Mi Padrino: Building a Global Business in an Emerging Market
As her young children played in the yard at her home in Houston, Juliana Garaizer sat on the deck reviewing one of her recent favorite investments as a Partner with Portfolia – Mi Padrino. She had just agreed to lead The Rising America Fund, the first venture capital fund led by five top women investors, all of whom would be women of color. They would invest in 10 high potential companies around the country– led by or focused in markets or innovations that were of interest to African Americans, Latinx, other people of color, or in the LGBTQ.
Juliana thought about the power of the Latinx market, today and in the future. Her husband is of Mexican heritage and she had immigrated from Spain. She knew that today 1 in 4 children in the United States K-12 population is Latinx, and Latinx purchase power is estimated to be $1.4 Trillion dollars, yet Latinos receive less than a 1/10th of a percentage of venture capital in the US.
Juliana had led the Portfolia’s investment in Mi Padrino back in July 2018, and she was planning to check in with them this month for a review of their progress to date, as well as get a clear picture of their projections, strategies and challenges for the next 18 months.
She thought back about her initial analysis of the strengths of the company and some of the weaknesses that she knew would need to be mitigated for their joint success. She had liked the focus and market size – creating a crowd-gifting platform initially focused on Quiceañeras – the coming-of-age party for Latina 15-year-olds, with an average cost of $25,000. Once they attracted the girl and her patrons, they would follow her through her wedding, births and other gifting events. And with the Latinx market the fastest growing demo in the US, she knew that major corporations and main street businesses were all searching for ways to show their devotion – which would be a major revenue opportunity as well.
Juliana had been impressed with CEO Kim Gamez. In just a year and with a tiny amount of cash, she and her part-time team had designed and launched the gifting platform, created a barebones marketing strategy, and attracted 90,000 users, resulting in approximately 8,000 events. 40,000 visitors had come in in the 1Q18 alone. She had early proof that the casual, family-based system of ‘padrinos’ – godfathers – supporting family events could be moved to a digital platform. But it was just the beginning.
And though this was a major accomplishment, the team was inexperienced in the tech world, and headquartered in Michigan. Kim had been a successful restauranteur but had no tech or digital experience. Her heads of tech, marketing and sales were all part-time and the bulk of her team were interns. She believed that she could convert them to a high-performing full-time team, and she had for the most part been able to do. Her husband was also on the team part-time as head of branding, which for many investors is a ‘deal killer’ and he had left company management as a condition of the investment.
The financial model itself needed to shift from purely transaction fees on events to an additional focus on revenue from affiliates and partnerships, but that would take significant marketing dollars and business development focus.
The financial projections were overly optimistic, not uncommon with a fresh start-up team, which required a financial adviser to be added to the team. Kim demonstrated that she could recruit top advisors, bringing in Carley Roney, CEO and Founder of The Knot, a major player in the wedding market.
Still, Portfolia felt the team needed depth in building relationships in the Latina corporate world. Portfolia wanted Juliana as a board observer for a $100,000 investment and dropped its commitment to $50,000 when the lead investor, Astia, refused.
Juliana had seen Mi Padrino’s latest growth numbers and was impressed. Their goal by July 2019 was to grow from 90,000 users to 300,000 users, and they had crushed it with over 500,000 users on the platform by July 2019—a huge achievement. Her board had pushed Kim to drive for user growth not revenue, and though she had over-performed as requested. The revenue was under target though and Juliana thought the Portfolia team might have preferred a more balanced approach to growth, ensuring the revenue numbers were aligned. Still an amazing performance by the Mi Padrino team, with an amazing future ahead.
Questions to ponder:
1) The Silicon Valley measure of success is User Growth, often over revenue or profit – capture users then monetize. But companies like Uber, Lyft, Robinhood, Ellevest and others have difficulty showing any trendline for profitability. What is your view of user growth, rather than revenue growth or earlier profitability?
2) An early potential deal-killer was that Kim and husband Victor had been business partners in other endeavors and wished to remain so in Mi Padrino. Many VCs are loathed to fund couples, yet companies from Cisco, to EventBrite to Houzz were led by couples. Have you been in business with a spouse or other family member? Would you consider it? If so, how has it worked out? What would you need to do to make it successful?