February 5, 2024 • 40 mins
Ever wondered how startups grow by buying other companies?
Today on Things Have Changed, we're delighted to host returning guest, Dylan Terrill, Chief Business Officer of Asaak, as he discusses his company's remarkable expansion, now spanning two continents.
Asaak, founded in 2016, is a fintech company offering loans for motorcycles and smartphones to people who couldn't get traditional bank loans. This approach not only addressed a critical financial gap but also spurred economic empowerment in Uganda.
Now they've set their sights on to Mexico, through a strategic acquisition of FlexClub Mexico. With over 300,000 active Uber drivers and a smartphone penetration of 93%, yet with less than half the adult population banked, Mexico presents a fertile ground for Asaak's mission-driven approach.
This move raises several questions: How will Asaak's experience in Uganda's unique market translate to Mexico's diverse economy? With Mexico's significant unbanked population, what new opportunities and challenges will Asaak encounter?
Join us on Things Have Changed for a deep dive into Asaak's groundbreaking journey and the visionary leadership steering it into new frontiers.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Shikher Bhandary (00:02):
Have you ever wondered what goes into
strategic acquisitions withinthe startup world?
How does one startup acquireanother?
What are the driving factors andlong term vision that would be
achieved via acquisitions?
Today on Things Have Changed,we're delighted to host
returning guest Dylan Terrell.
Chief Business Officer of Asak,as he discusses his company's
(00:25):
remarkable expansion, nowspanning two continents.
Dylan Terrill (00:29):
we are straddling Two continents by way of
acquisition into Mexico.
But very much still focused onAfrica and trying to come up
with a pan African solution.
Shikher Bhandary (00:37):
But first, let's give a quick refresher on
Asak.
Asak, founded in 2016, is afintech company that initially
made waves in Uganda by offeringinnovative financing solutions.
They specialize in providingloans for motorcycles and
smartphones, catering to theneeds of the unbanked and
(00:57):
underbanked population.
Dylan Terrill (00:59):
what we're essentially trying to build is a
financial services platformspecifically for mobility
workers in emerging markets.
We work with platforms likeUber, and we lend to their
drivers to help them buy avehicle to help them get access
to Emergency lines of creditfinancial services, like savings
and investments and insuranceproducts.
Shikher Bhandary (01:19):
This approach not only addressed a critical
financial gap, but also spurredeconomic empowerment in Uganda.
Now, Assak is stepping onto anew stage, acquiring FlexClub
Mexico and venturing into theLatin American market.
This move raises severalquestions.
How will Assak's experience inUganda help in Mexico?
Dylan Terrill (01:41):
One day we want to be in all of the different
pockets of the world.
Shikher Bhandary (01:45):
With Mexico's significant unbanked population,
what new opportunities andchallenges will Assak encounter?
Join us as we explore thesequestions and more, discussing
the strategic implication ofAssak's cross continental
expansion and what it means forthe future of financial
inclusion.
Dylan Terrill (02:04):
Mexico doesn't have usury right now.
Basically they don't have limitson what you can charge for
loans.
And I think that's a, it's ahuge, like predatory problem.
And it needs to end.
Jed Tabernero (02:52):
Today on things have changed podcast.
We have one of our very firstfounders that have come on to
the show.
When we started this back in2020, right after the pandemic,
our good friend, Dylan Terrellhad come to talk to us about a
sock, a Ugandan FinTech companythat has been making waves in
(03:13):
the last few years.
Dylan, welcome back to thingshave changed.
It's such an honor to have youback on the show, man.
Dylan Terrill (03:19):
Yeah, likewise, it's really good to be with you
guys again.
Yeah, super excited to dive in.
Love the show.
Just quickly, Asak, what we'reessentially trying to build is a
financial services platformspecifically for mobility
workers in emerging markets.
So we work with platforms likeUber, and we lend to their
drivers to help them buy avehicle to help them get access
(03:41):
to Emergency lines of credit tohelp them access other types of
financial services, like savingsand investments and insurance
products.
And our first market was inUganda and East Africa.
So we started back there in 2000and 18 had.
Taken a few different roads toget to where we are today sort
(04:02):
of had a hard pivot to mobilityin 2019 and then through the
pandemic and a few differentchanges, we've ended up to where
we are today.
I think for just a little bit ofcontext too, is, the idea was
that we would start in Africaone day, we would get to.
other markets around the world.
But thinking about this being avery much an African business,
(04:23):
we would expand to other partsof East Africa and then think
about casting our business intodifferent parts of the world.
So where we are now is that weare straddling Two continents by
way of acquisition into Mexico.
And I know this episode is aboutthat.
We'll dive into that in moredetail but very much still
focused on Africa and trying tocome up with a pan African
(04:43):
solution.
So we've set up businesses inother markets already in Africa.
Not publicly disclosed becausethey're still very much in early
days.
But as we continue to lookforward to the new year and 2024
ahead, I think we'll see alittle bit more of that
progressing.
But very much still focused onthe core business, trying to
provide the best possiblefinancial services to this
(05:06):
customer demographic that isgrowing and extremely bankable.
Shikher Bhandary (05:11):
Great, great to have you here.
I know we spoke literally amonth before the pandemic.
So, so much has changed.
I just wanted to ask justbecause of how relevant it will
be with our discussion of yourcompany expanding to different
continents, why was the decisionmade to cater to the mobility?
(05:32):
sector in Uganda.
Like why motorcycles?
Why bikes?
What was the reasoning behindthat decision?
Dylan Terrill (05:39):
Yeah, it's a great question.
Ultimately, when we started, wewanted to just be able to
provide financial services inthe form of credit to any type
of business in Uganda.
And we started with Uganda for afew different reasons, but
ultimately found that it was agreat market to be in and trying
to figure out how we couldleverage some of our experience
(06:00):
working in other markets andbring that to a place that
really needed this access tocredit.
And when you're looking at allthese different types of
businesses, it's very hard tounderwrite all the different
businesses under the sun.
There's somebody from like aretail shop or could be like an
import export business.
It could be somebody that's evenrunning a money lending business
(06:21):
of their own.
It's very difficult tounderstand, what are the macro
factors and micro factors thatmake that business?
bankable, investable and how wecan track a path to
profitability.
And what we found was, lendingto all these different types of
businesses.
This sort of segment aroundmobility was becoming extremely
popular.
There's a lot of labor shiftingin that direction of this sort
(06:44):
of gig economy where people arepiecing together work from a few
different sources.
And companies like At least inUganda, like Save Boda, like
Jumia, like Uber we're offeringa way for people to have a lot
more stable income.
And this, product has existedoff platform for many, many
years as a way for people to getaround town, to deliver goods
(07:07):
and services, to, go from schoolto work to wherever.
And we thought if we startlending to that segment.
We can one provide them with anasset that is income generating.
So the asset is a hard good.
You can't move it.
It can't disappear.
Cash can't be diverted into someother endeavor.
It has to go to the physicalasset.
(07:28):
So that's great.
And then it's income generating.
So it provides them alivelihood.
It's a clear path for them to beable to repay the loan.
If we're funding a new business,it's very hard to understand
will that work out or not, butin the case of buying a vehicle
that provides them with a steadystream of income, it makes a lot
of sense to bank that.
(07:49):
So we started moving in thatdirection in 2019, mid 2019, and
it became super clear justseeing like the first couple of
repayment cohorts that peopleare repaying on a weekly basis.
So payment volume and velocityis there.
It became very quick after thefirst few months that this is
where we should be.
And just thinking about this gapthat exists, not only in Uganda
(08:09):
and East Africa, but across thecontinents and across many other
markets.
So it just made a lot of sensefor us to start pushing in that
direction.
And so far, it's even throughthe pandemic, it's been going
really well.
Jed Tabernero (08:22):
So I think we talked about this a lot in the
first episode.
I think it's still aninteresting Angle to point out,
which is that there's typicallya reason why certain populations
or certain subsegments areunbanked.
And one of the things that Ifound at least is that, banks
are very traditionalinstitutions have looked at
(08:43):
these markets as like.
Super risky.
So it's tough for them to figureout, there's maybe there's not
enough data to be able to givethem the tools to start looking
at these areas.
Could you give us a refresher, alittle insight into how you got
comfortable with the risk?
Because obviously going intothis market, you're providing
this access to these folks.
(09:04):
It's a lot more difficult to getcomfortable with, okay.
How do I make sure that this isa sustainable business model?
How did you think about risk?
And how did you all deal withthat?
I guess in Uganda,
Dylan Terrill (09:14):
Yeah, absolutely.
I think it's a couple ofdifferent things.
One, just from a pure businessfundamentals perspective is you
have the option for some prettyheavy, like interest rate
arbitrage in a sense that,you're borrowing from the us USD
'cause we are a US headquarterbusiness.
We have one leg here where costof capital is relatively cheap
(09:35):
even for this type of business.
Whereas we can turn around andwe can lend at a pretty high
rate.
So even thinking about, currencydevaluation or potential for
risk premium it still is a veryprofitable business from day
one.
And of course, it's hard toknow, right?
You think it's very easy to lendup money.
Really, anybody will be willingto take your money if there's no
(09:58):
strings attached, if they don'thave to pledge, any sort of
collateral they'll happily takeyour money.
Getting money back isexceedingly difficult, but in
the case of having an asset backloan you have an idea that,
okay, every loan that we giveout is tied to an asset that
worse come to the worse, we cango ahead and repossess that
vehicle.
It's a very liquid market tosell a bike or to sell a car,
(10:21):
and someone else will come in,perhaps even in step over and
take that loan right from wherethat other person was paying, or
you can just sell it off and getthe cash back.
So from that perspective, it.
It's very risk averse on reallywhat people needed was just
someone that's willing to takethat chance.
That's willing to okay, lend outthat first 10 K or 50 K and make
(10:45):
a lot of mistakes, understandwhat works, what doesn't and
then iterate from there.
And I think that's what a lot ofthese digital lenders like us or
tech enabled lenders have triedto do is just go work with the
populations, try to find anysource of data that you can that
may indicate repayment.
Whether that is smartphone dataor actual earning data, whatever
(11:05):
you can find, lend off of thatand then iterate from there.
So whereas we may have startedwith pretty high pricing when
we're unsure about this market,it's now, trying to be the most
efficient, the most costeffective lender in the market
based on the data that we havethat's not accessible by a bank.
And that's usually why a lot ofthese populations have been
(11:26):
ignored is that from the dayone, it's not.
It's not a good businessdecision for these larger banks
to go bank an individual whenthey can work with one business
customer.
And have, a much moreprofitable, a much higher
revenue generating product thanthey would if they worked with,
hundreds of individuals untilthey figure that out.
(11:49):
That's where we come in.
I think just the traditional wayof banking just doesn't work for
a lot of these populations.
Jed Tabernero (11:57):
just a quick follow up question to that, man.
Interacting with you,interacting with a SOC and,
continuing to take loans, assetbacked loans and pay them back,
does that make this populationmore bankable to the traditional
banks as well?
That helps them with their owncredit scores, doesn't it?
Dylan Terrill (12:16):
Yeah, no, absolutely.
And of course, as we continue toevolve, we want to be.
The bank of choice or sort oflike the financial services
center of choice for these guys.
So we try to meet all of theirneeds.
So in Uganda, we're partneredwith the standard bank, the
largest bank in Africa to try toprovide them with other types of
services that we can't legallyoffer like bank accounts to make
(12:39):
sure that they have the option,even through our own platform,
they can still save with us.
They don't have to go to a bankto.
To borrow other money they can,based on the credit that they
have or the equity that theyhave built up in their bike or
in their vehicle, they canborrow based on that.
And in the case of an emergencyor student loans or whatever the
case may be, but of course, whatwas nice recently is that our
(13:03):
sort of tier microfinanceinstitution in Uganda was just
approved to be able to report tothese credit reference bureaus
based on people's borrowinghistory.
And it's something that we'vetried to really push as hard as
we can, even just among ourcompetitors informally.
So we've done that for a while.
Like we're going to report toeach other that if, this person
(13:25):
is a good borrower or a badborrower, there's a database of
that.
That way, if they do go tosomeone else, for perhaps, we
just weren't the right fit atleast.
That other company knows thatthis person is bankable or not.
But now, getting that officialstamp of approval from the
government is a huge stepforward where, we might not be
able to buy someone a house, orwe might not be able to give
(13:47):
them, the huge business loanthat they're seeking.
But if someone else can do that,and they can see their credit
history with us.
That's a huge win for all of us.
So something that we'recontinuing to push and move
forward with.
Hopefully, we can either onestop solution, but recognizing
that, that's not always going tobe feasible.
Shikher Bhandary (14:06):
It's awesome.
You basically defined how thevehicle was like an entry point.
And then based on theperformance whether the person
is a bad or a good borrower canrequest additional lines.
And this could be for otherthings like school, smartphones,
whatever.
So that is so interesting.
And how That can then play a lotbetter for all their future
(14:31):
transactions, future needs,because now you've got that
authentication from thegovernment.
So that's freaking cool.
Dylan Terrill (14:37):
Yeah.
Yeah.
We're super happy about that.
Shikher Bhandary (14:39):
Transitioning a little bit with the big news
that was announced recently,we'd love to understand how that
transition took place, because Iknow from the blog posts and so
on you're still, ASAC is still avery Africa based.
company that wants to actuallyexpand all across the different
(15:01):
diverse countries in thecontinent, right?
So how did this wholeopportunity actually arise?
Dylan Terrill (15:09):
Yeah.
So we, to be completely honest.
We weren't thinking of expandingto another continent.
At this time, we're thinking,okay, it's on the road map.
One day we want to be in all ofthe different pockets of the
world.
But initially, the idea was,let's just look to our
neighboring countries.
It's pretty easy to go fromUganda to Kenya or from Uganda,
(15:32):
Tanzania or from Uganda toCongo.
And that's where we set up Ourinitial sort of pilot phases
that we're still undergoing nowis in our neighboring countries
and This sort of opportunitycame up from one of our
investors.
They had invested in anothercompany called Flex Club that
(15:53):
was based in both South Africaand Mexico that was thinking of
selling.
Themselves rather than going andpursuing additional funding, and
they had been through, a fewdifferent changes along the way,
they weren't necessarily sure oftheir path forward.
They were looking to pursue adifferent type of business and
thought, let's exit out of thisone and try something different.
(16:17):
And I think.
Zooming out of what makes a goodacquisition, it was just like a
simple business fundamentalsthat, Hey, this is a good way
for us to up level, we enter anew market and we can go through
all of the macro micro factorsof why that made sense.
But fundamentally that was justlike a good strategy for us to
pursue.
And it's similar to this idea ofdo you want to.
(16:39):
Do you want to build somethingor do you want to buy something?
In the case, where're, you'reevaluating product.
Often it is that you shouldbuild something because it's
just cheaper than going aheadand buying, whatever software
exists in the world.
In the case of expansion,thinking about this, just
fundamentals is okay, we couldgo to Mexico.
By investing X millions ofdollars to get to this point
(17:02):
that this company had alreadydone, or we could buy what this
company was doing and expandthat way.
So initially, the talks were bythe whole company, go to South
Africa, go to Mexico.
After doing some due diligence,we realized that the real value
was moving to Mexico.
And just took that step forwardbased on the recommendation of
our investors going through ourown sort of analysis and thesis
(17:25):
of why it made sense.
And now straddling these twocontinents that are, very
different, but also verysimilar.
And thinking about, where doesthat bring us next?
It's this sort of strategy wherewe can be in many African
countries.
And we can also be in many LatinAmerican countries at the same
time.
The value proposition, thebusiness.
(17:46):
The business model, everythingmakes sense in both places.
Jed Tabernero (17:49):
Very interesting because as you've just pointed
out earlier, we had an episodeon things have changed talking
about slobalization.
And how Mexico is stepping up tobe a place where manufacturing
was booming, there were otherindustries that were growing and
their middle class is startingto become more robust.
Through this exercise of lookingat this acquisition, we thought
(18:12):
to ourselves what makes Mexicoreally similar to Uganda?
Like what are the things thatyou might've learned from Uganda
that you could have practiced inMexico as well?
And, some factors came intoplay, like just from our outside
understanding, it looks likethere's also a pretty large
unbanked population.
It seems like your model ofworking with kind of mobility
(18:38):
also works really well inMexico.
Something interesting that Ifound just doing independent
research on like, how is Uberdoing in Mexico is that Uber's
running a lot of business inMexico.
Ton of people are signing up tobe Uber drivers.
It's one of their mostprofitable markets.
Dylan Terrill (18:55):
Yeah, everything definitely that you said for
sure was part of the calculus.
I think, just zooming out alittle bit for why Mexico made
sense aside from just being likea fundamental good business
decision.
The market itself, it's threetimes the population of Uganda.
It's something like 60 percentof Africa's entire GDP.
Just on that alone, like wewould have to be in
Shikher Bhandary (19:16):
that's massive.
Dylan Terrill (19:17):
African countries right to match this level.
Or if you say by population,like most of the E.
A.
C.
Right?
The East African community,which makes up many countries.
So rather than trying to expandto, say, five or six countries
at minimum to match this market.
Rather than do that, we can goto one place.
(19:39):
We can deal with one regulatorybody with one set of rules, with
one population, one language, etcetera.
Like that just makes a lot of,fundamental sense.
And then as you mentioned too,it's like a great place for
mobility.
It's one of Uber's most popularmarkets in the world.
They have something like 300,000 active Uber drivers on Uber
(20:00):
alone.
So this is not other platforms.
And that's 5 percent of theirdriver population that, that's
crazy.
Coming from from one market,right?
So and then, yeah, you mentionedmanufacturing.
Mexico is the seventh largestproducer of vehicles on the
planet.
So thinking about supply on bothelectric vehicles, which we've
been trying to do for a whileand then regular combustion
(20:22):
engine vehicles like suppliesunlimited.
So that's it's fantastic thatcompanies like GM have had a
huge presence there for decades.
Yeah, and then, of course, theentry point to Latin America.
Coming to other places.
It just makes a lot of sense.
But yeah, like comparing Ugandaand Mexico.
From our perspective, what wewere getting into with Mexico is
(20:42):
like a much easier countryeconomy to operate in.
And it's funny when you liketelling our team in Mexico this
or telling investors, telling,anyone that has like some
experience working in Mexicothey just laugh.
They think you're crazy that tothink that any place else harder
to operate.
(21:02):
It's a blessing that we startedin Uganda because I think going
anywhere else will be mucheasier for us.
And taking sort of the playbookof.
These are all the good things todo.
These are all the bad things todo.
And then compressing them andgiving that to the team in
Mexico and running with it it'sgoing to just allow us to move a
lot faster than we did.
Previously.
(21:22):
But yeah, a couple other thingstoo, like just in comparison,
you have a much highersmartphone penetration in
Mexico.
It's 93 percent of adults have asmartphone which is pretty
crazy.
So to think that.
Okay.
Maybe our smartphone loanproduct will not be super
popular in Mexico as it is inUganda, but we have the option
from day one to offer them abunch of different financial
(21:45):
services because of the factthat they have a smartphone and
we can get access to a bunch ofdata that we don't always have
in Uganda to be able to lend onthat.
So that, that's a huge win.
Similarities, they, Okay.
They still have a pretty highunbanked population.
So like less than 50 percent ofadults have a bank account.
Shikher Bhandary (22:03):
that's significant, right?
Dylan Terrill (22:05):
Yeah, it is.
It
Shikher Bhandary (22:06):
Considering 93 percent of them have
smartphones.
Dylan Terrill (22:09):
Right.
So just think about thatconnection there, right?
Okay, they, they're used tooperating digitally.
They may be on Uber, but theyhave no bank account.
So how can we close that gap?
I think that's a huge valueproposition right there.
And then the other thing too,which is pretty alarming is that
Mexico doesn't have usury rightnow.
Basically they don't have limitson what you can charge for
(22:32):
loans.
And we see that as a hugeopportunity.
Like clearly there's a lot ofroom for improvement.
It's not that we're going tocome in and start charging the
200, 300, 4%, 400% like paydayloans that we see in the market
operating today.
It's just that, Hey, we canoffer something that's way more
cost effective.
We can take a little bit less.
(22:53):
Profit but that'll just allow usto build immediate trust with
the population.
So in that case, it's verysimilar to Uganda where, people,
the alternative to our productor the alternative to products
like ours is just like crazy.
Just like abusive.
The rates really I just don'tunderstand how anyone can pay
300 or 400 percent and make thatlike a profitable business
(23:15):
decision on their side.
Like they clearly are using thatfor only emergencies.
And I think that's a, it's ahuge, like predatory problem.
And it needs to end.
So just those few factors arejust.
Or something that we see islike, okay that margin of other
businesses is definitely ouropportunity to go in and start
taking advantage of this andstart building trust with
customers and giving them a muchbetter product.
Shikher Bhandary (23:36):
What are the rates out in Uganda?
It's probably like 400, 300, 400percent because I remember when
you came on last time, you didmention the interest rates were
in the high two hundreds, threehundreds, and you're telling me
that Mexico today.
Which is the number one biggesttrading partner with the US,
which just overtook China thisyear.
(23:56):
You still have those instances?
That's incredible.
Dylan Terrill (24:00):
Yes.
Yeah.
It's absolutely shocking.
Yeah.
So talking to our team there,running that due diligence
process, it was just like thisneeds to end.
It's crazy that is still thecase.
And in the U.
S.
too if you were to take a paydayloan.
You're still paying like anextremely high rate, and it's
just, it's insane that thesemarkets are allowed to operate.
(24:22):
But some of the largest fintechsin Mexico are offering rates
that are that high.
And yeah, it just it's reallyfrustrating for us, for our
customers, and we're lookingforward to closing that out.
Jed Tabernero (24:35):
man.
Yeah, I, a lot of the things youjust mentioned didn't even come
up in our research.
So it's just shocking to seewhat kind of these macro factors
look like.
Just to help our listenersunderstand kind of what
FlexClub's business is.
Do you mind giving like a quickrundown and what they've done in
Mexico, what their operationlooks like and what their goals
(24:56):
were?
Dylan Terrill (24:57):
Yeah.
Yeah, absolutely.
Yeah, I would say it's verysimilar to what we're doing.
They call themselves like alease to own product.
So very similar sort of idea tous is that okay, we're going to
offer a borrower, technically avehicle on credit.
They'll pay on a weekly basisaccess to this vehicle.
They call it a subscription.
We call that a loan.
(25:19):
And then at the end of the loan,they are given the option to a
vehicle.
Essentially, X amount X percenttoward the vehicle purchase, and
then they can buy the vehicleoutright.
So very similar to what we do inUganda that the idea still was
to do this through, like a sortof tech enabled solution.
So you apply online.
You don't necessarily deal withanyone physically.
(25:41):
And then when we hand over thevehicle.
At one of our disbursementcenters.
That's like the only sort of inperson interaction, but
otherwise everything ishappening online.
And then you repay online aswell.
That was the mission.
And, just looking at the microfactors are business specific
factors that we thought werepretty.
Interesting is that we had thistiny team.
(26:01):
There was six people when webought the business and then two
people immediately left.
So you had technically fourpeople that were running, this
multimillion dollar business apretty sizable portfolio,
outstanding, like just supermotivated, achieving this
outsized performance with noresources.
And what was crazy, too, is thata lot of these processes that
(26:22):
they had internally okay, thecustomer journey may have been
digital, but everything that thecompany itself was doing behind
the scenes was very manual.
Google Sheets, Excel no reallending operating system.
Nothing from like paymentreconciliation was automated.
So we just saw a lot of thisstuff where we could come in and
immediately from.
from day one, essentially justmake them way more efficient.
(26:42):
So if they were alreadyachieving, these crazy outsized
performance, what can we do justby introducing some of the tools
that we had built out alreadyand bringing our playbook in?
Yeah we've been on the hiringspree.
So we've quadrupled the teamsince taking over.
We've tripled the fleet sizethat they have outstanding.
Brought a lot of externalfunctions internal for more
efficiency.
(27:02):
Just try to take care of thecustomer.
We launched our first in personcustomer service center.
So that was like an externalfunction.
So we have an office, adedicated space where customers
can come.
And then we just launched a Oursoft loan product or personal
loan product in December.
So that allows people that havegreat repayment history That
have built out that equitycushion to go ahead and borrow
(27:23):
on that money Like we've done inuganda and it's been a great
product great reception so farin mexico.
Yeah these different factors andof the business I think made it
make sense And then what we'veseen so far is just a lot of
great progress very quickly Ithink when you make so many
mistakes the first time aroundin Uganda going to a new market
is just going to feel so easy.
(27:43):
And we've proven that out withMexico so far.
Shikher Bhandary (27:47):
dude, that's, that's incredible.
You were just talking about likejust four members being able,
being responsible for such ahuge operation.
It just goes to show what'spossible.
There's a different level oflike grit going into banking.
So it's, that's incredible.
With that team, were there like,because, the markets are so
(28:11):
different, what you're trying tosolve is the similar team over
here, but were you.
a bit surprised with, culturaldifferences of how things are.
I know like maybe Uganda has abit more cash based than Mexico
with all the smartphonepenetration.
In addition to that, were thereother things that you noticed
(28:34):
that, huh, you know what, thiscould be a lot easier than,
scaling it out in Africa whereyou were, building the train and
putting down the rails?
Dylan Terrill (28:45):
Yeah.
Yeah.
Yeah.
That's a, it's a great analogy.
Yeah, absolutely.
I would say that culturallythere's a lot of similarities
I'd say from like the people andthe fundamentals of how they
operate, what they think about,what's important to them, which
I think has been really helpfulboth from a team and And how
they think about working andtheir relationship with work and
(29:06):
the relationship with each otheras teammates, how they keep each
other motivated and on this pathand Remain, mission aligned.
And then from our customer base,like there's still a lot of
similarities.
I, if you think about youraverage day to day in Uganda,
you're going to still have a lotof cashless transactions because
of the prevalence of the mobilemoney system.
(29:26):
So that the telco based systemthat's been popularized by say,
like M Pesa in Kenya, way backwhen that has now included
companies like MTN and Airtel.
A lot of our transactions.
Well, 100 percent of ourtransactions are digital,
whether that is disbursement offunds or repayments from
borrowers.
But even, the day to day payinginvoices, paying our employees
(29:49):
our drivers earning fromcustomers, a lot of that happens
on platform digitally.
So that wasn't too muchdifferent.
And it's still in Mexico.
You have a lot of prevalence ofcash and people wanting to pay
for their Uber ride in cash.
Trying to make that calculus ofhow that's similar or different.
So yeah, a lot of similaritiesthere, I would say less so on
(30:12):
the differences side.
But I think what is just stuckout the most two is a few
different things.
But Because Mexico is for us aneasier market to operate in from
a business perspective, likethings just seemingly get done a
little bit faster.
There's a little bit lessbureaucracy and our
relationships with our customersare also a little bit different.
(30:35):
One thing in particular stoodout to us when we were running
through our due diligence.
And to be honest, it sounds likeIt can't be true.
But they were having extremelyhigh repayment rates and 98
percent of their customers payon time.
And this is just insane.
Yes.
Shikher Bhandary (30:55):
that unheard of?
Dylan Terrill (30:56):
yes, completely unheard of.
And when I tell people this now,they don't believe it until I
show them the backup data.
In Uganda, we also thought ourproduct was really high.
Like we have 90 percent Plus, Iwould say on time repayment, and
that is still like prettyunheard of, and we think about
it as being a factor of theproduct, but also the culture as
well.
And it's just that much higherin Mexico.
(31:19):
And then in one case inparticular, which is pretty
insane, like in the case of arepossession.
So when we are working with theborrower, and for whatever
reason they can't repay in 80percent of those cases in
Mexico, the driver returns thecar to us.
Directly.
So there's no chasing them.
(31:39):
There's no calling a tow truck.
There's no anything.
They just say, you know what?
I couldn't repay.
I'll bring the car back to you.
I can't imagine that happening.
If I had a car and someone wasrepossessing it or trying to
repossess them,
Shikher Bhandary (31:54):
you're driving to a grand canyon, dude.
Dylan Terrill (31:56):
Yes, I would set the car on fire, like, I would
throw the keys in the Hudson,like, I, I would not, I would
not be this nice about it, andthey, but they do that, and they
bring it back, they understandthat, okay, I wasn't able to do
it now.
But maybe, maybe in a week,maybe in a couple of months,
I'll go back, I'll be able tobuy a different car with my, my
(32:19):
down payment in hand and thesubscription payment on a weekly
basis.
We leave that open for them, andthey appreciate that.
So I think that's likeparticularly unique There's no
way that would happen in Uganda.
There's 0 percent chance thatsomeone is returning the vehicle
to us.
So I just thought that wasparticularly unique.
That happens in 80 percent ofthe cases.
And then in the other 20, likewe can find the vehicle within a
(32:42):
day and then we're able to finda replacement driver in four
days.
So it's just like this speed ofexecution is insane, like
completely insane, like you justhave not seen that.
In East Africa at all.
So those like indicators arepretty interesting that, okay,
we have extreme product marketfit.
(33:03):
People really want this product.
They're willing to pay for it.
And they're willing to workwithin the confines of these
guardrails that we have inplace.
So yeah, that's justparticularly interesting to us
and something that we can't waitto see expand.
Jed Tabernero (33:17):
I guess, given the extreme product market fit,
how do you feel about thisMexico expansion?
Would you be down to just sharewith us a little bit about your
experiences going in there doingthe due diligence?
Dylan Terrill (33:30):
We're at 14 people in Mexico.
We plan on being probably like50 by the end of the year.
We have a small littleportfolio.
We are one of four Uber partnersin Mexico.
So there's just a ton of room togrow to serve the country, not
only in Guadalajara, butthinking about other markets as
well.
So yeah, we have it working outfor us and it's just exciting to
(33:52):
think about a nice new hardproblem to work on.
I guess like tactically howwe've thought about it is I am
mostly based in New York.
So why don't we.
Have this sort of Mexicoexpansion and perhaps future
expansion just report under mewhich has given me a cool like
taste of operations that Ididn't necessarily have before
(34:13):
And then keep our coo Who's fromuganda based in uganda focused
on our african expansion thatway it doesn't take resources
away from Everything that isgoing on on that side but it's
given us a lot of time as wellto think about.
Okay.
How do we get and grow.
Maybe not only our leadershipteam.
So bringing on new people thatare at the highest level, but
(34:36):
also that senior, maybe directorVP level to make sure that you
know the business can operatewithout us intervening.
Ideally, you know that would bethe end state or the next phase
where We don't necessarily needour sort of day to day
intervention and things can runwithout us constantly in search
(34:56):
of good talent that will allowus to focus on other things and
replace ourselves and bring inthose experts that know more
than us.
So I definitely am not likefluent in operating in Latin
America.
So of course we'll have to bringon someone that is super
dedicated to understands themarket ideally would be, located
physically there that couldoperate the company on that
(35:20):
side, and it could be, somepeople that we have on the team
already, it could be somebodyelse time will tell.
But I think that's just thenatural evolution of a growing
company is that, okay our roleis dynamic.
It should be like, we should betaking on different things and
replacing ourselves with othermore talented people.
And surrounding ourselves withdomain experts that can fill the
gaps that we just don't evenknow yet.
Shikher Bhandary (35:41):
Just wanted to congratulate on Asak had a raise
I think early last year nowthinking, okay, we have grown
the team from four to 14 tosupposedly 50 in the next few
months.
So how are you planning out thiswhole journey?
You're probably, you've got yournext.
big problem to solve, whichknowing you and hearing how
(36:03):
enthusiastic you are about thesethings, you must be like, just
so revved up to tackle thisproblem now.
Dylan Terrill (36:10):
Yeah.
Yeah, absolutely.
Yeah, certainly having that,that raised behind us was
definitely helpful.
And then also being able toborrow money in the form of debt
to fund acquisition was great.
So we didn't use any of our owncash.
And now we are, globallyprofitable.
We have 160 people globally, sowe have a pretty sizable team
(36:30):
and.
We kind of feel like we're atthis unique position where we
don't need to raise money to beable to grow.
What we will do is probablyraise strategically for, funding
these expansion efforts forfunding R.
N.
D.
But not having to think about.
Being on the hook for bad terms,which, we're exploring
fundraising last year, and themarket was really terrible now.
(36:53):
Maybe that there's somestability, a light at the end of
the tunnel.
We might think about that again.
But I think that's it's a goodposition for us to be in.
And hopefully we can continue tobe on that path where.
We control our own destiny anddon't have to be beholden to
external third parties of whichdirection we need to go in.
There was another company thatwe know really well that was
even thinking about thisacquisition opportunity before
(37:15):
we went ahead with it and theycouldn't do it because their
board said no.
And I don't ever want us to bein that position where, we're
going to be dealing with thirdparties that don't necessarily
have our best interest at heartthat are thinking about
themselves.
And so hopefully we can continueto align ourselves with, very.
(37:36):
Value or mission driveninvestors and third parties.
And I think a way that we can dothat is by being very careful of
who we accept money from.
So I'm sure we'll raise in thefuture.
I don't know what that will looklike.
But yeah, certainly we want tojust be aligned with the best
people in the market.
Jed Tabernero (37:53):
That's awesome.
Great news.
Dylan, I just have to say you'reone of those people that.
Through the stories and theproblems that you've been
solving throughout your career,it just seems like you like to
go to these areas where peopledon't really expect those things
like you mentioned in the endand you end up with something
great.
We've been reaching out to LatinAmerican founders to learn more
(38:14):
about that market.
That's our kind of flavor ofinterest in 2024 as well.
We've reached out to a couple offounders in Mexico as well.
Hopefully we see you out therewhen we go and visit some of
these founders.
We had a Chilean founder onwhere we've had a Brazilian
founder on.
We're trying to expand more outin Latin America.
So super excited to see you guysmore out there as well, but best
(38:35):
of luck.
And thank you again for yourtime, man.
This was really cool.
Dylan Terrill (38:40):
Yeah, thanks, guys.
This was fantastic.
Yeah, going back to thebeginning and bringing that
forward.
It's super exciting.
So thanks for the time.
As always this was super fun.
The information and opinionsexpressed in this episode are
for informational purposes only.
And are not intended asfinancial investment or
professional advice.
(39:01):
Always consult with a qualifiedprofessional before making any
decisions based on the conceptprovided.
Neither the podcast, nor iscreators are responsible for any
actions taken as a result oflistening to this episode.
Have you ever wondered what goes into
strategic acquisitions withinthe startup world?
How does one startup acquireanother?
What are the driving factors andlong term vision that would be
achieved via acquisitions?
Today on Things Have Changed,we're delighted to host
returning guest Dylan Terrell.
Chief Business Officer of Asak,as he discusses his company's
(00:25):
remarkable expansion, nowspanning two continents.
Dylan Terrill (00:29):
we are straddling Two continents by way of
acquisition into Mexico.
But very much still focused onAfrica and trying to come up
with a pan African solution.
Shikher Bhandary (00:37):
But first, let's give a quick refresher on
Asak.
Asak, founded in 2016, is afintech company that initially
made waves in Uganda by offeringinnovative financing solutions.
They specialize in providingloans for motorcycles and
smartphones, catering to theneeds of the unbanked and
(00:57):
underbanked population.
Dylan Terrill (00:59):
what we're essentially trying to build is a
financial services platformspecifically for mobility
workers in emerging markets.
We work with platforms likeUber, and we lend to their
drivers to help them buy avehicle to help them get access
to Emergency lines of creditfinancial services, like savings
and investments and insuranceproducts.
Shikher Bhandary (01:19):
This approach not only addressed a critical
financial gap, but also spurredeconomic empowerment in Uganda.
Now, Assak is stepping onto anew stage, acquiring FlexClub
Mexico and venturing into theLatin American market.
This move raises severalquestions.
How will Assak's experience inUganda help in Mexico?
Dylan Terrill (01:41):
One day we want to be in all of the different
pockets of the world.
Shikher Bhandary (01:45):
With Mexico's significant unbanked population,
what new opportunities andchallenges will Assak encounter?
Join us as we explore thesequestions and more, discussing
the strategic implication ofAssak's cross continental
expansion and what it means forthe future of financial
inclusion.
Dylan Terrill (02:04):
Mexico doesn't have usury right now.
Basically they don't have limitson what you can charge for
loans.
And I think that's a, it's ahuge, like predatory problem.
And it needs to end.
Jed Tabernero (02:52):
Today on things have changed podcast.
We have one of our very firstfounders that have come on to
the show.
When we started this back in2020, right after the pandemic,
our good friend, Dylan Terrellhad come to talk to us about a
sock, a Ugandan FinTech companythat has been making waves in
(03:13):
the last few years.
Dylan, welcome back to thingshave changed.
It's such an honor to have youback on the show, man.
Dylan Terrill (03:19):
Yeah, likewise, it's really good to be with you
guys again.
Yeah, super excited to dive in.
Love the show.
Just quickly, Asak, what we'reessentially trying to build is a
financial services platformspecifically for mobility
workers in emerging markets.
So we work with platforms likeUber, and we lend to their
drivers to help them buy avehicle to help them get access
(03:41):
to Emergency lines of credit tohelp them access other types of
financial services, like savingsand investments and insurance
products.
And our first market was inUganda and East Africa.
So we started back there in 2000and 18 had.
Taken a few different roads toget to where we are today sort
(04:02):
of had a hard pivot to mobilityin 2019 and then through the
pandemic and a few differentchanges, we've ended up to where
we are today.
I think for just a little bit ofcontext too, is, the idea was
that we would start in Africaone day, we would get to.
other markets around the world.
But thinking about this being avery much an African business,
(04:23):
we would expand to other partsof East Africa and then think
about casting our business intodifferent parts of the world.
So where we are now is that weare straddling Two continents by
way of acquisition into Mexico.
And I know this episode is aboutthat.
We'll dive into that in moredetail but very much still
focused on Africa and trying tocome up with a pan African
(04:43):
solution.
So we've set up businesses inother markets already in Africa.
Not publicly disclosed becausethey're still very much in early
days.
But as we continue to lookforward to the new year and 2024
ahead, I think we'll see alittle bit more of that
progressing.
But very much still focused onthe core business, trying to
provide the best possiblefinancial services to this
(05:06):
customer demographic that isgrowing and extremely bankable.
Shikher Bhandary (05:11):
Great, great to have you here.
I know we spoke literally amonth before the pandemic.
So, so much has changed.
I just wanted to ask justbecause of how relevant it will
be with our discussion of yourcompany expanding to different
continents, why was the decisionmade to cater to the mobility?
(05:32):
sector in Uganda.
Like why motorcycles?
Why bikes?
What was the reasoning behindthat decision?
Dylan Terrill (05:39):
Yeah, it's a great question.
Ultimately, when we started, wewanted to just be able to
provide financial services inthe form of credit to any type
of business in Uganda.
And we started with Uganda for afew different reasons, but
ultimately found that it was agreat market to be in and trying
to figure out how we couldleverage some of our experience
(06:00):
working in other markets andbring that to a place that
really needed this access tocredit.
And when you're looking at allthese different types of
businesses, it's very hard tounderwrite all the different
businesses under the sun.
There's somebody from like aretail shop or could be like an
import export business.
It could be somebody that's evenrunning a money lending business
(06:21):
of their own.
It's very difficult tounderstand, what are the macro
factors and micro factors thatmake that business?
bankable, investable and how wecan track a path to
profitability.
And what we found was, lendingto all these different types of
businesses.
This sort of segment aroundmobility was becoming extremely
popular.
There's a lot of labor shiftingin that direction of this sort
(06:44):
of gig economy where people arepiecing together work from a few
different sources.
And companies like At least inUganda, like Save Boda, like
Jumia, like Uber we're offeringa way for people to have a lot
more stable income.
And this, product has existedoff platform for many, many
years as a way for people to getaround town, to deliver goods
(07:07):
and services, to, go from schoolto work to wherever.
And we thought if we startlending to that segment.
We can one provide them with anasset that is income generating.
So the asset is a hard good.
You can't move it.
It can't disappear.
Cash can't be diverted into someother endeavor.
It has to go to the physicalasset.
(07:28):
So that's great.
And then it's income generating.
So it provides them alivelihood.
It's a clear path for them to beable to repay the loan.
If we're funding a new business,it's very hard to understand
will that work out or not, butin the case of buying a vehicle
that provides them with a steadystream of income, it makes a lot
of sense to bank that.
(07:49):
So we started moving in thatdirection in 2019, mid 2019, and
it became super clear justseeing like the first couple of
repayment cohorts that peopleare repaying on a weekly basis.
So payment volume and velocityis there.
It became very quick after thefirst few months that this is
where we should be.
And just thinking about this gapthat exists, not only in Uganda
(08:09):
and East Africa, but across thecontinents and across many other
markets.
So it just made a lot of sensefor us to start pushing in that
direction.
And so far, it's even throughthe pandemic, it's been going
really well.
Jed Tabernero (08:22):
So I think we talked about this a lot in the
first episode.
I think it's still aninteresting Angle to point out,
which is that there's typicallya reason why certain populations
or certain subsegments areunbanked.
And one of the things that Ifound at least is that, banks
are very traditionalinstitutions have looked at
(08:43):
these markets as like.
Super risky.
So it's tough for them to figureout, there's maybe there's not
enough data to be able to givethem the tools to start looking
at these areas.
Could you give us a refresher, alittle insight into how you got
comfortable with the risk?
Because obviously going intothis market, you're providing
this access to these folks.
(09:04):
It's a lot more difficult to getcomfortable with, okay.
How do I make sure that this isa sustainable business model?
How did you think about risk?
And how did you all deal withthat?
I guess in Uganda,
Dylan Terrill (09:14):
Yeah, absolutely.
I think it's a couple ofdifferent things.
One, just from a pure businessfundamentals perspective is you
have the option for some prettyheavy, like interest rate
arbitrage in a sense that,you're borrowing from the us USD
'cause we are a US headquarterbusiness.
We have one leg here where costof capital is relatively cheap
(09:35):
even for this type of business.
Whereas we can turn around andwe can lend at a pretty high
rate.
So even thinking about, currencydevaluation or potential for
risk premium it still is a veryprofitable business from day
one.
And of course, it's hard toknow, right?
You think it's very easy to lendup money.
Really, anybody will be willingto take your money if there's no
(09:58):
strings attached, if they don'thave to pledge, any sort of
collateral they'll happily takeyour money.
Getting money back isexceedingly difficult, but in
the case of having an asset backloan you have an idea that,
okay, every loan that we giveout is tied to an asset that
worse come to the worse, we cango ahead and repossess that
vehicle.
It's a very liquid market tosell a bike or to sell a car,
(10:21):
and someone else will come in,perhaps even in step over and
take that loan right from wherethat other person was paying, or
you can just sell it off and getthe cash back.
So from that perspective, it.
It's very risk averse on reallywhat people needed was just
someone that's willing to takethat chance.
That's willing to okay, lend outthat first 10 K or 50 K and make
(10:45):
a lot of mistakes, understandwhat works, what doesn't and
then iterate from there.
And I think that's what a lot ofthese digital lenders like us or
tech enabled lenders have triedto do is just go work with the
populations, try to find anysource of data that you can that
may indicate repayment.
Whether that is smartphone dataor actual earning data, whatever
(11:05):
you can find, lend off of thatand then iterate from there.
So whereas we may have startedwith pretty high pricing when
we're unsure about this market,it's now, trying to be the most
efficient, the most costeffective lender in the market
based on the data that we havethat's not accessible by a bank.
And that's usually why a lot ofthese populations have been
(11:26):
ignored is that from the dayone, it's not.
It's not a good businessdecision for these larger banks
to go bank an individual whenthey can work with one business
customer.
And have, a much moreprofitable, a much higher
revenue generating product thanthey would if they worked with,
hundreds of individuals untilthey figure that out.
(11:49):
That's where we come in.
I think just the traditional wayof banking just doesn't work for
a lot of these populations.
Jed Tabernero (11:57):
just a quick follow up question to that, man.
Interacting with you,interacting with a SOC and,
continuing to take loans, assetbacked loans and pay them back,
does that make this populationmore bankable to the traditional
banks as well?
That helps them with their owncredit scores, doesn't it?
Dylan Terrill (12:16):
Yeah, no, absolutely.
And of course, as we continue toevolve, we want to be.
The bank of choice or sort oflike the financial services
center of choice for these guys.
So we try to meet all of theirneeds.
So in Uganda, we're partneredwith the standard bank, the
largest bank in Africa to try toprovide them with other types of
services that we can't legallyoffer like bank accounts to make
(12:39):
sure that they have the option,even through our own platform,
they can still save with us.
They don't have to go to a bankto.
To borrow other money they can,based on the credit that they
have or the equity that theyhave built up in their bike or
in their vehicle, they canborrow based on that.
And in the case of an emergencyor student loans or whatever the
case may be, but of course, whatwas nice recently is that our
(13:03):
sort of tier microfinanceinstitution in Uganda was just
approved to be able to report tothese credit reference bureaus
based on people's borrowinghistory.
And it's something that we'vetried to really push as hard as
we can, even just among ourcompetitors informally.
So we've done that for a while.
Like we're going to report toeach other that if, this person
(13:25):
is a good borrower or a badborrower, there's a database of
that.
That way, if they do go tosomeone else, for perhaps, we
just weren't the right fit atleast.
That other company knows thatthis person is bankable or not.
But now, getting that officialstamp of approval from the
government is a huge stepforward where, we might not be
able to buy someone a house, orwe might not be able to give
(13:47):
them, the huge business loanthat they're seeking.
But if someone else can do that,and they can see their credit
history with us.
That's a huge win for all of us.
So something that we'recontinuing to push and move
forward with.
Hopefully, we can either onestop solution, but recognizing
that, that's not always going tobe feasible.
Shikher Bhandary (14:06):
It's awesome.
You basically defined how thevehicle was like an entry point.
And then based on theperformance whether the person
is a bad or a good borrower canrequest additional lines.
And this could be for otherthings like school, smartphones,
whatever.
So that is so interesting.
And how That can then play a lotbetter for all their future
(14:31):
transactions, future needs,because now you've got that
authentication from thegovernment.
So that's freaking cool.
Dylan Terrill (14:37):
Yeah.
Yeah.
We're super happy about that.
Shikher Bhandary (14:39):
Transitioning a little bit with the big news
that was announced recently,we'd love to understand how that
transition took place, because Iknow from the blog posts and so
on you're still, ASAC is still avery Africa based.
company that wants to actuallyexpand all across the different
(15:01):
diverse countries in thecontinent, right?
So how did this wholeopportunity actually arise?
Dylan Terrill (15:09):
Yeah.
So we, to be completely honest.
We weren't thinking of expandingto another continent.
At this time, we're thinking,okay, it's on the road map.
One day we want to be in all ofthe different pockets of the
world.
But initially, the idea was,let's just look to our
neighboring countries.
It's pretty easy to go fromUganda to Kenya or from Uganda,
(15:32):
Tanzania or from Uganda toCongo.
And that's where we set up Ourinitial sort of pilot phases
that we're still undergoing nowis in our neighboring countries
and This sort of opportunitycame up from one of our
investors.
They had invested in anothercompany called Flex Club that
(15:53):
was based in both South Africaand Mexico that was thinking of
selling.
Themselves rather than going andpursuing additional funding, and
they had been through, a fewdifferent changes along the way,
they weren't necessarily sure oftheir path forward.
They were looking to pursue adifferent type of business and
thought, let's exit out of thisone and try something different.
(16:17):
And I think.
Zooming out of what makes a goodacquisition, it was just like a
simple business fundamentalsthat, Hey, this is a good way
for us to up level, we enter anew market and we can go through
all of the macro micro factorsof why that made sense.
But fundamentally that was justlike a good strategy for us to
pursue.
And it's similar to this idea ofdo you want to.
(16:39):
Do you want to build somethingor do you want to buy something?
In the case, where're, you'reevaluating product.
Often it is that you shouldbuild something because it's
just cheaper than going aheadand buying, whatever software
exists in the world.
In the case of expansion,thinking about this, just
fundamentals is okay, we couldgo to Mexico.
By investing X millions ofdollars to get to this point
(17:02):
that this company had alreadydone, or we could buy what this
company was doing and expandthat way.
So initially, the talks were bythe whole company, go to South
Africa, go to Mexico.
After doing some due diligence,we realized that the real value
was moving to Mexico.
And just took that step forwardbased on the recommendation of
our investors going through ourown sort of analysis and thesis
(17:25):
of why it made sense.
And now straddling these twocontinents that are, very
different, but also verysimilar.
And thinking about, where doesthat bring us next?
It's this sort of strategy wherewe can be in many African
countries.
And we can also be in many LatinAmerican countries at the same
time.
The value proposition, thebusiness.
(17:46):
The business model, everythingmakes sense in both places.
Jed Tabernero (17:49):
Very interesting because as you've just pointed
out earlier, we had an episodeon things have changed talking
about slobalization.
And how Mexico is stepping up tobe a place where manufacturing
was booming, there were otherindustries that were growing and
their middle class is startingto become more robust.
Through this exercise of lookingat this acquisition, we thought
(18:12):
to ourselves what makes Mexicoreally similar to Uganda?
Like what are the things thatyou might've learned from Uganda
that you could have practiced inMexico as well?
And, some factors came intoplay, like just from our outside
understanding, it looks likethere's also a pretty large
unbanked population.
It seems like your model ofworking with kind of mobility
(18:38):
also works really well inMexico.
Something interesting that Ifound just doing independent
research on like, how is Uberdoing in Mexico is that Uber's
running a lot of business inMexico.
Ton of people are signing up tobe Uber drivers.
It's one of their mostprofitable markets.
Dylan Terrill (18:55):
Yeah, everything definitely that you said for
sure was part of the calculus.
I think, just zooming out alittle bit for why Mexico made
sense aside from just being likea fundamental good business
decision.
The market itself, it's threetimes the population of Uganda.
It's something like 60 percentof Africa's entire GDP.
Just on that alone, like wewould have to be in
Shikher Bhandary (19:16):
that's massive.
Dylan Terrill (19:17):
African countries right to match this level.
Or if you say by population,like most of the E.
A.
C.
Right?
The East African community,which makes up many countries.
So rather than trying to expandto, say, five or six countries
at minimum to match this market.
Rather than do that, we can goto one place.
(19:39):
We can deal with one regulatorybody with one set of rules, with
one population, one language, etcetera.
Like that just makes a lot of,fundamental sense.
And then as you mentioned too,it's like a great place for
mobility.
It's one of Uber's most popularmarkets in the world.
They have something like 300,000 active Uber drivers on Uber
(20:00):
alone.
So this is not other platforms.
And that's 5 percent of theirdriver population that, that's
crazy.
Coming from from one market,right?
So and then, yeah, you mentionedmanufacturing.
Mexico is the seventh largestproducer of vehicles on the
planet.
So thinking about supply on bothelectric vehicles, which we've
been trying to do for a whileand then regular combustion
(20:22):
engine vehicles like suppliesunlimited.
So that's it's fantastic thatcompanies like GM have had a
huge presence there for decades.
Yeah, and then, of course, theentry point to Latin America.
Coming to other places.
It just makes a lot of sense.
But yeah, like comparing Ugandaand Mexico.
From our perspective, what wewere getting into with Mexico is
(20:42):
like a much easier countryeconomy to operate in.
And it's funny when you liketelling our team in Mexico this
or telling investors, telling,anyone that has like some
experience working in Mexicothey just laugh.
They think you're crazy that tothink that any place else harder
to operate.
(21:02):
It's a blessing that we startedin Uganda because I think going
anywhere else will be mucheasier for us.
And taking sort of the playbookof.
These are all the good things todo.
These are all the bad things todo.
And then compressing them andgiving that to the team in
Mexico and running with it it'sgoing to just allow us to move a
lot faster than we did.
Previously.
(21:22):
But yeah, a couple other thingstoo, like just in comparison,
you have a much highersmartphone penetration in
Mexico.
It's 93 percent of adults have asmartphone which is pretty
crazy.
So to think that.
Okay.
Maybe our smartphone loanproduct will not be super
popular in Mexico as it is inUganda, but we have the option
from day one to offer them abunch of different financial
(21:45):
services because of the factthat they have a smartphone and
we can get access to a bunch ofdata that we don't always have
in Uganda to be able to lend onthat.
So that, that's a huge win.
Similarities, they, Okay.
They still have a pretty highunbanked population.
So like less than 50 percent ofadults have a bank account.
Shikher Bhandary (22:03):
that's significant, right?
Dylan Terrill (22:05):
Yeah, it is.
It
Shikher Bhandary (22:06):
Considering 93 percent of them have
smartphones.
Dylan Terrill (22:09):
Right.
So just think about thatconnection there, right?
Okay, they, they're used tooperating digitally.
They may be on Uber, but theyhave no bank account.
So how can we close that gap?
I think that's a huge valueproposition right there.
And then the other thing too,which is pretty alarming is that
Mexico doesn't have usury rightnow.
Basically they don't have limitson what you can charge for
(22:32):
loans.
And we see that as a hugeopportunity.
Like clearly there's a lot ofroom for improvement.
It's not that we're going tocome in and start charging the
200, 300, 4%, 400% like paydayloans that we see in the market
operating today.
It's just that, Hey, we canoffer something that's way more
cost effective.
We can take a little bit less.
(22:53):
Profit but that'll just allow usto build immediate trust with
the population.
So in that case, it's verysimilar to Uganda where, people,
the alternative to our productor the alternative to products
like ours is just like crazy.
Just like abusive.
The rates really I just don'tunderstand how anyone can pay
300 or 400 percent and make thatlike a profitable business
(23:15):
decision on their side.
Like they clearly are using thatfor only emergencies.
And I think that's a, it's ahuge, like predatory problem.
And it needs to end.
So just those few factors arejust.
Or something that we see islike, okay that margin of other
businesses is definitely ouropportunity to go in and start
taking advantage of this andstart building trust with
customers and giving them a muchbetter product.
Shikher Bhandary (23:36):
What are the rates out in Uganda?
It's probably like 400, 300, 400percent because I remember when
you came on last time, you didmention the interest rates were
in the high two hundreds, threehundreds, and you're telling me
that Mexico today.
Which is the number one biggesttrading partner with the US,
which just overtook China thisyear.
(23:56):
You still have those instances?
That's incredible.
Dylan Terrill (24:00):
Yes.
Yeah.
It's absolutely shocking.
Yeah.
So talking to our team there,running that due diligence
process, it was just like thisneeds to end.
It's crazy that is still thecase.
And in the U.
S.
too if you were to take a paydayloan.
You're still paying like anextremely high rate, and it's
just, it's insane that thesemarkets are allowed to operate.
(24:22):
But some of the largest fintechsin Mexico are offering rates
that are that high.
And yeah, it just it's reallyfrustrating for us, for our
customers, and we're lookingforward to closing that out.
Jed Tabernero (24:35):
man.
Yeah, I, a lot of the things youjust mentioned didn't even come
up in our research.
So it's just shocking to seewhat kind of these macro factors
look like.
Just to help our listenersunderstand kind of what
FlexClub's business is.
Do you mind giving like a quickrundown and what they've done in
Mexico, what their operationlooks like and what their goals
(24:56):
were?
Dylan Terrill (24:57):
Yeah.
Yeah, absolutely.
Yeah, I would say it's verysimilar to what we're doing.
They call themselves like alease to own product.
So very similar sort of idea tous is that okay, we're going to
offer a borrower, technically avehicle on credit.
They'll pay on a weekly basisaccess to this vehicle.
They call it a subscription.
We call that a loan.
(25:19):
And then at the end of the loan,they are given the option to a
vehicle.
Essentially, X amount X percenttoward the vehicle purchase, and
then they can buy the vehicleoutright.
So very similar to what we do inUganda that the idea still was
to do this through, like a sortof tech enabled solution.
So you apply online.
You don't necessarily deal withanyone physically.
(25:41):
And then when we hand over thevehicle.
At one of our disbursementcenters.
That's like the only sort of inperson interaction, but
otherwise everything ishappening online.
And then you repay online aswell.
That was the mission.
And, just looking at the microfactors are business specific
factors that we thought werepretty.
Interesting is that we had thistiny team.
(26:01):
There was six people when webought the business and then two
people immediately left.
So you had technically fourpeople that were running, this
multimillion dollar business apretty sizable portfolio,
outstanding, like just supermotivated, achieving this
outsized performance with noresources.
And what was crazy, too, is thata lot of these processes that
(26:22):
they had internally okay, thecustomer journey may have been
digital, but everything that thecompany itself was doing behind
the scenes was very manual.
Google Sheets, Excel no reallending operating system.
Nothing from like paymentreconciliation was automated.
So we just saw a lot of thisstuff where we could come in and
immediately from.
from day one, essentially justmake them way more efficient.
(26:42):
So if they were alreadyachieving, these crazy outsized
performance, what can we do justby introducing some of the tools
that we had built out alreadyand bringing our playbook in?
Yeah we've been on the hiringspree.
So we've quadrupled the teamsince taking over.
We've tripled the fleet sizethat they have outstanding.
Brought a lot of externalfunctions internal for more
efficiency.
(27:02):
Just try to take care of thecustomer.
We launched our first in personcustomer service center.
So that was like an externalfunction.
So we have an office, adedicated space where customers
can come.
And then we just launched a Oursoft loan product or personal
loan product in December.
So that allows people that havegreat repayment history That
have built out that equitycushion to go ahead and borrow
(27:23):
on that money Like we've done inuganda and it's been a great
product great reception so farin mexico.
Yeah these different factors andof the business I think made it
make sense And then what we'veseen so far is just a lot of
great progress very quickly Ithink when you make so many
mistakes the first time aroundin Uganda going to a new market
is just going to feel so easy.
(27:43):
And we've proven that out withMexico so far.
Shikher Bhandary (27:47):
dude, that's, that's incredible.
You were just talking about likejust four members being able,
being responsible for such ahuge operation.
It just goes to show what'spossible.
There's a different level oflike grit going into banking.
So it's, that's incredible.
With that team, were there like,because, the markets are so
(28:11):
different, what you're trying tosolve is the similar team over
here, but were you.
a bit surprised with, culturaldifferences of how things are.
I know like maybe Uganda has abit more cash based than Mexico
with all the smartphonepenetration.
In addition to that, were thereother things that you noticed
(28:34):
that, huh, you know what, thiscould be a lot easier than,
scaling it out in Africa whereyou were, building the train and
putting down the rails?
Dylan Terrill (28:45):
Yeah.
Yeah.
Yeah.
That's a, it's a great analogy.
Yeah, absolutely.
I would say that culturallythere's a lot of similarities
I'd say from like the people andthe fundamentals of how they
operate, what they think about,what's important to them, which
I think has been really helpfulboth from a team and And how
they think about working andtheir relationship with work and
(29:06):
the relationship with each otheras teammates, how they keep each
other motivated and on this pathand Remain, mission aligned.
And then from our customer base,like there's still a lot of
similarities.
I, if you think about youraverage day to day in Uganda,
you're going to still have a lotof cashless transactions because
of the prevalence of the mobilemoney system.
(29:26):
So that the telco based systemthat's been popularized by say,
like M Pesa in Kenya, way backwhen that has now included
companies like MTN and Airtel.
A lot of our transactions.
Well, 100 percent of ourtransactions are digital,
whether that is disbursement offunds or repayments from
borrowers.
But even, the day to day payinginvoices, paying our employees
(29:49):
our drivers earning fromcustomers, a lot of that happens
on platform digitally.
So that wasn't too muchdifferent.
And it's still in Mexico.
You have a lot of prevalence ofcash and people wanting to pay
for their Uber ride in cash.
Trying to make that calculus ofhow that's similar or different.
So yeah, a lot of similaritiesthere, I would say less so on
(30:12):
the differences side.
But I think what is just stuckout the most two is a few
different things.
But Because Mexico is for us aneasier market to operate in from
a business perspective, likethings just seemingly get done a
little bit faster.
There's a little bit lessbureaucracy and our
relationships with our customersare also a little bit different.
(30:35):
One thing in particular stoodout to us when we were running
through our due diligence.
And to be honest, it sounds likeIt can't be true.
But they were having extremelyhigh repayment rates and 98
percent of their customers payon time.
And this is just insane.
Yes.
Shikher Bhandary (30:55):
that unheard of?
Dylan Terrill (30:56):
yes, completely unheard of.
And when I tell people this now,they don't believe it until I
show them the backup data.
In Uganda, we also thought ourproduct was really high.
Like we have 90 percent Plus, Iwould say on time repayment, and
that is still like prettyunheard of, and we think about
it as being a factor of theproduct, but also the culture as
well.
And it's just that much higherin Mexico.
(31:19):
And then in one case inparticular, which is pretty
insane, like in the case of arepossession.
So when we are working with theborrower, and for whatever
reason they can't repay in 80percent of those cases in
Mexico, the driver returns thecar to us.
Directly.
So there's no chasing them.
(31:39):
There's no calling a tow truck.
There's no anything.
They just say, you know what?
I couldn't repay.
I'll bring the car back to you.
I can't imagine that happening.
If I had a car and someone wasrepossessing it or trying to
repossess them,
Shikher Bhandary (31:54):
you're driving to a grand canyon, dude.
Dylan Terrill (31:56):
Yes, I would set the car on fire, like, I would
throw the keys in the Hudson,like, I, I would not, I would
not be this nice about it, andthey, but they do that, and they
bring it back, they understandthat, okay, I wasn't able to do
it now.
But maybe, maybe in a week,maybe in a couple of months,
I'll go back, I'll be able tobuy a different car with my, my
(32:19):
down payment in hand and thesubscription payment on a weekly
basis.
We leave that open for them, andthey appreciate that.
So I think that's likeparticularly unique There's no
way that would happen in Uganda.
There's 0 percent chance thatsomeone is returning the vehicle
to us.
So I just thought that wasparticularly unique.
That happens in 80 percent ofthe cases.
And then in the other 20, likewe can find the vehicle within a
(32:42):
day and then we're able to finda replacement driver in four
days.
So it's just like this speed ofexecution is insane, like
completely insane, like you justhave not seen that.
In East Africa at all.
So those like indicators arepretty interesting that, okay,
we have extreme product marketfit.
(33:03):
People really want this product.
They're willing to pay for it.
And they're willing to workwithin the confines of these
guardrails that we have inplace.
So yeah, that's justparticularly interesting to us
and something that we can't waitto see expand.
Jed Tabernero (33:17):
I guess, given the extreme product market fit,
how do you feel about thisMexico expansion?
Would you be down to just sharewith us a little bit about your
experiences going in there doingthe due diligence?
Dylan Terrill (33:30):
We're at 14 people in Mexico.
We plan on being probably like50 by the end of the year.
We have a small littleportfolio.
We are one of four Uber partnersin Mexico.
So there's just a ton of room togrow to serve the country, not
only in Guadalajara, butthinking about other markets as
well.
So yeah, we have it working outfor us and it's just exciting to
(33:52):
think about a nice new hardproblem to work on.
I guess like tactically howwe've thought about it is I am
mostly based in New York.
So why don't we.
Have this sort of Mexicoexpansion and perhaps future
expansion just report under mewhich has given me a cool like
taste of operations that Ididn't necessarily have before
(34:13):
And then keep our coo Who's fromuganda based in uganda focused
on our african expansion thatway it doesn't take resources
away from Everything that isgoing on on that side but it's
given us a lot of time as wellto think about.
Okay.
How do we get and grow.
Maybe not only our leadershipteam.
So bringing on new people thatare at the highest level, but
(34:36):
also that senior, maybe directorVP level to make sure that you
know the business can operatewithout us intervening.
Ideally, you know that would bethe end state or the next phase
where We don't necessarily needour sort of day to day
intervention and things can runwithout us constantly in search
(34:56):
of good talent that will allowus to focus on other things and
replace ourselves and bring inthose experts that know more
than us.
So I definitely am not likefluent in operating in Latin
America.
So of course we'll have to bringon someone that is super
dedicated to understands themarket ideally would be, located
physically there that couldoperate the company on that
(35:20):
side, and it could be, somepeople that we have on the team
already, it could be somebodyelse time will tell.
But I think that's just thenatural evolution of a growing
company is that, okay our roleis dynamic.
It should be like, we should betaking on different things and
replacing ourselves with othermore talented people.
And surrounding ourselves withdomain experts that can fill the
gaps that we just don't evenknow yet.
Shikher Bhandary (35:41):
Just wanted to congratulate on Asak had a raise
I think early last year nowthinking, okay, we have grown
the team from four to 14 tosupposedly 50 in the next few
months.
So how are you planning out thiswhole journey?
You're probably, you've got yournext.
big problem to solve, whichknowing you and hearing how
(36:03):
enthusiastic you are about thesethings, you must be like, just
so revved up to tackle thisproblem now.
Dylan Terrill (36:10):
Yeah.
Yeah, absolutely.
Yeah, certainly having that,that raised behind us was
definitely helpful.
And then also being able toborrow money in the form of debt
to fund acquisition was great.
So we didn't use any of our owncash.
And now we are, globallyprofitable.
We have 160 people globally, sowe have a pretty sizable team
(36:30):
and.
We kind of feel like we're atthis unique position where we
don't need to raise money to beable to grow.
What we will do is probablyraise strategically for, funding
these expansion efforts forfunding R.
N.
D.
But not having to think about.
Being on the hook for bad terms,which, we're exploring
fundraising last year, and themarket was really terrible now.
(36:53):
Maybe that there's somestability, a light at the end of
the tunnel.
We might think about that again.
But I think that's it's a goodposition for us to be in.
And hopefully we can continue tobe on that path where.
We control our own destiny anddon't have to be beholden to
external third parties of whichdirection we need to go in.
There was another company thatwe know really well that was
even thinking about thisacquisition opportunity before
(37:15):
we went ahead with it and theycouldn't do it because their
board said no.
And I don't ever want us to bein that position where, we're
going to be dealing with thirdparties that don't necessarily
have our best interest at heartthat are thinking about
themselves.
And so hopefully we can continueto align ourselves with, very.
(37:36):
Value or mission driveninvestors and third parties.
And I think a way that we can dothat is by being very careful of
who we accept money from.
So I'm sure we'll raise in thefuture.
I don't know what that will looklike.
But yeah, certainly we want tojust be aligned with the best
people in the market.
Jed Tabernero (37:53):
That's awesome.
Great news.
Dylan, I just have to say you'reone of those people that.
Through the stories and theproblems that you've been
solving throughout your career,it just seems like you like to
go to these areas where peopledon't really expect those things
like you mentioned in the endand you end up with something
great.
We've been reaching out to LatinAmerican founders to learn more
(38:14):
about that market.
That's our kind of flavor ofinterest in 2024 as well.
We've reached out to a couple offounders in Mexico as well.
Hopefully we see you out therewhen we go and visit some of
these founders.
We had a Chilean founder onwhere we've had a Brazilian
founder on.
We're trying to expand more outin Latin America.
So super excited to see you guysmore out there as well, but best
(38:35):
of luck.
And thank you again for yourtime, man.
This was really cool.
Dylan Terrill (38:40):
Yeah, thanks, guys.
This was fantastic.
Yeah, going back to thebeginning and bringing that
forward.
It's super exciting.
So thanks for the time.
As always this was super fun.
The information and opinionsexpressed in this episode are
for informational purposes only.
And are not intended asfinancial investment or
professional advice.
(39:01):
Always consult with a qualifiedprofessional before making any
decisions based on the conceptprovided.
Neither the podcast, nor iscreators are responsible for any
actions taken as a result oflistening to this episode.
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