Gamble that paid off: quitting Wall Street to co-found unicorn Konfío

“When I told my parents I was returning to Mexico, they weren’t happy. They couldn’t believe I was leaving the great job I had in New York.”

This is what Francisco Padilla, a Tec de Monterrey graduate in Computer Technologies, remembers about when he decided to quit his job on Wall Street to join his current partner David Arana to undertake a startup in Mexico.

It was in 2013 when Francisco and David began their journey by creating Konfío, an artificial intelligence platform that offers loans to entrepreneurs who been turned down by the banks.

Today, Konfío has become the fourth unicorn company in Mexico. It was born when its founders took a risk by returning to the country where they were born.

From avoiding unemployment to becoming an entrepreneur

After graduating in 2007, Francisco moved to the United States to work. He experienced the financial crisis of 2008 firsthand at his job on Wall Street in New York.

This crisis, the biggest since the Great Depression of 1929, crippled credit, affecting the world economy.

“There were staff cuts every week. As an immigrant, you could be sent back the next day. You had to show that you brought value and you deserved another week,” he recalls of his time at the company MicroStrategy, whose largest global client was Citibank.

There he met David Arana, a Mexican who had studied mathematics at the Massachusetts Institute of Technology (MIT) and worked at Deutsche Bank.

Arana identified an opportunity in banks’ fear of giving out loans and decided to offer a financial solution to companies, but in a different location: Mexico.

“When I learned that David was returning to Mexico to create an online credit platform, I joined the project.”

His gamble to contribute to Mexico

Francisco’s parents, both systems engineers, advised their son not to quit his job in the United States.

However, Francisco had a very clear motivation in mind: “My goal of returning to Mexico is to contribute to the country,” he said.

“(David) understood the financial side very well, and I understood how to make large-scale technology for banks. So, we built a website using artificial intelligence so that businesses could apply for financing through self-service.

“We took on the task of ensuring it was an unsecured loan to make it flexible, which meant there was operational risk that we managed to contain with artificial intelligence,” he adds.

Thus, in 2013 Konfío was born, a platform that offers financing and management services to help entrepreneurs in Mexico.

“We want Konfío to continue to grow. We’ve helped 35,000 entrepreneurs since the company was born. Our goal is to bring it to 120,000 in the short term.”

The beginning, with “drastic losses”

Francisco says that the money for the loans came from their own savings. In January 2014, after working 7 months on the platform, they gave their first loan of 10,000 pesos to a Mexican micro-entrepreneur.

“Where do we get the money from? From our savings. We gave them automatically. The first time we calibrated the system, we had drastic losses, but it was double or nothing,” he says.

“Konfío’s premise was: if we get a thousand customers, a thousand will have been served,” he adds.

By 2016, Francisco and David had already closed their first round of investment and began the task of finding new offices. However, there was no budget to buy furniture.

“‘Where do we sit?’ said David and I. We left our desk for other people and grabbed 2 computer boxes, one TV box, and made a desk out of boxes.”

In 2016, Konfío had its first round of investment. They concluded it with 8 million dollars.

Early investors taught them about credit and unit economies, when to give discounts, when not to, and the value of building long-term relationships with customers.

“That same round was joined by the Kaszek Ventures fund, owned by Hernán Kazah, the co-founder of Mercado Libre. He was looking for Latin American companies for Latin Americans. We were his first investment in Mexico,” he says.

“We left our desk for other people and grabbed 2 computer boxes, one TV box, and made a desk out of boxes.”

Its mission: empower small and medium-sized enterprises

Konfío’s operation is based on 3 pillars:

• Financing in a flexible way; 
• Software-based business solutions; and
• Payment components such as company credit cards.

As time went by, they added people to the team, such as Pablo Mazzucchi, an Argentine Master of Science graduate from Tec de Monterrey.

“I joined Konfío when David told me about his mission to empower SMEs, the lack of access to credit, and how we can help them using data and technology,” says Pablo.

“Konfío’s original solution is to finance in a flexible way with a number of requirements and speed that doesn’t exist anywhere else in the country,” he says.

Mazzucchi, Director of Machine Learning at Konfío, points out that the intention is to empower small and medium-sized enterprises.

“Empowering SMEs and solving all the inconveniences that entrepreneurs may face so that they can focus on their business. The ultimate goal is to be SMEs’ allies,” Mazucchi explains.

Today, Konfío is an all-in-one platform for companies, offering collection, payment, billing, and credit solutions. Their staff is MIT trained, and they work closely with Google.

The fourth Mexican unicorn

After an investment round at the end of September 2021, Konfío had a valuation of 1.3 billion dollars, which makes them a unicorn company in the business world.

Unicorns are those tech companies that reach a value of one billion dollars in the stages of capital raising.

In July 2021, The Financial Technology Report’s list of the top 100 financial technology (fintech) companies put Konfío in 18th place.

In 2020, the company Kavak, a car rental, sales, and financing company, was the first Mexican company to achieve that status.

Bitso, a currency and cryptocurrency exchange platform, and the Clip company, which offers payment processors and terminals for card payments, became unicorns in 2021.

“It makes us proud that this has happened in Mexico, that there is real innovation in the country, but at the same time, it’s a huge commitment to ensure that it lasts, endures, and multiplies in our society.”

The responsibility of being a unicorn company

Francisco recounts that some investors joined the project, and as they continued to grow, they began to measure how much their customers benefitted.

“Yes, we were making an impact, and yes, we were getting stronger, but at the end of the day, a business is going to want to do a lot of other things. In the end, we see ourselves as a technology business more than a financial company,” he says.

It was then that they took on the task of complementing the solutions they currently offer. By the end of 2020, they entered the software sector with the purchase of a company called Gestionix. 

Similarly, in August 2021, Konfío acquired Sr. Pago, a B2C or Business to Costumer tool to grow its offering of billing solutions along with the launch of its corporate card and business payment portals.

“Some of us run races, and after 1 kilometer, you feel a lot of emotion, you start out with a lot of energy, and people are cheering you on. 

“But, if you accelerate and continue at that pace, you’re exhausted after 20 kilometers. You need to have restraint and understanding. (At Konfío) we’ve had to use that strategy,” says Francisco, who adds that they didn’t make a fuss about the announcement of being unicorns.

The future of Konfío

Their objective, adds Francisco, is to continue supporting large and small entrepreneurs in Mexico, offer a unique workspace, and he doesn’t rule out the possibility in the future of looking to other countries in Latin America.

“We want Konfío to continue to grow. We’ve helped 35,000 entrepreneurs since the company was born. Our goal is to bring it to 120,000 in the short term. That would mean a lot of impact and support for the country,” Francisco said.

“We’re the first unicorn in Mexico co-founded by a Tec graduate, and that’s a source of pride for me. The Tec prepared me for everything. People who graduate from the Tec are well prepared and very well received because they know how to adapt, think fast, and invent solutions,” he says.

Francisco reflects on that moment when he decided to quit his job on Wall Street and return to his country as an entrepreneur. 

“Returning to Mexico for me is about offering people the kind of place where I would’ve liked to work the day I finished college.

“It makes us proud that this has happened in Mexico, that there is real innovation in the country, but at the same time, it’s an enormous commitment to ensure that it lasts, endures, and multiplies in our society,” Francisco concludes.

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