This is one post part of a series showcasing game-changers part of global entrepreneurial ecosystems.
In Latin America, it costs 25x more to make an investment than it does in the United States. Literally, what costs $1 in the US costs $25 in Latin America. Nicolas Galarza realized what a ridiculous surge charge this was and did something about it. In 2015, Galarza launched Quiena – an investing platform for people in Latin America, particularly for millennials with about $2,000 in investable assets. The millennial generation is a population often neglected by brokers and investment firms. Historically, investment firms and brokers work exclusively with clients considered a high net worth individual – about 542,000 High Net Worth individuals (or 0.08% of LATAM’s population) but the industry adapted to serve about up to 1% of the richest population – those who have enough money to make these firms brokers’ time worth their while. That said, this excludes the majority of the population and is a missed opportunity overlooking the millennial generation. Millennials are positioned to outrun baby boomers in the next 10 years – collectively, their annual spending power at $3.5 trillion dollars a year. Given the results of the baby boomers on the economy and stock market, this is a future trend that can’t be ignored. Which is why Quiena is seizing the opportunity.
In Latin America, it costs 25x more to make an investment than it does in the United States.
Galarza studied jazz composition in Contemporary Music School in Buenos Aires, Argentina and less than a year of economics at the University of Buenos Aires when he dropped out to start an investment club. Just for fun, he started an investment club with 12 other people. They pool their money together for a sum of $50,000 and began investing in high growth stock options. This group of 12 grew to 65 in 2 years and these investments ultimately came down to the decisions of a 4 person management team. The result? They had accidentally created a grassroots investment management firm. The success of this investment club inspired Galarza to launch Quiena.
Quiena dropped out of college to create an investment club which eventually would become the impetus for his company Quiena.
So what accounts for the vast disparity of cost between investing in US markets from the United States versus Latin America? US markets are liquid, cheap and easy. The $30 cost of investing in a US stock if you are based in Latin America is an outrageous price people will pay despite the simple hack that if you change your postal address to one from the US, you’ll be able to access to US cost. During his time at the Thiel Summit when he was 21, Nicolas saw this inefficiency and started Quiena to address it.
What accounts for the vast disparity of cost between investing in US markets from the U.S. versus Latin America?
Competitors such Alkanza in Latin America or Wealthfront in the United States leverage robot advisors to automate wealth management and offer to the mass public the wealth advisory services previously reserved for the 1%. Products such as Quiena and Wealthfront are disrupting banks whose antiquated systems can’t compete with automated services these apps provide creating innovative systems and unprecedented speed. But automation isn’t enough in and of itself – something that sets Quiena apart from its competitors. Despite the efficiency and speed of automation that these apps can offer, Quiena believes that there should only be so much automation to make customer onboarding seamless, but that doesn’t deprive customers of the right to choose the investments they want. On the Quiena platform, customers can choose industries of interest, their portfolio risk comfort, and select particular stocks of interest. Quiena will provide projections of best and worst case scenarios as well as 10-year estimates based on past patterns. Not to mention, Quiena responds to its customers’ requests – for instance, showcasing certain industries of interest like medical marijuana which is a current viral investing trend of Latin American Millennials.
Quiena’s ideal customer is a millennial with about $2,000 investable assets – a person whose needs are currently not being met by brokers due to their income class but someone who is part of the potent purchasing power of the next generation who will overconsume baby boomers. Despite traditional investing and finance broker platforms like Fidelity that is saturated with antiquated user experience (if any) and filled with jargon purposefully meant to create barriers between the investor and making investments (thus, forcing the investor to connect with a broker and a bank directly), Quiena has catered to the next generation by creating a seamless user experience, brightly colored, content in terms that adolescents could understand, and easily navigable from getting started in 2 clicks to making your first investment in a few simple steps (2 minutes to be exact). In 2 minutes, you will have a personalized investment portfolio and after 3 simple steps to open an account, you can start investing upon your account’s approval. You have a multitude of investment options – either a reliable favorite strategy such as the standard portfolio recommended by Quiena for average returns or creating custom investments based on areas of particular interest (like marijuana). Users have complete control over your risk profile and Quiena’s algorithm creates custom projections on your prospective investments leveraging worst case scenarios (using data from 2008 stock crash) and best case scenario. This platform also has the same security as your traditional bank – backed by the SEC and SBIC. Quiena is currently only serving Spanish-speaking customers, but is working with over 100 clients and managing over $900k in assets – and they are growing at a rate of 11% in clients every week and 50% a month in managed assets. Having launched in January 2017 with $97,000 – today they’ve multiplied by 9.2x the sizes of assets managed. Crazy growth for the first quarter of a startup’s launch.
One obstacle is engaging millennials to save and invest money as opposed to spending it. In some ways, trying to get millennials to save money over spending it is like telling people to eat healthily and exercise. Everyone knows it’s the right thing to do, but a staggering few are truly motivated to practice what is preached. Quiena’s innovative approach is this: the idea that it’s the same thing to invest in Apple stock as it is to buy an iPhone. Investing in stocks makes you an owner of more than a product, but of part of a company and all its products. If you are planning to consume Apple products for the foreseeable future, why not get a return on the purchases you are going to make?
If you want to buy an iPhone, what’s the difference between consuming Apple products and investing in Apple stock?
Quiena’s latest triumph is a massive one – having poached the former CMO of Santander Bank in Argentina (the biggest private bank in the country) to join the team, Santander serving over 100M people across United Kingdom, Europe, and Latin America. According to Galarza, selling to potential employees is one of the main jobs of CEO as part of it’s most important role: sales in general. “CEOs should always be selling,” Galarza says, “To investors, clients, potential employees. Getting people behind you is imperative.” This authentic belief and enthusiasm is a key when selling your company and your product. Another thing that Nicolas is excited about is the current cost of Quiena’s customer acquisition which equals less than $60 per customer. This number is staggering when compared to that of banks of which cost per new customer is over more at $2,000. Not to mentions, this number has dropped by $20 in the last 2 weeks since I interviewed Nicolas. Translation? They are getting sh*t done and moving mountains in their high growth trajectory. But Galarza isn’t satisfied /content yet. He’s excited to keep driving down this number. The other exciting aspect is the stage of growth Quiena is in after a year of frustrations of launching phase, changing landscapes, dozens of iterations, data collection and campaigns. He’s excited they’ve entered their next stage of growth toward profitability and customer acquisition after getting the product to a stable and awesome point.
Quiena is getting sh*t done and moving mountains in their high growth trajectory.
Their current challenge is automating onboarding of new users as well as keeping costs as low as possible. In order to service a lot of people, they must acquire new customers for less than what clients pay for the service (which is really low and extremely affordable) – a feat already accomplished on an average recovery period of 4 months – an incredible benchmark for the industry. They are also operating in a market with customers who don’t have as much trust in online platforms as do users in the US, Uruguay, and Argentina, in particular, doesn’t trust putting money on online mediums. However, Quiena is combating this by lowering the barrier to entry and providing multiple ways to fund investments – from bank accounts, credit cards, debit cards, to beyond. Another challenge is existing in the financial industry itself – the structure of which being bureaucratic and riddled with regulatory red tape. The most frustrating of it all? The monthly maintenance fees. In the US, this is a non-issue – equivalent at most to the price of dinner with friends. However, making deposits in Latin America banks investment accounts charges 3.5% of the deposit. This is the last problem they need to solve to set themselves on the road to success in disrupting the antiquated banking system altogether. They are currently piloting an innovative solution by leveraging Bitcoin – by exchanging the cash deposit to bitcoin value and transferring the money in that form, they’ll bypass the hurdles of the 3.5% surcharges. However, Bitcoin is a potent up and coming industry through a fluctuating risk-averse one. That said, bitcoin is the enemy of banks and an enemy of your enemy is a friend as the old adage goes. Using bitcoin to transfer money would save Quiena – and people around the world – massive amounts from the cost of $80 per transfer in traditional banks to a mere $0.50 via bitcoin. This has massive potential for impact when you think on the scale of millions of dollars.
But Galarza doesn’t like being considered part of the fintech hype in LATAM (despite the fact that the number of potential users is expected to amount to 295.9M by 2021). He believes the most valuable companies are the 1 or 2 out of a 100 who are doing something. “If you do the same thing as everyone else and copy what others are doing, you get to get in a state of comfort and you won’t change anything,” Nicolas says.
“If you do the same thing as everyone else and copy what others are doing, you get to get in a state of comfort and you won’t change anything.” – Nicolas Galarza, CEO of Quiena
7 major impactful results of the Parallel18 on Quiena.
- Experimentation: Experimenting in Puerto Rico market gave the company a great opportunity to prototype in a market known to be “the bridge” between Latin America and the United States.
- Powerful Introductions: Intros to new investors → unlike LATAM risky investors who give low valuations for very little money
- Preparation: Galarza says getting to prepare for their financing round with talking with investors was crucial.
- Investor Offers: With the key preparation mentioned in the previous point, Quiena says a handful of powerful offers from investors right out of the gate.
- Feedback: Getting insight from the other side of the table (i.e. inside the minds of investors and authentic feedback from mentors)
- Entrepreneurship Insights: Peer to peer mentorship from fellow companies
- Unprecedented Mentorship: Mentorship would never have had access to otherwise
As for advice, Galarza shares an important reminder to entrepreneurs – you gotta love what you do as you’ll more often than not be forced to do it for free as part of your entrepreneurial journey.
Take 2 minutes to sign up to try Quiena right now.
“You gotta love what you do. More often than not, you’ll be forced to do it for free as part of your entrepreneurial journey.”– Nicolas Galarza, CEO of Quiena