Federico Malek, a seasoned entrepreneur from Buenos Aires, Argentina, has navigated the complex waters of startups and acquisitions, establishing himself as a prominent figure in the business world. His journey, marked by strategic decisions and keen insights into the dynamics of emerging markets, offers a wealth of knowledge for aspiring entrepreneurs.
Federico's latest venture, Wonder Brands has attracted funding from top-tier investors like Alarko Ventures, Kube VC, Mountain Partners, and Spectra Investments.
In this episode, you will learn:
Building startups in emerging markets like Argentina requires strong unit economics and sustainability from day one due to macro and political fluctuations.
Early exposure to successful entrepreneurs inspired Malek to pursue entrepreneurship in Argentina's burgeoning tech scene.
The high-growth, high-burn model is less suitable for emerging markets, where stable capital markets are scarce.
After selling his first company to Groupon, Malek shifted to developing sustainable, profitable business models.
Wonder Brands focuses on creating consumer discretionary brands for Latin America's rising middle class, emphasizing sustainable and profitable growth.
Raising capital in Latin America is more challenging and time-consuming compared to more mature markets like the US and Europe.
Aspiring entrepreneurs should carefully choose their market, considering both potential and challenges, rather than being attached to their home country.
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About Federico Malek:
Federico Malek has over 12 years of experience in the business world. In 2020, they became Co-Founder of Wonder Brands and a Member of the Board Of Advisors at Salesforce.
From 2017-2020, they were the CEO of iúnigo, an Insurtech carrier focused on customer experience. From 2014-2017, they were the Co-Founder and CEO of Avenida Inc., a pure-play e-commerce with end-to-end fulfillment.
From 2010-2014, they were the Managing Director at the South Cone of Groupon, where they led the company from scratch to insane growth rates. In 2010, they were also Co-Founder of Walooz, which was later acquired by Groupon.
Lastly, from 2008-2010, they were an M&A Analyst at IB Partners (currently Landmark Capital), where they worked on M&A projects in Argentina, Chile, Brazil, and Colombia.
Federico Malek obtained a BA in Economics from Universidad de 'San Andrés' in 2007. In 2009 and 2010, they attended Georgetown University McDonough School of Business to pursue a GCL 2010.
Entrepreneurship, Leadership. In 2019 and 2020, they attended Stanford University Graduate School of Business to pursue an Executive Program in Leadership.
Currently, they are pursuing a Master of Business Administration - MBA from Kellogg-HKUST Executive MBA, which they are expected to complete in 2022. In April 2015, they obtained an Endeavor Entrepreneur certification from Endeavor.
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Read the Full Transcription of the Interview:
Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So today. We have an amazing guest. You know I guess that has done it multiple times you know, um, he he has some exits too which is amazing and we're going to be talking about fundraising and emerging markets versus let's say what you could be experiencing fundraising. Let's say in the Us. In other places. Ah that are similar also thinking about regional operations going regional scaling teams and also scaling the operations in parallel as well as you know what happens you know when you go through that full cycle of building. You know, scaling financing.
Federico Malek: Um, um I would say.
Alejandro Cremades: And also reaching the finish line with a company that you founded from the groundup. So without far ado let's welcome our guest today Federico Malik welcome to the show.
Federico Malek: Thank thank you! Thank you and it's a pleasure to be here.
Alejandro Cremades: I so originally born and raised in Argentina because I walked through memory lane. How was life growing up. Okay.
Federico Malek: It oh it was great. It was great Argentina it's I always say the same I think that I'm im in love with my my my hometown buenosidis I think it's one of the best cities in the world. Super eclecive. It's great to do you know the type of thingss that we do and and you know a lot of there are there are a lot of ah tech startups here. There's a lot of talent. So so one of item was great. I love soccer I love beef. So it's kind of like the perfect city for me. Yeah.
Alejandro Cremades: So in your case How how did you get into the world of entrepreneurship and business I mean I know that you studied economics but they but this whole venture world. How did it come knocking to you.
Federico Malek: Ah, so yes, um, I'm in my thirty s right now Mid thirty s so so when I was in in college um in in probably early two thousand here in in Argentina we had. This amazing success stories for kind of like the first wave of entrepreneurs of ah web and internet entrepreneurs with you know that they were making great companies like vericali they like deremate. You know all the first. Very successful. Let's say wave of companies and I was really inspired by them when when I was tatting in college when I was in school high school and I probably knew from the early beginnings that I just wanted to go there I just wanted it to be. You know this kind of. You know guys you know raising money ah from international and global investors. Um, you know, funding companies and doing companies that were really with very inspiring. Let's say purposes and missions that were really trying to. To change the way we do certain things in light am so I guess that up from the early beginnings I knew I just wanted to go there. It was just a matter of time. Um, so so when I had the chance you know after college I went to started doing investment banking m and a.
Federico Malek: Probably 1 of the most typical let's say outcomes for for a photograph graduate and after that I just you know after two years two years and a half I just thought hey this is my time I need to try I need to to risk and and to take some risk and and and I just you know took the the shot right.
Alejandro Cremades: So let's talk about that because I mean it was ah you know, kind of like a similar model to to group on and they were talking about. You know I mean the the company went public. You know a group on you know back then but but but I guess. Groupon ended up acquiring you guys and then you kind of like started developing or or doing the expansion you know across latin America so how is that journey like.
Federico Malek: We it was an amazing journey. So the first company we were really lucky because ah so when we were like 24 years old we started we we started learning about this this when we started kind of like analyzing what type of companies we wanted to do we understood that ecommerce.
Federico Malek: Was an amazing opportunity for latin America and we learn about this new you know project that was really um, doing very well in the us and back then um, rubon and we started analyzing and we thought you know we reached the conclusion that. For that time for for different reasons. Um, this model was going to be very successful and indeed after you know a couple of years after that the penetration that we had with Groupon in the region was higher that in certain time you know and you know, ah. European countries so we had like ah, an amazing success with the Groupon model and attempt. But you know back then we we knew it was going to be successful and we started ah a groupon clone you know a Groupon kind of model a heart discount. Company called Wallus that was offering hard discounts in different local services in in in bonoitis and um, you know 1 year after we started, we got approached by one of the ah by the roupon team. That they wanted to go international. So we we started talking and we ended up selling. You know our company. Our startup to to them. No.
Alejandro Cremades: So what was it like to go through an acquisition process because this was you know the the first time around and and I'm sure he was frightening. It was exciting but but how was that like.
Federico Malek: It it was it was um, it was very exciting because we knew that. Ah, um, this this was of course changing our let's say the dude was going. You know take us to a. Totally different level. You know and and six months after the acquisition we we went from a team of 16 people to almost 180 so we knew that um you know this was really going to change the the our company for the better.
Federico Malek: Um, ah you know we were young. We were kind of like eager to to take the experience. Um, and we we didn't think you know we didn't thought about it like ah us like ah like ah um, like a frightening experience. We.
Federico Malek: When when we had the chance to do it. Um, we just took it I mean it was like and it was obvious for us that we should you know, go over that. Let's say path and let's say the only problem that we had back then is like hey we are a startup we're doing Well. Um. Maybe this is like ah an early exit for us and maybe we shouldn't take it but the way that we structure it. You know with earn out made us possible to capture the future growth that that the company had So um. So It was overall I think it was a good deal. A very good deal for us and ah and and um, much better experience.
Alejandro Cremades: So in the end, you know you guys send it up a starting an e-commerce company. You know, right? after the whole you know, seeing the company going public and you know all of that day. Good stuff. You ended up venturing you know and going at it again. So. Call us about tell us about what happened with Avanita how? How did you guys come up with a concept and and the idea of going at it with it.
Federico Malek: Yeah, yeah, so after we saw the the kind of like the penetration that roon had in in in latin especially in countries like Argentina and Chile Colombia um, the you know the the model really. was' really successful in these countries and um, ah you know there was kind of like ah it was obvious for us that ah a more pure play ah player of ecommerce multicategory more alike more similar to Amazon. Was going to be really successful in in in Argentina as well. Um, so we started with that idea so in Argentina back then we had a groupon we had medical daily that back in in that moment in 2013 2014 it was a model that was very similar to to to ebay. Um, and we thought hey we there's there's a big room here to create an Amazon business model. Let's say a pure pure play commerce with own fulfillment doing marketplace for other players selling 1 party. Um. Stock and inventory as well with a great customer service with a great customer experience. So we started you know we started a company in 14 we raised you know $50000000 from 3 subsequent rounds from global vcs like tiger global by naspers.
Federico Malek: And probably what we didn't realize back then is that ah you know doing doing business in emergent markets. So and raising money for emergent markets is a little bit difference than that in the us we. We you know. The the the business model of a pure play commerce. It's extremely Let's say relay relies you know a lot on on on capital and and the problem of emerging market says that especially in Argentina is that the macro and the political fluctuations are very extreme. Um, as you can see right now from what's going on right now. But um, so so um, so in you know in 1 of this downturns. It became really difficult to continue you know raising money for the original model and back then we realized that we had a you know, very good. Um.
Federico Malek: Techg for for to sell it as software as a service. Um for other players because our platform was really good and um and and so we kind of like Pivoted. We sold the business we pivoted it to to more of ah, let's say software. As a service platform for non ecommerce players that wanted to to to to be um or become a marketplace like banks like other retailers and um, those type of players so that is what we realized back back back then you know.
Federico Malek: If You are thinking about a business that relies on Capital to grow and you know you you really need to think about what's your Target market right? because emergent markets the problem that you have is that you know these fluctuations make it really difficult. Ah, to to kind of like continue this type of business for the long run. Yeah.
Alejandro Cremades: So then so then obviously we have Anita you know there was quite a a bit of lessons learned I think I guess which one was the top one that you took away with you from the Avannia experience.
Federico Malek: And it's it's what we said I mean top 1 is is um, you know if you are doing. Ah so so everyone is talking about probably kind of like ah you know ah becoming profitable right now and you know having profitable growth. And probably for a lot of companies on a lot of startups this highrow high burn model. It's it's not working anymore what we realized back then in 20152016 is that the highrow high burn model was not suitable for a lot time. Um. Because you you cannot rely on having let's say a very mature capital markets that could um and you know a lot of you don't have a lot of investors that are willing to invest like big amounts of money in laan to sustain a high-growth highburn model. You know. So um, so like ah so so so that's that's that's the main lesson that we learn if you want to do a startup in emerging markets. You better. You know you better figure out how to become sustainable from the early beginnings and have strong unit economics and. Ah, probably instead of ah starting a highburn high-growth business model. You should become really aware how to make a sustainable business from the early beginnings because probably and and this is everybody that is doing you know business in emerging markets face it in some way. Um.
Federico Malek: The you know in 1 year you the the the markets where you are operating might you know be really hot for some investors and you know in in eighteen months the situation can change dramatically and you can find in yourself in a very tough situation to raise money. Although the company might be doing well and might be doing great. So so so that is very important. You know if you're starting a business here. Um, you know you need to figure out how to become sustainable from day one if you like to do like let's say a highrow highburn type of business.
Federico Malek: You probably should go to a more mature market like Europe like some places in in Asia or in of course the us. Ah, but but not in but not in latintime not in in in kind of like mid emerging markets.
Alejandro Cremades: So then it's quite a shift going from ecommerce to insure take so why different segments. So what? what? what trigger that.
Federico Malek: Um, yeah.
Federico Malek: I just wanted to I always felt um, very curious about doing stuff outside of ecommerce I wanted an experience there. Um, after Aveita I just wanted so so so you needo. Was the first insurete. Um, let's say end-to end insure tech of latin um, you know we had some let's say ah websites like comparisons. Um, you know, but we were an we we are on an authentic.
Federico Malek: Ah, end-to-end insurance company and um, when I watch you know our you know main shareholder was one of the largest um insurance companies of of the region. So when I got approached by them. You know I guess I needed an experience where after Aviita I needed an experience of like Okay, let's let's let's let's try to do something different. Let's try to do something within like a large institution and um, you know, just ah.
Federico Malek: Keep it. Let's say come for for a couple of years and and so I started this. You know it. It was a great experience. I really enjoyed um because it was really different. It was much more. Let's say tech than than than doing ecommerce. Um, because we had to ah. Software for underwriting for fraud prevention for issuing ah of you know policieses. We had to create an entire interface and digital interface to to interact with the you know with our digital customer that was acquiring. our our products um so it it it was it was a great experience after ah, you know some years I wanted to go back and you know be be. You know to you know start my own business again. Um. And that's what we did and and and and we wanted but you know with all the experience that we had um before with you know my you know my founding colleagues and you know my my partners we we we wanted to go back to ecommerce because the ecommerce opportunity is yeah. Huge in latan la time is is the fastest rowing e-commerce market in the world. Especially Mexico it has a lot of room to continue expanding but we wanted as I said before you know we had a lot of experience and we we started like kind of like um, creating some dogmas like.
Federico Malek: So dogma number one is like we're not going to make a company that um, that loses money I mean we are going to start a company that is sustainable and profitable from from day one number 2 we we don't want a company that relies exclusively on customer acquisition. Customer aquisition is like insanely high for for for Latin America as it is in other countries and other parts of the world but we want to do ecommerce so we we decided that that ah the way to kind of like ah when you mix all this. You see we saw and an amazing opportunity on creating digital brands. You know for the digital buyer for the digital consumer. So that's what we're doing right now in wonder runs that we started in 2021.
Alejandro Cremades: So let's talk about the business model there now of wonder brands. How do you guys make money.
Federico Malek: So so we create ah we create consumer discretionary brands for the rising middle class of latin america so we are serving a huge market of 400000000 people. Um by serving them and providing them. Um, consumer brands in discretionary categories such as home garden and ah pets accessories, baby accessories, tools and all the you know do- yourself essentials mattresses and sleep products we have more than 16 brands over 3000 products that we sell. On online marketplaces on our own d two cs channels as well. We are right now one of the top 10 marketplace operators in Latin America and of course yeah, but.
Alejandro Cremades: So so so how how is it going to the um, the whole approach for example of because I know that you guys have raised 35000000 here what has been the experience of raising that money and then also what is it like to raise money.
Federico Malek: In it.
Alejandro Cremades: You know in the us versus let's say raising money in a place like Latin America
Federico Malek: It's very different. So so yes, so um, we have a tech backbone that help us develop this brands. Um, and you know it's it's it's I mean probably the.
Federico Malek: The success that we had because a lot of the brands that we have right now in our portfolio have become really champions on their categories. So for instance, we have the number 1 selling mattress brand of online channels in Mexico we're selling more mattresses than anyone else. Our. Ah, luggage brand that is called Rumbo it's ah you know it's the number 3 luggage brand from Amazon in Mexico as well. So we have a lot of success storieies we we were able to really penetrate in some categories with our brands and I think that the main reason is that ah because we are doing it very different. We are developing brands as you develop software with you know, starting with and Mvp and from an Mvp. We iterate the the products and we get to kind of like the winner product very fast. And once we get that we start investing heavily on on that product. But once we know that it's it's going to be a successful product so it's it's a very lean approach that we learn from you know, almost ten years doing software and we took it to the real world and that's kind of like our secret sauce. that's that's our main differentiator. Um.
Federico Malek: And you know raising money for this model raise money in emergent markets raising money in Latin America it's very hard all right. It's it's very difficult we had I think we had like ah um, like a golden age from 2016 to 2020 1 2022 with all this money coming from softbunk and a lot of other you know funds that were really active in the region I think that some of them are still active. But the options that you have. To raise money and latin in America are are much more reduced than in the us and when in a moment of like low interest rates a lot of investors go to this type of um, emerging markets to seek you know for growth alternatives when you know. Interest rates go up. There's a fly to quality and this regions tend to try up so it becomes more challenging I think that great companies are always going to get funded somehow. Ah, regardless of the region. But it's it's it's the options that you have in a lot time are a little bit more reduced so you need probably so to ah have a lot of friends that are raising money and have raised money in the us and and we were kind of like aware of the process. There. So.
Federico Malek: A typical process that in the us might take you know three weeks four weeks to get a termate and you know probably close a deal in like you know, like probably a month and a half two months it probably takes four months here in in la ham you need to see. It's a lot of other investors. Investors are a little bit more cautiousuchious about investing in laam. Um, they they probably start doing like a very tough due diligence. You need to be prepared for that. Um, and um, you know, just the.
Federico Malek: You need to be aware that the process is here in in in that time are they they take more time they are more difficult they end up being like very different from the original plan that you designed so so you the the companies need to be prepared for that. Um, in in the Us I've seen companies you know, running out of cash doing it. You know, just knowing that they can raise money because the the market is the capital markets are much more Ma material. It doesn't happen here in that time so you need to be more careful when you when you plan ahead.
Alejandro Cremades: So when when planning ahead you know I'm thinking about the vision here. Obviously that's what the investors reallyly betting on. So if you were to go to sleep tonight feday and you wake up in a world where the vision of wonder brands is fully realized what does that world look like.
Federico Malek: It's so it's it's it's probably a very similar world than than than the one that we have right now I think that um latam has made a lot of progress and some of the latin american ecommerce markets are have become really big right. So we just need. We just need time to realize our mission. We are right now. Um on a $100000000 run rate in in in terms of net revenues and we know and we we still didn't launch Brazil and we with Brazil we can. Triple you know the size of our company on a very short term. Um and we know that it you know very in in a very short term. Let's say in less than three years we can be doing $500000000 in sales. So that's a big company even for the us right? so. So it's it's it's just a matter of time of continue deploying and continue taking our brands to the rest of the latin american countries. Um, so so so it's a matter of time I mean the the market is ready. There. It's already big. To create huge companies like the one that we are creating right now at wanderbras.
Alejandro Cremades: So let's talk about the past here because now you know you've built several companies. So if I had to give you the opportunity where let's say you're coming out you know of now being a graduate you know they're at the university that day and on this and you are now thinking about the. You know, maybe like a world of your own a world where you know maybe you can bring a solution to a problem that you're encountering. Let's say you had the opportunity of having a chat with your younger self. You know, maybe maybe even that younger self that was coming out of of giving the notice at the investment bank where you were at you know, initially and. You were able to give 1 piece of advice to that younger self that younger feday before launching a business. What would that be and why given what you know now.
Federico Malek: Well probably you know one of the best advicees that um I would give to any entrepreneur coming out from argenino or any any other merchant market is that you you choose you choose you need to choose very wisely the country where you're going to to. To start your business because we tend to have let's say um, we tend to you know store our business in our hometowns and in our home countries and that's because we think that it's going to be easier to start there than in any other country or in any other market. Ah. In in the world you know and and yeah because I'm I'm from Bonociis or I'm from Spain or whatever probably it's easier for me to start my business there but you know, starting starting your own business. You know this I hand rate it's it takes a lot of effort and it's it's it's a pretty hard. It's it's a very hard business to start a company and um, you know, just don't be attached to to your home country. Don't be attached to a country where you were where you were kind of like born. Ah. Because that probably not be the best option for you. You know like ah so so so so probably I would have started. Ah, ah you know a startup or a company in in in other parts of the world when I was younger. Yeah I mean.
Federico Malek: Younger people tend to be a little bit have a lot of more liberty to to travel around and you know move to another country is move to another regions. Um I would probably you know recommend that to to my younger self just you know if you want to start a business. Choose wisely where you want to to to to do it because it's going to be hard anyway, it's goingnna be hard here in the Us in Europe or in India or whatever. But if you choose your your market wisely. You might you know you, you won't have to to fight or let's say. You won't have the obstacle of ah of the ro market for your business. Do you know? what? what? I'm saying like it's the same I mean it's it's us hard. You know probably doing ah the business in India and ecommerce you know e business in India it's as hard as as probably doing it in Mexico. But India is 10 times biggerer you know? So so so that's that's it. So probably you know when you're in your thirty s in your 40 s you know, moving to India. It's a little bit more difficult but when you're starting out you know, like probably that's an adventure. You know.
Alejandro Cremades: A hundred percent fed it for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Federico Malek: Ah, probably Linkedin Twitter ah, you can find me there and happy to answer any questions or you know engage into any conversation.
Alejandro Cremades: Amazing well faith it. Thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Federico Malek: Thank you very much alejandro and hope to see you soon.
*****
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