Startups with foreign investors
By: Alejandro Brega
Tags: Startups, Investors, Local

For a local startup, Argentina’s crisis is bad news, but at the same time the export of its services offers them coverage that few small and medium-sized companies have today. This is stated by Leandro Sabignoso, co-founder partner of Auravant, a technology-based company aimed at the agricultural sector (AgTech) that has raised $ 750,000 in two rounds of investment led by Wayra, NXTP Labs, Glocal and Nesters, in addition to being incubated in the Madrid innovation center of the European Space Agency. Recently it opened a new round to continue accelerating its growth.

That of Auravant is one among a handful of local technology companies that, despite the crisis, were able to carry out capitalization rounds and carry out the expansion of their borders outside business: although all the cases surveyed agree that devaluation is not a help, no it is less true that foreign clients pay in dollars and that the main cost of a startup is knowledge.

“There is a crisis of confidence in the country, which covers all Argentine companies with a blanket of uncertainty”, says Sabignoso. “The local investor unscrews until he clarifies, and foreigners think several times before making any move. In our case, it finds us right at the beginning of the internationalization process, with clients in eight countries and opportunities in many more, so, within the negative scenario, it affects us a little less”, he analyzes.

Since its creation, in October 2016, Auravant offers a “Software as a Service” platform to monitor crops and carry out precision agriculture projects, under a freemium model: users can try a free version of the tool, or opt for packages with affordable prices to take advantage of advanced features such as reports, settings and performance estimates. According to company data, they have 9,000 users with 4 million hectares of 31 countries in Latin America and Africa.

Sabignant says that abrupt devaluations generate more problems than solutions. “In the very short term, there is a decrease in costs in hard currency that, within a few months, returns to the place where it was,” due to cost inflation. “It is a scourge that negatively affects all aspects: less sales, more turnover and less planning time horizon of the different links in the chain”, he continues.

Marginal benefit

For Andrés Augspach, who co-founded in July 2018 a platform to digitize the entire agricultural supply chain that Circular baptized, the crisis impacts in the medium term. “Today it does not affect our sales, of $ 7 million in the year, because they are plans already agreed with customers. The impact is in the delay of the decision making of new clients ”, says.

Doesn’t devaluation benefit them?

“It is true that there is a marginal benefit of devaluation. But the change in variables and the instability that the process entails are worse than the possible point benefit, ”he says. “It is much more important to grow and have a market than save in a certain month a percentage of the costs. The equation is surely different in mature companies, which have another balance between their current structure and their growth plan. But our bet is to grow and, if a cost discount delays us, it doesn’t suit us, ”he completes.

With Cargill as the main user of the platform and US $ 100,000 of investment contributed by The Yield Lab, Circular is in full search of capital. “The crisis can affect the greediness or potential investment profile,” says Augspach. On the other hand, he affirms that the investment of effort in managing what has already been achieved in the most efficient way possible is not less. “We cannot convert the dollars invested to pesos and lose a third nor pay income tax when there are none”, he summarizes.

Opportunity

One key seems to be that opportunities exceed the current problems. This is how Diego Bertezzolo warns him at least, which co-founded in June 2017 Avancargo, a platform that unites cargo donors in the agricultural, container and equipment segments with medium and long distance carriers.

With a business model based on charging the carrier a commission of 5% of the travel fare, the platform brings together more than 6,000 transport companies and more than 500 cargo givers, among which mention Cresud, Cargill, Adecoagro, Bunge, Indigo, Unilever, Walmart, Pepsico and Dulcor, with a turnover of $ 50 million annually. In parallel, it adds investments of US $ 1 million from Globant VC, Grupo Murchison, Román Organization and Supervielle CVC. And, where appropriate, denies that the devaluation benefits them. “It makes difficult the analysis of costs and the calculation of rates to all those involved in the system. It is a reality we live with, but it is not beneficial. In addition, it forces us to review costs that are often dollarized or quasi-dollarized, as in the case of servers, IT services abroad or certain resources, against a drop in real dollar revenues, ”he clarifies. And he completes: “Despite this, we believe that there is still a lot to grow”.

Reluctance

Getting a client to adopt a new technology is arduous and more in times of crisis, because potential customers are more reluctant to make investments, simultaneously with the fall in their margins. This is analyzed by Nicolás Reyes, co-founder partner of Digirodeo. This is another “agtech” platform, created in April 2017, for the digitalization of rodeos and animal traceability.

“We started by developing an intelligent syringe, which records the sanitary work performed on animals in the field. Interact with a free mobile app, which adds metadata and allows treatment records. Subsequently, upload the data to our cloud platform, where they can be integrated with the producer management system, thus achieving the total digitalization of the sanitary process, with its consequent traceability, ”he says.

With 90% of the own costs in dollars, the key to the sustainability of the company goes through the capital investments that have been raised, specifically about US $ 225,000 from private investors and The Yield Lab fund. “The funds have as The main destination is to increase the software platform and integrate more Internet of Things equipment that interacts with it, ”he says. And complete, convinced: “Farmers need to face their production based on new technological tools that support their work.”

“While we invoiced US $ 70,000 this year, we decided to adjust our business model towards a service scheme, called TAAS (for Traceability as a Service), with an entry cost at a considerably lower price and that associates our revenues on the basis of each application that the user makes ”, the entrepreneur continues.

Volume

Sirena is an app whose proposal is to facilitate the commercial communication of companies with their customers through WhatsApp. “Businesses that use it pay subscriptions starting at US $ 99 per month. They are companies that have a large volume of contact with end customers, and recognize WhatsApp as one of their main communication channels for sale and after sales, ”explains Miguel Morkin, co-founder of the company, with offices in Buenos Aires, San Pablo and Ciudad from Mexico. A year after its launch, in 2017, the startup received institutional investments from Mercado Libre, Dalus Capital and NXTP Labs for almost US $ 3 million.

Sustainability involves having a diversified customer base

“Putting all the eggs in the same basket, in such volatile markets, is never a good idea,” he says. He says that the crisis had an impact on the decision making of his clients in the domestic market but, he adds, most of his client base is in the rest of Latin America and even adds some in Asia, Europe and the United States. “This minimizes the impact on our company”, he says.

Morkin also denies that devaluation entails some kind of benefit. “This is not the case in the software industry, with very high competitiveness for talent and barriers between almost non-existent countries. The impact of devaluation on wages is very rapid. In fact, we must make adjustments to our cost structure in Argentina at least every six months. And the stress it generates on customers makes it negative”, he observes.

In conclusion, it mentions a recurring sales volume of around US $ 3 million per year, with an annual growth of 300%, thanks to the traction in the international market. In that context, he estimates that Argentina represents only 10% of the company’s sales.