturing is because we learned that we have the strongest retention rate, actual product market fit, with this factoring and reverse factoring product, and we understand the workflows. 

Mac: You've mentioned this other startup. But can you tell us what that other startup did? I want to hear like what that startup did.

Luis: Yeah. So it basically was an influencer marketing marketplace. So we put together content creators in contact with big brands. 

Mac: So that company didn't work out. What was the biggest learning you took away from the failure of that company?

The pre-Kredfeed-post-mortem is coming up after this.

[Break]

Welcome back. Luis is passionate about solving cash flow issues for manufacturing companies in Mexico. But the investors want to know - what happened at the previous startup he worked for?

Mac: So that company didn't work out. What was the biggest learning you took away from the failure of that company?

Luis: You gotta really like what you're doing and love the problem that you're attending. The founders of that company, I really admire them. I learned a lot from them. But they started because they like tech. It looked like it worked, got some traction. But they weren't really convinced about the problem that they were solving. So they said, you know what, it's not worth it. We're just gonna shut it. So that was one of it. The second of it, the biggest learning I got, is that you really have to put together a great team. Like really bring in A people to the game to - to share the vision and I think those are the biggest takeaways that I take from that other experience. I was there for six years, so yeah.

Elizabeth: Those are good learnings. I'm gonna ask you a hard question, though.

Luis: Yeah. Please do.

Elizabeth: You - it sounds like you sort of stumbled a bit into this by talking with manufacturers.

Luis: Yeah.

Elizabeth: Just given your background is not in any sort of manufacturing. Do you love the problem you're working on?

Luis: Cashflow? I do. I love it. I love the - that's why I'm working with this cashflow forecast to automate all the underwriting. At the end of the day, it's a finance problem. But I - yeah, I really do. 

Pascal: Your energy says so, as well. What do you wish investors understood better about your business or the opportunity? Or what do investors not understand the way you understand it?

Luis: That lending is still huge. The lack of access to financing, it's still a huge problem. I know that we're just - factoring today. But the largest startup in Mexico today, it's just a purple credit card called Nubank.

Charles: Yep 

Beck: What are your terms? 

Luis: Yeah. We're raising 1.2.

Beck: Yep.

Luis: We already have 905k secured.

Beck: From? 

Luis: Two VCs from Mexico. Techstars, We have also a VC from Singapore and some strategic angel investors. 

Elizabeth: And what are the terms on that?

Beck: Yes. The terms. Yes.

Luis: Sorry. The last cap was signed at an 8 million post money cap. 

Pascal: So we're out for simple reasons. We predominantly focus on the US and Canada. Now that said, I love what you're up to. You have an incredible energy as a founder. Seems like you've learned a lot and so I'm very bullish on that. But it's just not a fit for our fund, like, the thesis and what we invest in.

Luis: No worries. I appreciate it, though. 

Beck: I am in for 50k. This is not typical to what I focus on, but I like the energy, I like the lessons you've learned. That's why I'm in.

Luis: Appreciate it. Thank you. Welcome.

Beck: Thank you.

Elizabeth: Tell me a little bit about the retention.

Luis: 71%, 24 month retention rate.

Elizabeth: What does that mean? Are you talking about dollars retained? Number of customers retained?

Luis: Number of customers retained. Net dollar revenue retention, 108.

Pascal: Love it when people actually know their numbers.

Beck: He knows his numbers. Now, I would hope that, given you're the finance person and you love cashflow.

[laughter]

Beck: This man said, I love cashflow. 

Charles: I think I am actually out. We were one of the first investors in ClearBank and went all the way up and then sadly all the way back down. And then we also have another company in our portfolio that you remind me of called Brightflow.

Luis: Oh yeah. 

Charles: So I think it's for us, we just have probably all of the exposure to kind of lending - but I will say this, like, I think this is the category that most investors don't understand. You can build really big businesses here. I have no question about that. I think we just probably have as much exposure at the firm level as we can take. But this seems like a really great idea and you seem like the right person to go after it.

Luis: I really appreciate it, Charles. 

Elizabeth: So Hustle Fund has previously also had a credit fund. So we know a bit about debt and I think my perspective is that lending companies have a hard time getting to scale as a VC backed business, because you don't want to obviously force bad loans, right. But there's always sort of this pressure to grow But obviously, you seem like you have a great cash management background, just per your understanding of your numbers right off the bat. That's kind of where I'm struggling around like, okay, for lending, in manufacturing, in Mexico - like, once you do all that slicing and dicing, and I know you have plans to try to expand in other ways in manufacturing, but still don't quite understand that vision. I feel like it's going to be challenging per the terms for us to get involved at the eight post. So, thank you.

Luis: No. Thank you. 

Mac: So -

Beck: I love when it starts with so.

Mac: You are really impressive.

Luis: Appreciate it. 

Mac: This is a business that could be a really big business, but could be a hard business, right. I think you're focusing on the right market segment. Like, manufacturing, nearshore manufacturing is going to be a gigantic deal. For a lot of the things that Charles and Elizabeth mentioned, tough - but I like you a lot.

Luis: I like you too. You're one of my - 

Mac: So -

Luis: You're one of my first follows on Twitter when I started this entrepreneur -

Mac: Oh! Don't do that! Don't do that. 

Mac: Ah. For prudence sake, I'm out. But I feel like this is going to be one of those where I'm gonna pop up one night and be like, oh, I need to give him a call. But, it's a no today. But you're incredible. And I do want to say one of the things that you mentioned that stood out to me is how much you spent late nights thinking about making payroll. But how you always made sure you paid on time. That's the same founder who's going to make sure that -

Beck: That's right. 

Mac: - even if things go south, I get something back for my investors. Not enough founders think that way. But I can see you as somebody who's like, yeah, I'm not getting a zero out of this. You believed in me and - and like, that integrity that you have came through just from the stories you told about your previous company. 

Luis: I truly appreciate it. 

Luis: Well, thank you.

Beck: Thank you, Luis.

Charles: Thank you, Luis. Nice to meet you.

[thank yous] 

Josh: That's new.

Beck: I know I love this little… 

Pascal: It's a good reminder for us that there are people outside listening that are going to judge us afterwards.

Mac: I - That experience is incredible. The way he talked about making sure things were getting done was impressive. The way he talked about making sure he talked to those customers and finding that manufacturing and the way you do factoring for manufacturing is different, but that's something that they can own. He’s doing a lot of smart things. I was a little surprised that he only did 400k. Right.

Elizabeth: Yeah, I thought the valuation was frothy.

Mac: Yeah.

Elizabeth: I think if the valuation had been cut in half, I would've done it.

Mac: Well if it was cut in half?

Elizabeth: Well, yeah, but it's also LatAm. I mean, let's just be honest. Geography matters because it matters on M&A, it matters on how many people can fund you.

Mac: Yeah.

Elizabeth: Like, the reason he hasn't raised that much, if we're gonna be honest, is like there are just not that many investors who invest in LatAm. I think at eight, now I have to believe this is going to be a billion dollar business, and I think factoring in manufacturing in Mexico - like, just, I don't think that's a billion dollar business. He has to add on all these other pieces to make it a billion dollar business.

Mac: You have to believe in his ability to do the add on and navigate through those - okay, we got this, we nailed this, here's the next four or five things. Or here's the next four or five countries. 

Elizabeth: Yeah. You have to believe in all of those things.

Charles: But the thing Elizabeth said that's really true of - I've seen these businesses that like - it's very - you should have incredibly low loss ratios in the beginning because you are -

Beck: For sure.

Charles: - doing the prime loans, like, the very best highest quality lending. And it's not just the pressure to grow, it's entrant - like, we saw this with Cap Check - when all of the revenue based financing companies get like - you can compete on two things, like loan quality and price. Both of which put pressure on your ability to scale the business. Either you have to compete over lower quality loans, which will push your loss ratios up, or to win the good ones, you have to make less money. And so -

Elizabeth: Yeah.

Charles: It's really - and there really aren't any moats to lending, other than having a lower cost of capital than your competition, which comes with scale. Sometimes.

Josh: So are you saying this type of business actually gets less efficient at scale?

Elizabeth: No. It's just you have no loyalty. People always want the best rate.

Charles: Yep.

Elizabeth: So they're not necessarily incentivized to stick with you. Like, we found this with our revenue based financing fund, which I alluded to. So Hustle Fund had a revenue based financing fund -

Josh: But you don't anymore?

Elizabeth: We do not anymore. It did really well, but we had problems scaling it because, other folks out there were willing to lend at way less profitable rates and we couldn't compete on that.

Pascal: Similarly -

Elizabeth: So we would lose deals, and that's what makes it hard to scale. We made money. But I cannot imagine building that into a billion dollar business. 

Josh: You see the path to a billion dollar business here?

Beck: It's a little fuzzy for me, but I think he's the one to bet on, if there was one.

Mac: Yeah.

Beck: If there was a like - who's gonna be in LatAm the billion dollar unicorn, I'm like, I'm willing to bet on that. 

Josh: Okay. Well said. Thank you guys. Another great pitch.

[thank yous]

Beck: Next one. Five minutes? How we doing? How we doing?

Luis left the room with a $50k commitment from Beck. And the other investors did give him a lot of credit.

After the break, we check in with Luis to see if Beck actually writes the check or if this deal will end, in default.

[break]

Welcome back. Three months after his pitch, we called up Luis to see what happened with Beck. But first ~

Josh: Were you happy with how your pitch went on the show? 

Luis: I was, I mean, when you look backwards and hear something, you always think like, okay, I could have answered this better but I was happy. I was happy with the, pitch and very happy to get to meet with these people that I really look up to 

Josh: So you got a 50,000 commitment in the room 

Luis: Yep

Josh: and then you had a due diligence call with Beck. Tell me what happened on that call. 

Luis: So I remember that we jumped in to the call. I remember that she was in New York at the time wearing a fur because it was, you know, Super cold at that moment there. She told me that she had done a little bit of due diligence on her own. We talked about the competition. 

Beck: I do want to talk about the competitive landscape. Cause you have some major, major players that have raised a lot of money. Xepelin, for example, has raised 146 million. I'm like, Hmm, Okay. So walk me through, if you could what's the difference here? 

Luis: The market has room for, for multiple competitors. But most of them are trying to steal customers from the banks, that are already being served. we have at least three to four users that churn from Xepelin into Kredfeed every month. And what I've seen with Xepelin, that they basically replicated their bank processes, which is you're gonna sign an account executive, and that's a lot of back and forth for through WhatsApp. that can take between 6 to 8 weeks to get the financing. So that's basically where we're seeing some difference on the operational side. 

Beck: Yeah

Luis: but also we're really focused on the manufacturing industry and I'm certain that if you try to serve everybody, you end up serving nobody 

Beck: Hmm. Um, hmmm I'm going to spend more time looking at the competitors 

Josh: By the end of the call, like where did things land? Like, how are you feeling? 

Luis: I didn't feel she left that call that convinced cause she was pretty focused on the competition about this other competitor that has, uh raised a lot of money about a hundred million dollars on equity. Then they also raised their debt facility. It's around $140 million, which is a lot of money. We're working today with 1 million. So yeah, there's a big difference there. 

Josh: So then what happened after that call with Beck?

Luis: So after the call, we got an email I think it was a week later

Josh: Yeah 

Luis: she basically said that she was impressed with what we have accomplished But she used nearly this analogy, like she liked the, the jockey or the rider, but she didn't like the horse.

Josh: The jockey

Luis: The jockey, but she, she wasn't convinced about the horse, about mainly the market. I mean, the fact that there's this other competitor that has much more funding, so she's like -

Josh: a much bigger horse, yeah 

Luis: a much bigger horse. So, she didn't see how we might win the market or win over this competitor. 

Josh: You should’ve responded and said, our horse is more agile

Luis: I should’ve said that.

Lisa: Oh my gosh

Luis: And I still can!

Josh: You still can, it’s not too late

Lisa: Oh gosh 

Josh: Well, that's unfortunate. 

Luis: Ah, It's part of the game I mean, I really like her. I like her vibe, her style too bad she didn't jump in.

Josh: Is it frustrating to hear that as the reason for passing? 

Luis: It is, it actually is. Yes. I mean, that's something that I, that I've heard a lot because Yeah, they have a lot of money. $140 million to, to originate loans.

We only have one, but the financing gap in Mexico in the, in the B2B market, it's $164 billion. So they, they can only serve 0. 06 percent of the market. So it's not like all of us are banking in one single place. I mean, not in the States, not in Mexico. There are multiple banks that have their own expertise.

Josh: Of the investors that pass, how many of them are identifying this competitor as their reason? 

Luis: I would say about half of them. 

Josh: Oh, wow. 

Lisa: That’s a lot

Luis: Yeah. And this is one of the answers where I dropped the ball, or I didn't mention that the way we leverage technology to provide the access to, to this financial product or services that this company needs is where we innovate. I mean, customers don't have to go to a bank directly to go get assigned an account executive and do a lot back and forth of documentation. And the real estate as collateral, they need to provide their own property, mainly the house of the business owner 

Josh: And you don't need any of that stuff. You just plug straight into their bank account and see the money flowing in and out. And you recognize the customers and you're able to put two and two together and say, all right, this is a good company to lend money to.

Luis: Yeah. 

Josh: So can your competitor, this big competitor, can they even serve manufacturing companies? 

Luis: They could, but they will ask them for collateral. They would take around eight weeks to underwrite at customer. We take around six hours. 

Josh: This is the startup that's raised a hundred million dollars.

Luis: That’s right 

Josh: [laughter] So the investors in the room who passed said they were not on board with the market. Like manufacturing companies in Mexico was too small for them. and they didn't see how you could turn that into a big like billion dollar business. Do you hear that a lot from US VCs?

Luis: I get that like as a first impression maybe being from the states, you see other smaller countries like yeah I don’t think that’s going to be a big enough market. Which it is, it totally is. Uh, Today there are 770,000 manufacturing companies just in Mexico. We only need 5,000 to, to get to a hundred million dollars in, annual recurring revenue to be a billion dollar company with the average revenue that we're generating today with our current users. 

Josh: 770k Manufacturing companies??

Luis: Yeah 

Josh: Did you know that number in the pitch room?

Luis: Yeah, I did. I, I, I did all my numbers beforehand in case I got that question. 

Lisa: Okay, why didn't you say it in the pitch room? 

Luis: I didn't get that question. I only had two minutes to do the pitch. 

And something that we, I like to point out is that on the tech industry, the VC, the startup world everybody knows about our competitor because they raise this amount of money and they read crunch base and whatever. But our market doesn't do that. Our market’s focused on something else. They're not –

Josh: Wait, you’re saying manufacturing companies in Mexico don't read TechCrunch? 

Luis: That's right. 

Lisa: [laughs] 

Luis: We have our survey on our data room. We asked our customers if Kredfeed ceased to exist, what would be your other alternatives? Nobody mentions these other large startup 

Josh: How's the rest of your round going? You had raised, I think, 905,000 of your 1. 2 million round on the show. where are you at right now?

Luis: The round is basically done. We're actually just missing coincidentally, only 50k.

Lisa: [laughs] 

Josh: Oh my gosh, you're so close. 

Luis: We are. We actually got some tickets this week. So we're, we're there. 

Josh: Well, there's one thing nobody ever doubted. That was the jockey. 

Luis: That's right . 

Josh: Got to love that.

Luis: I do. it was comforting to hear that. 

Josh: Oh gosh. 

So… Lisa and I did a bit more digging in on this deal. And while I respect all the VCs on our show and their opinions. I think Luis is on to something big. 

People are seeing this as a lending company, but actually I think KredFeed is more like vertical software. Luis is using factoring as the trojan horse to get people to use his software. Automating the accounts and receivables for manufacturing companies. Does it sound sexy? No! But will it get manufacturing companies hooked on his product? Yes! 

This is one of those markets that sounds smaller than it really is. I believe Luis can build a massive software company. A software company, that just happens to do a bit of factoring.

So… The Pitch Fund is investing $50k in KredFeed.

If you're interested in investing with us, you can learn more at thepitch.fund. We just hit the halfway point for fund 1, but we still have room for listeners to join. If you invest now, you get ownership in allll the companies we’ve already invested in so far. It’s a pretty good deal. 

Next week on The Pitch… finally, pants you can pee in

Georgia Grace: Pants were never designed to be worn by women in the first place. 

Georgia Grace: Until now. This is the GoFly technology. 

Elizabeth: I might just be dense, but could you explain what this tech is? Is it the zipper? 

Georgia Grace: it appears like two different zippers, but this is actually one continuous zipper track that's sewn down between two pulls. 

Georgia Grace: And then there's a custom fabric flap on the inside so that they're really comfortable. So comfortable that a third of our customers actually go commando.

Cyan: I have an investment in my portfolio that you remind me of: Sheertex. 

Elizabeth: Oh, Sheertex is amazing.

Mac: this innovation's dope. You're dope. I have a problem, though.

Answer nature’s call, next week on The Pitch. Subscribe now and turn on notifications so you don’t miss it.

This episode was made by me, Josh Muccio, Lisa Muccio, Anna Ladd, Enoch Kim, Jackie Paapanair and Alma Langshaw. With casting help from Peter Liu and John Alvarez.

Music in this episode is by The Muse Maker, Breakmaster Cylinder, Strange Knight, Cold Storage Percussion Unit, Boxwood Orchestra, and FYRSTYX

The Pitch is made in partnership with the Vox Media Podcast Network.