‘Too Much Capital Is a Double-Edged Sword’, Tiendanube’s CEO Says

With a valuation of $3.1 billion, the Argentine e-commerce unicorn is Latin America’s fifth most-valuable

Photo: Tiendanube
May 03, 2022 | 12:30 PM

A little over 10 years ago, five graduates of Buenos Aires technical college (ITBA) left the school with a common idea, “to help SMEs and entrepreneurs to develop in the brand new digital economy”. That group was made up of Santiago Sosa, José Abuchaem, Martín Palombo, Alejandro Vazquez and Alejandro Alfonso.

“Nobody knew very well what it was, and today the concept of the digital economy still sounds strange to some people,” Santiago Sosa, CEO of Argentina e-commerce unicorn Tiendanube, said an interview with Bloomberg Línea.

“In a changing world, where the rules of the game are different, from the beginning we were looking to help contact the more traditional customer, the one who comes from the street through a platform. On the other hand, we had to teach those who came from working in a physical operation how to advertise, to communicate in a different world,” Sosa recalls.

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The first five years were difficult for the company because e-commerce penetration was less than 1% and there was no habit of online consumption. However, the focus was always the same. More than a decade later, Tiendanube’s valuation at $3.1 billion makes it the fifth most-valuable startup in the region, as reported by the company, and the 11th Argentine startup to achieve unicorn status.


Following its most recent financing round, in August last year, when it received $500 million, its board of directors now includes one of the first investors in Facebook and Slack, among other high-profile executives. “Having exposure to those people who are in the top league is great because you get ideas, contacts, experience, learning; it gives you a very, very big knowledge advantage,” Sosa says, and who adds that he is now preparing an even bigger venture.


The company will soon invest around $10 million to launch Tiendanube Capital, an investment fund created by the company to strengthen the e-commerce segment in the region.

Photo: Courtesy of Tiendanubedfd

The following conversation was edited for length and clarity.


Bloomberg Línea: The pandemic must have been complex for Tiendanube, which was already on a path that many had not taken, and because the company has done so well and even become a unicorn.

Sebastian Sosa: Between 2015 and 2019 we had already started to see a lot more speed, a lot more traction. At that point, the company started to grow at a steady, consistent rate. Every year we were growing at rates of 50%. And that basically put us in a situation where, prior to the pandemic, we had managed to create one of the largest entrepreneurial networks in Latin America, and without a doubt the largest in Argentina. There were a number of things that we did well, the first was that our product had historically been designed to be very, very easy to use. We also always tried to make it very cheap. When the pandemic broke out and everybody was forced to use digital services, those advantages were very noticeable and a massive amount of SMEs got onto our platform very quickly. And the business basically grew five-fold in 12 to 18 months. But we went from 20,000 or so clients to 80,000 or 85,000; we went from $20 million in sales per month from our clients to almost $100 million. So there was a very abrupt peak that was basically difficult to navigate.

Was the infrastructure sufficient or did you have to go out and expand all at once?

We had to abruptly implement expansions of all kinds. Although our technological infrastructure was elegant, neat and well assembled, it did not have the size to support such a scale. So we stopped all development and focused on taking the technical infrastructure to the next level, and we came out of that much stronger. And then, on the other hand, we had to strengthen everything related to customer support, because our customer service team was sized for a base of about 20,000 customers, and suddenly we were adding 1,000 customers per month at first, and then 8,000. We also had to very aggressively expand the team in a very short period of time and all remotely.

In between the funding rounds and achieving unicorn status....

I think something we did very well was that we were able to access two rounds of financing, some of the most important in the history of Latin America. The round that led us to become a unicorn was the largest in the history of Argentina.

In August 2021, through a Series E investment round co-led by Insight Partners and Tiger Global Management, we received $500 million. In addition, this contribution included the participation of other funds of the greatest international prestige.


Had you been trying to put these rounds together before the pandemic or did the pandemic boost investor interest?

It was a little bit of both. In 2019 we were looking for investment, the truth is that although our ambition was very big, it was not as big as $500 million.

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It wasn’t part of your plans?

No. Anyone who says they had that in their plans is lying. What happened was totally unforeseeable. We did have the same vision that we have today, to build a very large ecosystem in the very long term. If I go back to 2019, we were looking for a capital sum much closer to $30 million, which was effectively what we ended up getting. That gave us the energy to be able to develop our plans for the next 18 months. Now, with this growth curve, what we saw was that on the one hand there was an opportunity to access capital that was not available before, and on the other hand, we saw that this capital could be put to good use.

And how did that change your roadmap?

The conceptual plan did not change. In concrete terms, it basically allowed us to go from a team of 100 or so to 700 in 18 months. Then we bought two companies, a logistics company in Brazil called Mandaê, and another educational company called Ecommerce na Prática. This expansion and these acquisitions were just to make our plan go faster.

The e-commerce company is one of the most valuable in the region.dfd
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In what sense?

Our plan has four pillars. The first is the core platform: there is still a lot to do in the shopping experience, to make it easier, more intuitive, to connect with more social networks, to make the vendor’s management experience simpler. The second is the payment plan: we launched a payment solution initially in Brazil, and which we are planning at some point for the rest of Latin America. This solution in less than 15 months became practically 20% of the turnover. Third, we launched the shipping solution. We are building a first-class logistics infrastructure, but making it 100% available to small and medium-sized businesses. And finally, the geographic expansion, which we launched with Mexico. We also have Colombia, Chile and Peru on our roadmap.

Does the unicorn status put you in a different place when thinking about each investment?

No, not to me, clearly there is a whole mystique around it. We have been congratulated and called and so on, which obviously makes one happy and grateful. It is great that it is happening in Argentina and I think it inspires a lot of new generations of entrepreneurs. I love all that part, but I would say that it doesn’t change anything about our DNA. But it can make some people dizzy. Too much capital is a double-edged sword. You should not get dizzy, you have to take care of your monetary resources as much as possible, focus on productivity. It is good to keep your feet on the ground.

However, does it give you a window on the world that you didn’t have before?

Yes, that is true. It helps you a lot, it helps you in attracting talent, clients. My head and my team’s heads are where they’ve always been. Now, it is totally real, you open a new market, a new sub-segment and you are in a very good executive position, and that helps a lot.


Has the SME mix changed at Tiendanube in this new economic and social context?

We started, if you will, very much associated with the world of small fashion brands, and that is still the case today. But, on the one hand, our technological platform was evolving and, along with the improvements we were making, our customers were also growing. That’s when we launched Tiendanube Empresarial, which is basically a product we have for brands that need something superior: a more personalized customer service, someone to accompany them in their day-to-day needs, who need more sophisticated functionalities. And this was the result of helping our customers throughout their trajectory, where they started small and grew. And as we were doing that, big brands started to join us, international brands such as Osram and Billabong, for example. In the pandemic it was very interesting because there was an area that we would never have imagined in our platform, which is food. We never imagined that a supermarket would use Tiendanube to sell, suddenly you could buy a piece of steak from a butcher, or fresh fish from a vendor in São Paulo.


What is your strategy to continue growing in a market that is becoming more and more competitive?

We believe it is to keep doing the same thing, but with more depth and more speed. We always try to position ourselves in a place of intersection between two great worlds. One is that of cutting-edge technology, which has nothing to envy Silicon Valley (management, lower purchasing times, payments, logistics, etc.), and the other is what we call the “Latin flavor”. The latter has to do with understanding that Argentina is in an inflationary context and understanding how that impacts an entrepreneur, understanding that Brazil is in an election year and understanding how that impacts the life of an entrepreneur, for example. We try to position ourselves in that intersection where our client feels that they have state-of-the-art technology, but at the same time that speaks their language, speaks Mexican for the Mexican, speaks Brazilian for the Brazilian and Argentine for the Argentine.

And in this complex context, how do you see the issue of pricing?

Pricing is always a very difficult issue. I believe that companies in general this year will be showing a more cautious attitude than we have seen in the last 18 months, especially those that benefited from the pandemic. I am not surprised that they are taking measures more oriented toward profitability than toward growth, and this may imply price increases and so on. The world is entering a phase of caution or one of less euphoria.

Translated from the Spanish by Adam Critchley