Neil Patel

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Angel Sahagun is now on his third company, and it has already raised tens of millions of dollars to completely disrupt a major industry. His venture, Albo has raised funding from top-tier investors like Valar Venture, Dr. Cornelius Boersch, Conny & Co, and Greyhound Capital.

In this episode, you will learn:

  • The importance of focusing on landing your lead investor
  • Sahagun’s top advice before starting a business
  • The book that will help you strategize your end game

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    About Angel Sahagun:

    Angel is the CEO and Founder of albo, the Mexican leading and fastest-growing challenger bank that helps its customers manage their money by providing them with customer-centered financial services through the latest technology, disrupting people’s perspective on the banking system and the way they use their money.

    Albo has raised $72M USD from top fintech investors such as Valar Ventures, Omidyar Network, Greyhound Capital, Mountain Nazca, among others.

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    Connect with Angel Sahagun:

    Read the Full Transcription of the Interview:

    Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very exciting founder joining us. I think that we’re going to be talking a little bit about Latin America and what’s happening there. For those of you that haven’t seen this, as well, you probably saw my latest book, Selling Your Startup, that came out last week. Obviously, amazing stuff there, over 20 founders recommending it that have sold their companies for over 500 million apiece, and even over a billion, and it’s basically the roadmap to helping you understand what the exit is, how to package it, and how to get to that finish line, which, at the end of the day, is what it’s all about. But without further ado, I want to welcome our guest today. Angel Sahagun, welcome to the show.

    Angel Sahagun: Hey, Alejandro. It’s a pleasure to be here.

    Alejandro: It’s wonderful to have you, Angel. Let’s talk about your early beginnings because you were born in Campeche. How was life growing up there?

    Angel Sahagun: It was quite nice. It’s a very small coastal town in the Yucatán Peninsula. It’s a very beautiful city and very peaceful. I learned a lot about how to be involved in your community and feel very close to your parents and to your family. So it’s great.

    Alejandro: That’s something that I very much appreciate from Mexico, where people always travel together. They want to spend time together. I think it is really different from what you see, maybe in Spain, where I’m from, or even in the U.S., where people are all over the place when it comes to their family. That unity is amazing.

    Angel Sahagun: Definitely. In a place like Campeche, where less than 100,000 people live, it’s very easy to engage with your relatives.

    Alejandro: Yeah, of course. In your case, what brought you to America?

    Angel Sahagun: When I was 17, I moved to America from Campeche because I went there to start at the university. I started as a student in Southern Ingeniero. But, quickly, after one year there, I decided to stop my studies and move to Guadalajara to start working with an NGO helping people in need.

    Alejandro: When you paused, did you think that was going to be temporary, or did you think that was going to be forever?

    Angel Sahagun: I didn’t know at the time, but it was temporary because after two years in Guadalajara when I learned a lot, and I grew a lot because I learned the reality of the world. I was deeply involved helping poor children or people with terminal diseases in rural areas. So it was quite tough, but also it was an amazing experience. After two years there, I decided to move back to America to finish university.

    Alejandro: Let’s talk about this because this led you to the starting of your first company, MoneyMenttor. Tell us what that process was like and how was that journey?

    Angel Sahagun: When I returned to America, my family was in deep financial trouble. My father told me, “I can’t pay for your tuition anymore.” I didn’t want to go back to Campeche, so I started working in a beverage company in a very boring administrative role. Suddenly, I realized that I was very bad at managing my finances. I was spending a lot of money more than I earned. I didn’t know how to save or how to invest. So six months later, I was studying and working but with a huge debt. I said, “I can’t be in this situation.” So I started studying about personal finance and reading some books. It was a surprise for me to learn that a lot of my friends and different people I knew were in the same situation. So one day, I thought, “Why don’t I build something to help people in this situation. I started my first FinTech called MoneyMenttor. It was the first person of family management app for people in Latin America, and it was quite innovative at that time because it was 2008-2010 when I launched MoneyMenttor. It was a natural Blackberry because Blackberry was a popular device at that time, and we were the first to build this account obligation system where you could leave your different bank accounts in one place and create and generate monthly reports, calendars, all of those tools to help you achieve other financial life. It was an amazing experience. In the end, it was a failure because the market wasn’t ready. I made tons of business mistakes. For example, I couldn’t build a sustainable business model behind MoneyMenttor. But it was an amazing experience when I learned how to build amazing digital products.

    Alejandro: I think it’s interesting because I guess from all of these struggles is where one is able to really learn. With this company, you did not achieve the outcome that you had expected, but as I always say, you either succeed or you learn. When you’re looking back, and you’re looking at that journey, and also the lessons that you took away with you that you knew you were, no doubt, going to implement to your next endeavors, what were some of those that got stuck from that experience?

    Angel Sahagun: First of all, you need to have a very strong business model behind your product. I think that sometimes, a lot of founders focus so much on product without focusing on the business model, and both are very, very important. That’s one of the most important learnings. I also learned how to manage a team. It was a very small team of four people, but, nevertheless, it was the first time I was managing a team. I was 20, 21 at the time, so it was a challenge. Also, I learned about technology, startups, venture capital. I remember that in 2010, I made my first trip to San Francisco, and I was amazed. I learned about venture capital for the first time, and it blew my mind. That was a breakthrough moment when I decided that I wanted to be part of this world. I love it because, for me, since I founded MoneyMenttor, the most important aspect was how to build a better financial life for everyone. When I discovered the start of FinTech, I saw an amazing opportunity to merge those ambitions, building technology that allows each of our customers to improve their financial lives.

    Alejandro: You were talking about the exposure to the U.S. culture, to San Francisco, to that mentality of startups in hypergrowth companies, obviously, a very different mentality of the one in Mexico at that time. And I think in America, the whole startup environment has exploded in the last five years, and you have all these big investors going there to invest. But back then, when you were executing this company, the whole startup world was completely unheard of. So what were some of those differences that you were seeing and also how you’ve seen it evolve to where you are now?

    Angel Sahagun: Yeah. Fintech wasn’t even a word.

    Alejandro: Yeah.

    Angel Sahagun: Well, a lot of things have changed. First of all, market adoption. When we launched MoneyMenttor, less than 10% of the population in Mexico owned a smartphone. Now, 90% of the Mexicans have smartphones. That’s huge. Also, for example, the FinTech Law that the government launched in 2018, was a tipping point for the market. It gave us credibility as an industry and also credibility to the investors. Yeah, now, it’s Mexico’s time. The market is super-hot, and the customers are looking for new solutions in the FinTech space. We are very happy to be in this position right now.

    Alejandro: We’ll talk about Albo, which is your latest baby, but before we go there, obviously, for you, after this experience and turning the page and moving on, you developed or created a software development firm to help with larger companies, and this is what led to you creating and bringing Albo to life. So tell us about what those sequences of events look like and how things unfolded.

    Angel Sahagun: After MoneyMenttor, some bankers approached me and said, “Angel, it looks like you’re developing a technology company, technology for banking institutions. Why don’t you develop software for us? I founded my second company. It was a suburban company that specialized in financial institutions. We work with banks like [11:01], among others. It was a three-year journey from 2012-2015, and I learned a lot about how a bank operates behind the scenes. I learned why their processes are so broken, why they charge so many fees. For me, in 2015, what’s very clear and what’s obvious was that Mexico needed a new type of bank, a digital one with branches that deeply cares about the customers. That’s when I said, let’s build it.

    Alejandro: I love it. What was that process like where you go from making the decision of actually executing on this to bringing it to life? What happened there between that moment and Albo being a reality?

    Angel Sahagun: It was very, very tough. The first 12 months of Albo were very tough because, on the one hand, we build the product, the technology, the platform, and all of that stuff. But, on the other hand, I spent a lot of time meeting with regulators, explaining to them how digital could work because, at that time in 2015, regulators were asking us, “You won’t grow if you don’t have branches. How about the security? How about cloud? How about blah, blah, blah—things that now seem silly or obvious, but at that time were a huge concern for authority. Hopefully, they gave us their blessing, and we launched in October of 2016.

    Alejandro: Ultimately, for the people that are listening, what is the business model of Albo?

    Angel Sahagun: Albo is the leading bank in Mexico. We offer a portfolio of different financial products. We started with various accounts and cards, and now we are also offering repayments, savings accounts, bill payments, and crypto, loans, and also business accounts for S&Bs. We only make money when we deliver value to our customers. Our main revenue streams are interchange fees on the card payments. Every time an Albo customer pays with the Albo card, we earn the interchange fee. We also have net interest income with our loans. We have a bank in our crypto platform, so we have different revenue streams. But the beauty of everything is that Albo is completely free—completely, completely free. You don’t need to pay anything in terms of fees. That’s why we have grown so much with more than one million accounts, with a 40% market share in Mexico, and leading this race.

    Alejandro: That’s amazing. You guys are fully regulated. Your background is not coming from the legal side, so I’m sure that for you getting up to speed on the regulatory side of things was quite a steep learning curve.

    Angel Sahagun: Yeah. My background is more product-content-oriented. Nonetheless, when you’re leading a neobank, you need to be on top of legal and regulatory stuff. Given that I spent so much time dealing with regulatory in 2015 when the government started planning FinTech Law in 2016, they asked me to be an advisor. That’s how I was involved with the FinTech Law. At the end, everything went awesome, and we launched, and the government launched the FinTech Law in May of 2018, and that was huge.

    Alejandro: For those that are not familiar with the FinTech Law, can you give us a very high level of what are the new things that this law opened up.

    Angel Sahagun: Yeah. Basically, the FinTech Law implemented a new type of financial institution in Mexico called Institution [15:31] and also another entity called the [15:38] entity. At the end, it allows tech companies to be more involved in their financial space, which related entities with 100% digital operations without branches. It’s very similar to the E-Money License in Europe. But even with more capabilities. It’s like a mini-digital bank where you can hold the funds, where you can issue your own debit cards, where you can do crowdfunding, and many other things. It was a huge step forward for the industry, and that’s the license we already have, the FinTech license that allows us to issue our own debit cards to hold the funds. That’s why we don’t need a partner bank to operate and give us a lot of control of the customer experience.

    Alejandro: In this case, for you guys, you’re a multi-product type of platform. There are multi-products, and you were alluding to it. That sounds very challenging. Just doing one is tough, so how do you guys manage to do all of those at the same time?

    Angel Sahagun: Yeah. It’s very tough. First of all, since we have started, we have a lot of experience building financial systems—software for finance. So we decided to build our own core banking system from scratch, and this allows us to build new financial products on top of that very quickly. That’s how we have built so much product in almost no time. In less than five years, we have built a full portfolio of different financial products. This allows us to increase engagement of attention to expand the revenue per customer, to decrease the costs even though we are not using a partner bank, we [17:33]. We are using our own infrastructure. We are in the mission to build the biggest bank that Mexico has ever seen. The only way to do that is to own your tech stack.

    Alejandro: For you guys, you’ve raised quite a bit of money. How much money have you raised to date?

    Angel Sahagun: We’ve raised $72 million.

    Alejandro: That’s a lot of dollars for being in Mexico.

    Angel Sahagun: Yeah. But when you are building the largest bank that Mexico has ever seen, you need to raise a lot of money.

    Alejandro: Yeah. How has the journey been of raising that money? Was it all in one go? Was it in different financing cycles? Why don’t you walk us through that?

    Angel Sahagun: Definitely in different cycles. The first two years from 2016 to when we launched in 2018 were very difficult because, at that time, the neo bank model wasn’t so appealing for investors, so it was a challenge to raise money. We had a couple of near-death experiences, but in 2018, we were very lucky that we found an amazing partner in Mountain Nazca, Mexico. They invested $7.5 million in our seed round. In 2019, we raised another $35 million from Valar, Peter Thiel’s fund. They have a lot of experience in FinTech. They are the main investors transfer-wise in Number 26, in [19:20], in different amazing FinTech companies. That was our Series A. In December of last year, we raised our Series B, $45 million, also led by Valar. Now the market is very, very hot. We are in a very strong cash position. Nonetheless, we are looking for opportunities because there’s a lot of appetite from the investors’ side in Latin America, and specifically in FinTech investments.

    Alejandro: There are probably a lot of people now listening and a lot of people that are outside of the typical hubs like New York or San Francisco where it’s easier to walk into a Starbucks and find that investor drinking coffee kind of thing. When you’re in Mexico and you’re able to enroll someone like Peter Thiel and his fund to invest, what is that process like, and what kind of advice or things you’ve learned to engage investors in the U.S. being far away there in Mexico?

    Angel Sahagun: First of all, you need to explain the market opportunity. Mexico is one of the top ten biggest countries in the world, with 130 million people live here. You need to explain that, and you need to explain the banking landscape and the banking penetration that it’s so low. If you understand macro trends, it’s very obvious that Mexico is in the best part to be disrupted in terms of financial services. Once you’ve explained that, you need to show traction; you need to show numbers; you need to show revenue, your number of customers, your growth rates. After that, you need to show that you are capable of assemble an amazing team. Who is in your team; why they are there; what was their previous experience? For me, these are the three main factors in order to convince a very good investor to put money into your business.

    Alejandro: When you were talking about it earlier, you’ve raised $72 million. How have you seen the needs of the company, especially a company that is doing what you’re doing and is capital intensive, especially at the beginning? Just in licenses alone in the U.S. are an arm and a leg? How did you think about the capital allocation as you were going from one financing cycle to another financing cycle, and the company was transforming so fast?

    Angel Sahagun: First of all, the way we are looking at money is very different than a traditional financial institution because, as I always said, we are a technology company that offers financial services. We are not a bank with digital channels. We have a different strategy. The way we look at money is first, we think of the customer. How can we deliver more value to each of our customers? The best way we have found that we can deliver value is by building product. So we invest a lot of energy and money and resources building the best products. What does this mean? We’re hiring the best developers, product managers, C-level, and building processes that allow us to deliver more value quickly, faster than anybody else. That’s why we have launched more products than anybody else in marketing in a couple of years. For me, that’s an obsession—how to deliver more and more and more volume faster than anybody else. That’s why almost all of our spending is technology, product, and how to speed our teams with our current development. Obviously, also, growth—how to acquire more customers with the lowest possible take, trying different channels, trying different initiatives, partnerships, online, offline channels. By far, those are the two main aspects where we invest more money.

    Alejandro: When you have the numbers, and you have the historicals, it gets a little easier to raise money. But you were alluding that early on, you had some near-death experiences when you were raising money, and Mountain Nazca stepped in and helped you guys take things to the next level. What were some of the challenges that you were encountering there, and how were you able to overcome those challenges so that the company not only was able to survive but, more importantly, thrive?

    Angel Sahagun: In 2016, when we launched Albo, we were the first neo bank in the country. So the neo model wasn’t so mature, not in Mexico, and not anywhere. Luckily, investors were not so excited about the opportunity because they didn’t believe that the smallest startup could challenge the traditional banking system and the big guys in the banking system. So it was very tough. Also, FinTech wasn’t so hot, and Mexico wasn’t so hot. Not any U.S. investor or European was looking to enter the market, so your only choices were lock on investors. That’s why it was so hard. But suddenly, Mountain Nazca stepped in, and they gave us a very good term sheet, and with that term sheet, we were able to convince investors such as Greyhound Capital from London, and also Media Network from [25:23] in San Francisco. We closed this amazing $7 million seed round. That was the people from the company. That’s where we started to scale.

    Alejandro: Talking about scaling, now, and thinking about the future, too, imagine that you go to sleep tonight, Angel, and you wake up in a world where the vision of Albo is fully realized. What does that world look like?

    Angel Sahagun: I love that question. It’s an open and decentralized financial system where Albo is a one-stop shop for each of our customers. Obviously, Albo is the leading bank in Mexico with 50 million customers. That’s our vision. We definitely believe that the bank that will win will be an open, decentralized bank with a platform approach. One mistake that a lot of traditional banks have made in the past is that they are offering every service and every product by their own. You enter WellsFargo.com, and you will find checking accounts, credit cards, insurance, investment banking, you name it. No bank could be the best in everything. That’s why Albo is not making printers. We believe that in Albo we must build three or four anchor products, each one in one vertical, and we need to build the financial platform that allows other parties, other financial institutions, other banks, other retailers who offer their products to our customer base and [27:09]. The secret sauce for that is to build your own tech stack. The second is the data. We are data-obsessed, and we have a lot of data of each of our customers. We have the KYC, but we also have the transactional information, and we know things. For example, we know if you prefer [27:33] MacDonald’s. On top of that, we have alternative data. We have the GPS location of each of our customers. We have the device, the [27:45]. So with this data, we can do amazing, beautiful things because we can understand our customers. Given that we are the biggest neo bank in the region, we have this data advantage. With this data, we are offering new financial products to our customers, partnered with tier parts.

    Alejandro: Wow. In this sense, as we’re talking about what the vision is, where things are at, where are things today? Is there anything that you can share with us in terms of how many employees do you have or anything else to give us a sense of the scope and the size of the operation of Albo?

    Angel Sahagun: Definitely. As I mentioned, we have more than one million open and active accounts growing for x per year. We are 220 employees working remotely. Most of us are based in Mexico, but we also have people in other countries. Our goal is to become the largest bank that Mexico has ever seen, and that’s why we are investing a lot of energy building the team. We have brought amazing talent the past few months, people from [29:03], Goldman Sachs, [29:06], Google. I’m very excited about these new journeys that we are pursuing. The thing that excites me the most is that we have built this amazing platform with different financial products. Now we are ready to conquer Mexico and to become the largest bank that Mexico has ever seen.

    Alejandro: Amazing. So imagine that I put you in a time machine and bringing you back in time, and I’m bringing you back in time with this wealth of knowledge that you’ve been able to acquire over the course of building and scaling this company. And I bring you back in time perhaps to when you were still in university and thinking about the world, and you had the conversation with your dad, and you needed to find your own way. Imagine you’re able to have a sit-down with your younger self, and you’re able to tell that younger self one piece of advice before launching a business based on what you know now. What would that be, and why?

    Angel Sahagun: The first is to focus on the mission. For me, now, it is very clear that I am building the world that I want to live in. For me, that’s my motive. I would say to this younger Angel, “Choose your motive. Focus on that. That’s the most important thing, the end game.” Second, to be more aggressive at the beginning, I should have started earlier. Maybe I should have started Albo in 2013-2015. Also, not to worry, but to enjoy the moment. I’m always stressed about the future goals and how to develop more value, and a lot of things are going on every day. I need to learn that the present is the only thing we have, so to enjoy the process more and the journey.

    Alejandro: I fully agree with you on that. That’s very profound. There’s nothing like embracing the journey because people always think about the end goal and the future, and that makes them completely unhappy, and it takes out the joy. I’m right there with you, Angel. For the people that are listening, what is the best way for them to reach out and say hi?

    Angel Sahagun: Email and Twitter. My email is angel@albo.mx. My Twitter handle is @AngelSahagun. Those are the two best ways.

    Alejandro: Amazing. Angel, thank you so much for being on the DealMakers show today.

    Angel Sahagun: Thank you, Alejandro, for the invitation. I really enjoyed the conversation.

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