Neil Patel

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Tarek El Sherif took the bold step of not only launching his own startup, but also moving to a whole new country to do it. His venture, Zinobe, has raised funding from top-tier investors like Monachil Capital Partners LP, Ali Saadat Meli, Ataria Ventures, and QED Investors.

In this episode, you will learn:

  • Equity versus debt financing
  • Choosing your investors
  • Tarek’s top advice when starting your own business


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About Tarek El Sherif:

Tarek El Sherif is the founder and CEO of Zinobe, a Colombian fintech specializing in online lending. Tarek has over seven years of investment banking experience split between New York and London. Previously worked for Deutsche Bank Global Markets providing corporates with derivative solutions for asset and liability management. Prior to that, he worked at JP Morgan in the Investment Banking Coverage and M&A group. Tarek holds an MBA from Columbia University and a Bachelor of Science in Finance from Northeastern University. He currently lives in Bogota with his wife and two daughters.

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Connect with Tarek El Sherif:

Read the Full Transcription of the Interview:

Alejandro: All righty hello everyone and welcome to the deal maker show. So today. We have a pretty exciting founder so we’re gonna be talking about expats you know in in lot time we’re gonna be talking about building scaling going from investment banking to really you know, starting your own business. So you name it. And I find that you’re gonna find our guest quite inspiring so without further ado. Let’s welcome our guest today Tarik el- Sharif welcome to the show so you were originally born in New York City obviously your parents from Egypt but they but give us a little. Ah.

Tarek El Sherif: Thank you very much and pleasure to be here.

Alejandro: Of of how walked through memory lane. How was life growing up.

Tarek El Sherif: Well I grew up in in London in central London and I think it’s probably 1 of the few places in the world where my background didn’t seem very strange a lot of people from different parts of the world and I didn’t really think about. You know all the different heritages that I had growing up in London and only when I left when it was so complicated to answer the simple question of where are you from? did I realize that it was not very normal. So for me I always say well. I was born here I grew up here. My family’s from there and yes, it’s not not an easy question to answer. But London was a good place for that and I think very international very cosmopolitan and that’s a place that I always like to go to. I was just there just a few weeks ago I caught some Wimbledon action very fortunately. Um, and yeah I think for me, you know, growing up there high school there I thought it was a very good experience and I want you know my children to have something similar as well. I liked. Liked the structure I liked you know the the discipline the just the overall experience of kind of english schooling and it was yeah fairly stable for a while I I had the american passport being born in New York so I had a longing of. You know, visiting the us maybe working in the us studying in the us at some point so that was always something that was compelling so all throughout high school I I had the dream that I would you know end up in the states. You know, relating to the states only through through movies and some vacations and just through. Through general media. But at that point. Yeah I didn’t have much much idea of what I was going to do only when I when I when I left high school I ended up going to to university in the states I started. You know, thinking much more. But. Finance and banking and and this world which which I’ve stayed in ever since.

Alejandro: Now in your case I mean you came here to do your studies. You went to northeastern then you did your Mba in Columbia but you enter the investment banking world and you did stay there for a while I mean none in New York and then in. In London so what? what attracted you into the whole investment banking arena.

Tarek El Sherif: I think at the time it’s very different to its image right now it was a completely different area. So I liked you know the markets I liked valuations I liked you know, working in excel I enjoyed that type of schoolwork when I was studying. Ah, in my undergrad and it was kind of a natural destination for for people ah liking that field and wanting to challenge and challenge themselves and it also had the prestige. Ah. Yeah, it sounds. Yeah it. It sounds like I’m speaking about a different issue right now. But that’s the way it was you know when I when I start in jp Morgan in in 2000 I think you know the stories that I hear about the the banking sector now that the average age has gone up. They keep having to raise salaries because of the the churn that they have. It wasn’t the case I think then we were still towards coming out of the end of the tech boom. So I think banking was very very hot with all the Ipos and the m and a activity that was going on. So I think it was just very very compelling for me at that point.

Alejandro: So out of being in the investment banking side I mean what? what did you learn about you know and I guess you know different perspectives right? So you have the perspective you know from from being a Us investment banker and then perhaps you know the perspective of being a European you know Investment Banker. So. So I Guess from that point, what did you get to learn from.. Perhaps you know the companies that were working well from the companies that were not working so well, you know that Pattern Recognition. So.

Tarek El Sherif: Yeah, and I think it was invaluable I think as as a foundation and I really um I’m lucky I think that I started my career in New York as well. I think New York is a very good environment to to begin working to. To learn the right mindset and the efficiency and work ethic I think that exists there so in in the investment banking world Jpmorgan was very strong in a lot of areas but particularly ah, let’s say on the credit side of the of the business I think. Lessons that I learned there of analyzing companies looking at strengths looking at vulnerabilities assessing them I think I’ve used those skills ah throughout my career. It was a very good foundation ah to build on you know and moving from large corporates. To consumers in s andme which I’m doing right now on the fintech side. But yeah, the the banking world particularly if the analyst is is not you know, particularly rewarding I think that’s one of the surprises you get after you start working there. Because you know you’re working very very long hours. A lot of the work is disposable and very hard to make an impact but you do get a crash course and accelerated learning I think that a lot of other industries. Don’t give you. And you’re working with a lot of driven people you’re working you know with tight deadlines and and you know quality of work is is very very important and you know when I when I ended up going to business school I think the investment bankers and the consultants really stood out as far as. You know, being able to turn something around and make it professional very very quickly. Ah, and so I definitely while I don’t want to do it again. Maybe I wouldn’t recommend it for my kids, especially you know with a change in the environment I do feel it. It helped me a lot. So. Ah, in in my in my career.

Alejandro: Now for you at what point do you realize you know that it’s time to really you know perhaps give you a notice and get to you know work in your own company in your own idea I mean at what point that sinobi. The idea of you know we come knocking and how do you go from ideation to to lunching. So.

Tarek El Sherif: Yeah I mean it took probably longer than it should let’s say I mean when I started in and jp Morgan I think everyone’s on the track and the analyst side to go to business school so I did what what I was supposed to do then after business school you know I I always thought I would end up doing some something entrepreneurial, but. I probably took the safer the easy way to do go back into bank again and just switching from the advisory to sales and trading. But so it was good for a while. But I I realized you know as I rose up that it was getting less fun. You know, maybe a bit more political and and less rewarding. And yeah I just at some point I just thought that you know I need to you know, do something that I’m happier in the day-to-day more and I had more control and I could have more impact and I could use different parts of my brain. So I always knew I would do something entrepreneurial and. I think I I think I just lost lost the engagement of of my of the day to day in the banking and at the point that I left I didn’t really know what I was going to do I I just thought let’s. And let’s change the scenery. Let’s move to another another another country just and just before I left London some of my friends from business school ah had introduced me to some of their friends who had a startup in London called ebery and that was a Fx. Fintech ah, which a lot of them are popping up in in London at that time and I joined that one letting them know that I was going to leave the country and maybe I could set up Latin America for them because I chosen to move to to Latin America my wife is Colombian and we thought. You know why? not you know, not only change careers but change the scenery a little bit so we decided to go there so I left being part of that fintech and when I arrived here I just found it very difficult to to work. Ah, with them being so far away and it was a new business and they wanted a concert in Europe. So um, one of the one of the partners told me you know why don’t you have a look at some of these companies that are doing this new data-driven lending and see if you could apply that in Columbia so I looked at the models. And and then I thought no this is very interesting and it kind of appealed to me the the simplicity of it. The efficiency of it and how revolutionary I thought that proposition was of instant approvals of using you know, new datasets.

Tarek El Sherif: Of having that amazing ux that was very different to kind of the bureaucratic slow process and and that’s that’s how as Zenobi began I did I hired a lawyer did a legal due diligence to see what was viable. How I could structure the product and once I got the green light. I started it at at that time I when I arrived in Columbia I was introduced by my brother to a local entrepreneur somebody called Martin Shrimp who had founded a payments company which later became peyou latan which is owned by naspers. And he he was working full time there but he was a very good partner for me to at least ah help me network and help me set up a business coming as a foreigner to to Columbia. So we we set up the company with both of us as shareholders him maintaining his job and pay you and me. Kind of being operational.

Alejandro: But this was like 2011 the world finte at that point didn’t even have any type of definition definition I mean forget even about being in latime I mean latime startup were like nonexistent unbeliev.

Tarek El Sherif: Yeah, and not only fintech was relatively new I think Colombia as an investable country was was not viable either.

Alejandro: Yeah I mean now you have like the soft banks of the world. You know going there and day. But that was you know completely noneexistent. so so unbelievable so I guess for the people listening what end there up being you know the the business model of of Ziobi. So.

Tarek El Sherif: Yes there’s no I mean when you go into these markets. You can look around say there’s opportunity everywhere so we decided to focus on what we thought was a very actional item was ah was consumer credit looked at you know some macro indicators such as you know, private debts ggggdp. Credit card penetration. All the kind of the key metrics that that show access to credits in the market and they were you know Ah very very behind and even behind a lot of the peer group countries in in Latan so we thought that was ah, kind of the lowest hanging food that we could start and. And given that there wasn’t much going on on the investment side a consumer consumer side credit ah required less capital. So we thought maybe that was more efficient to do it. So the idea was to create a product that would tackle. Ah, credit inclusion providing short-term credits and using technology as a differentiator so technology as you know to provide a Ux that was more accessible more friendly, more efficient less paper intensive and then technology on the risk side. provide better underwriting to provide you know ah you know more precision on the models so that you could approve some of these people that weren’t passing the traditional scoring scoring algorithms.

Alejandro: Now three years ago you guys changed the model. What happened.

Tarek El Sherif: Yeah I think there’s a lot of learnings because when you start that business and you you kind of project out to where you’re going to be. You know you can think you know we’re going to be a standalone profitable company. Maybe we’ll start taking deposits. Maybe we’ll be coming a bank but I think. As you mature. Ah you get to see what is more viable. What what is ah you know a more sustainable model and what happened about three four years ago is we started went from consumer to Sme we were approached by one of the. Ah, governmental banks ah to see if we could apply our consumer product to to the sme space and when we started that product from scratch we um, we tweaked the model a little bit so instead of having an open product where we’re attracting leads. Ah, from you know, big tech and lead generators. We thought there was a more efficient way of doing that and that efficient way of doing it is created you know more embedded products or you know a b two b two b model. Ah so that we could leverage ah flows that were already existing. So that we didn’t have to capture those clients so we could have operational efficiencies. We could have risk efficiencies and that that proved to be you know, very successful for us and it became the foundation of kind of our new company tangello that we wanted that to be. And attribute in all our products. You know that? ah you know being embedded has you know, many significant advantages or moats for your business. You know that you that you have ah you know protection from competition you had advantages on. Underwriting you have advantages on on operations that can help you build a much more sustainable business and that was one of the key learnings that we had because I think differentiating yourself from your competitors protecting yourself. Ah, with you know, structural advantages is um is an important part of any business I think but.

Alejandro: And how has it been for you guys to kind of like have this multi regional you know type of operation. So.

Tarek El Sherif: And I think it comes with it with its challenges. Ah, but um, we came together you know combining with a mexican company that was former me known as mexarnd and um I think what made this combination easier. Is that we were fairly complementary I think we were strong in some areas they were strong in other areas so we had alignment in what we wanted to do and we didn’t have to have much overlap in any of the working positions. Ah so that helped a lot and. You know and in the 2 countries we had um, ah different business units. So the you know the goal was to bring what what we were good in Colombia what we wanted to continue over to Mexico and and vice versa and in that way everybody was um. Ah, was aligned and there was no ah you know overlap or stepping on toes as far as the management was concerned so it’s been very very smooth I think. Probably write about this later on hopefully is a case study but it is an example of a very good combination that that made sense from the beginning.

Alejandro: Now in your space in fintech. You know there’s some consolidation going on and in fact, you actually yesterdaya you know, ended up doing a transaction So tell us about what’s happening and also tell us about this deal that you guys did first.

Tarek El Sherif: Yeah, so I think given mocking conditions I think a lot of people are going to be forced into consolidation. Ah, but in general I think it started even from last year or a little bit before people thinking about. Ah, combining companies. A lot of fintech were built on on very specific products or features and so it made sense for them instead of developing in-house combining with companies that could complement whatever their core product was. And we’re seeing that a lot in in not only in latin but I think across the world in in in the fintech space and it it makes sense. You know to leverage somebody else’s experience somebody else’s um. You know headcount relationships funding and so forth rather than to build everything ah from scratch we we were fortunate so part of the driving factors for this combination ah were ah that. The Ceo of mearran and I went to business school together in Columbia University so we knew each other that was a company that had a tech base but a lot of it was none d-party and they were looking to develop a lot of it in-house so they were going through the motions of deciding. You know we build it ourselves or we partner with somebody and we met in a conference in a lended conference in San Francisco about three four years ago and and then that started the discussions ah and and then it led to us. Initially making a joint venture which was called santao which we launched a couple of years ago which was taking our Sme product in Columbia and taking it to Mexico where we would provide the product and the technology and they would provide the the funding and the relationships and then because. We saw a lot more opportunities to work together and we and we we found that we were very aligned in just the vision of where we saw the market was going ah towards the end of last year we decided to take it a step further more than a join venture and do a more complete ah business integration. And um, so I mean our specialty was in everything technology-based more on the on the kind of the shorter duration credit products from vendor finance to kind of consumer lending.

Tarek El Sherif: Ah, they were special specialists in asset back lending everything from lease sell leaseback secured lending and some corporate business as well. Ah, so really, our businesses fit very well together and there was a lot of opportunity for us to take the colombian products and bring them to Mexico.

Alejandro: And and for this for this now for tangelo the the resulting entity from these 2 companies coming together. What ended up being I mean not one ended up being but but how much capital have you have you guys raised in total.

Tarek El Sherif: Ah.

Tarek El Sherif: If you say historically it’s it’s actually quite a lot especially on the debt side given kind of the the type of ah credit products that the mexican company was doing so it’s a little bit over None and equity and in the. Kind of well over 500000000 on the debt side. So I think combined we’re we’re coming up to $1000000000 I think in in total and that’s a variety of you know from vcs to private equities and to some banking institutions as well.

Alejandro: And how do you think about equity versus debt for a company like this. Yeah.

Tarek El Sherif: Well debt wasn’t very necessary in the beginning. Especially if we’re managing credit products. Ah but I yeah mean I think it really depends on the market conditions and the terms that you you get how to ah. Blitz between the two I think equity side for me I was always very very picky on who I wanted to work with I really viewed it as a marriage and I wanted to make sure that we had buy-in on on the strategy and we got along on a personal level. And you know that ensured that you know the board meetings and the strategy sessions would be very very smooth on the debt side. It’s much more transactional. Ah so it’s based on the contract and the terms and so forth. Um, as we’ve gotten bigger and and post this merger. Ah, the debt side has become much much easier much more flexible and we have a really ah diverse pipeline of different ah funding options on the equity side now. We’re looking for somebody that can take us to the next stage. Whether. You know we’re looking for a public market outcome or a strategic m and a so we’re looking for people that are much more aligned with with or have experience on that that side of the business.

Alejandro: And how were you able to bring foreign investors. You know, perhaps investors in the us you know like Qed you know to invest in a company like this because you know obviously Columbia is a. You know it’s it’s it’s kind of like a risky bet for for these people that are overseas that maybe are not so familiar with what’s going on there.

Tarek El Sherif: Yeah I mean there’s good and bad and being in a small market. So a small market doesn’t have a lot of investors. But I think it’s also easier to stand out or to make an impact so I think when the investors started to look at Columbia I think we definitely ah were. On the list of companies that that that could be seen. Um, and I think that one thing that we were lucky in is that we had None ars of relative or 4 years of relative bootstrapping. And that allowed us to really refine the business to have it working to have its ah you know positive unique economics to have some of the metrics that people look for like a qvd that they could appreciate. So I think um. I think once we our none conversations with Qd. They definitely looked at the product the way we did from a more long-term basis so not look at ah you know how much you’re charging or kind of a unique economics but more lifetime value more recurrency. You know, looking at some of the metrics that are good predictors of a sustainable company and a sustainable product and I think we were very very aligned ah with with their vision and they definitely. So us in the market as as a standout given the results that that would had.

Alejandro: So when it comes to um to building companies like this partnerships are a critical aspect now. So so tell us about you know the importance of partnerships in in fintech.

Tarek El Sherif: Yeah I think the the new fashion items the last couple of years is is the term embedded and and that’s you know that’s that’s got to do with partnerships and I think ah you know I think a lot of fintechx company started like ourselves. You know you look to do everything yourself to make it more efficient to align yourself. But I think you come to realize that you know you have specific advantages and it’s better to mitigate your weaknesses through partnerships. So you know 2 glaring you know hard Tosolve weaknesses. Are always going to be on on the credit business always going to be growth through customer acquisition and then funding cost. Ah constraints so partnership. You know we use that to to tackle the first one. Ah so instead of us ah looking to you know, build up our customers from scratch. You can leverage somebody that is looking for a credit product that has already customers ready with a history and so forth I think that’s very complementary I think fintechs that are part of the infrastructure that are enablers. I think are much more sustainable and I think that’s the the newer finex that those are the ones that I think are are doing well and and going to survive because I think initially the talk was all about disruption and replacement replacing the banks and I think that’s proven to be. You know a little bit of an exaggeration to to what what what has happened in the end.

Alejandro: So imagine if you were to go to sleep tonight Tarrik and you wake up in a world where the vision of tangelo is fully realized I mean what what does that world look like.

Tarek El Sherif: Yeah I think I think that let’s say for what what would? What did I mean in latin America I think you know increasing you know, general access to to credit and most businesses having viable. Ah, credit options to support ah their business I think that would transform you know major parts of the economy. Ah for for businesses for consumers and generally generally be a positive impact I mean we see ourselves. As kind of one of the leaders in this forefront in in providing sustainable credit solutions. Ah for businesses. So if if our dreams were to come true I think we would be embedded with you know, most of the large corporates. And multinationals in the area and will be have a presence across the region and we will be. You know, branded as kind of the the trusted credit originators and distributors in the region.

Alejandro: Nice now. Tarek imagine I put you into a time machine and I bring you back in time I bring you back in time. Perhaps you know to that moment that you were in London you know, still at doing shabank and and thinking about maybe you know like jumping ship and entering the venture world and. If you had the opportunity of even ah you know, perhaps you know, sit down. You know your younger self that younger Tarek and give you that younger self one piece of advice before launching a business. What would that be and why given what you know now.

Tarek El Sherif: Yeah I think it’s probably related to the element that that I that I said before is to project forward your business and see where it’s going to end up what type of business what type and then what what are the consequences. You know what type of investors. Do you need which country you should start in. So I think you know we start in Columbia not realizing the constraints of that market. You know that hard to raise money you know considered a small addressable market. Ah, ah you know, regulatory constraints ah pricing constraints and so forth. So. I think that when you start a business. It’s it seems like everything is open very similar to maybe when you graduate business school. You can do any career at that point then you pick a career then everything becomes ah you know more more confined so I think. Understanding what you’re building and what’s going to be an outcome What are your advantages I think are very important concepts to ah to think about so for us, you know the implications of if we’re lending. How big can we be how big do we want our balance sheet what does that imply for who we work with I I think that those were important questions probably that I was maybe more naive than I that I than I could be. You know, thinking that I could maybe start in Columbia and expand regionally. Ah, realizing. That’s not efficient at all from ah from an investment perspective I I think that yeah there was some lot of realities that that came through with the experience we had buildings in obi.

Alejandro: I love it I love it so Tarik for the people that are listening that want to reach out and say hi. What is the best way for them to do so.

Tarek El Sherif: I guess I either on Linkedin tarikul Sharif Tangelo um or or my email taek at ten tangelo latinten but com.

Alejandro: Amazing! Well hey tarrick. Thank you so much for being on the deal maker show today. It has been an honor to have you with us.

Tarek El Sherif: Now. Thank you very much enjoyed the experience.

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