Emerging markets in a new era for digital
Born in Dallas, Texas, Kyle Miller first got his start in emerging markets when he was working at Uber. His roles at Uber spanned data analysis, product management, international growth, and strategy–focusing on rider and driver growth in fast-changing markets such as China, India, Russia, Indonesia, Mexico, and Brazil–and later, helping to build the marketplace for Uber Eats. Kyle shared that this was when he first “felt empowered by the opportunity to build products for people outside of the U.S.,” recognizing how, even when people don’t share a common language, they’re united by having access to the same information via the Internet.
At Uber, Kyle met his co-founder and Nelo’s CTO, Stephen Hebson, when he was a Software Engineering Manager for the Uber Eats Expansion team, overseeing new markets and new business models including cash on delivery.
The two saw firsthand how apps like Uber’s helped facilitate economies’ rapid movement from cash to digital payments, and in 2019, decided to go all-in on what would become Nelo.
The vast opportunity space for Nelo
Nelo was born out of two technology mega-trends related to access and changing consumer behaviors, and a clear underserved audience opportunity. Only 12% of adults in Mexico have a credit card (vs. 80% in the U.S.) and ~50% have a bank account (vs. 95% in the U.S.), but Kyle and Stephen recognized an important trend towards high smartphone penetration (~72% in Mexico, and “virtually all of Nelo’s target audience”) as essential to changing this. The other significant trend Nelo taps into is the growing popularity of real-time payments in emerging markets, which could ultimately render the need for debit cards obsolete. Kyle and Stephen “found from day one that our value proposition – ‘we offer you credit at all your favorite online stores’ – is something this audience wanted” – so much so, they report, that a majority of their active users are acquired entirely by word of mouth.
Reflecting on the market opportunity, Frances Schwiep, Partner at Two Sigma Ventures, which led Nelo’s Series A round, says, “We strongly believe Nelo is cornering a unique intersection of trends and market accelerants and has the potential to leap-frog credit cards entirely as a predominant form of financing and payment in LatAm. Nelo’s team is taking advantage of Mexico’s stark lack of access to credit, an existing cultural norm that favors paying in installments, favorable demographic and regulatory characteristics, and Nelo’s unique and proprietary data assets to create what we expect will be a breakout fintech app. Finally, Nelo’s direct and recurring relationship with the consumer deepens trust and loyalty beyond what we’ve seen with most fintechs. Ultimately, this dynamic creates lasting value for the ecosystem.”
While Nelo believes the success of giants like Klarna and Afterpay can be seen as validating some aspects of Nelo’s business model–from the notion that consumers find financing in installments easier to understand than a line of credit, to the potential for marketplace products–Nelo differentiates itself through its primary focus not on competing at checkout, but rather on its app-based product, which it believes can give it an edge.
For one, Nelo believes the SKU-level data gleaned from being mobile-first enables Nelo to compete more effectively on credit limits and price, core drivers for sign-ups and retention. Further, by building a product that is mobile-first for a consumer base that has buying power and high purchase intent, Nelo believes it can layer in merchants’ offerings and seamlessly evolve Nelo into a marketplace. Unlike credit card apps, the Nelo app serves as a destination where consumers are making purchase decisions.
For fintech builders everywhere
Kyle credits Nelo’s growth to “taking a huge opportunity area and applying a lot of rigor and discipline in building a business.”
His advice to other fintech founders is that “unit economics trumps all else–gone are the days where you can buy market share and monetize later. You have to prove you have a sustainable business while you’re growing.”
Because of Nelo’s consistent focus on unit economics, Kyle believes “we can move the metrics we want. We hone in on 3-4 KPIs every month that the whole team focuses on, and everyone knows how they roll up to those.”
In working to build a sustainable business, Kyle credits Stephen in sharing that, “it’s really important to limit the number of people you hire, since limiting the number means focusing on quality. The notion of a 10x engineer or data scientist is actually true. Focus on finding that person and staying lean.” Kyle notes that Nelo only has 36 employees “when many companies at Nelo’s stage who have raised the same amount of capital have 2-5x that number.”
We can’t wait to see how the team at Nelo continues to apply rigor, discipline and ambition in seeking to redefine the future of digital payments and enable digital commerce across Latin America.