This month’s newsletter, we had a conversation with Gustavo Gorenstein, founder and CEO of Bxblue, a company that we invested at the end of last year. Bxblue operates in the public payroll loan market — a market of more than R$400 billion that still is very analog. Learn more about the business and the payroll loan market by reading the chat with Gorenstein.
- Gustavo, Bxblue is not your first venture. What is your story with the world of entrepreneurship?
I worked for many years in the corporate market until a time came and I wanted to try other things. I took a master’s degree in entrepreneurship and technology in London and, in 2010, when I returned, Brazil was experiencing the beginning of this wave of startups. I then decided to put in practice everything I had studied and ended up creating Poup, a cashback startup, which was acquired in 2017 by Digio Bank.
2. How was Bxblue created?
I met my partners Roberto and Fabrício in 2011, but it was only in 2016 that we decided to work together, even without having the project well designed — the idea was just to build something together. We spent six months thinking about possible projects until we reached the payroll market. A market that moves R$ 400 billion per year. We identified that this is a sector with a long, offline and conflictive chain. We found this segment perfect for an opportunity to create a marketplace, offering transparency and agility on one side and reducing operating costs and innovating in channels for the other side. And so Bx started :)
3. What are the first results of the work you are doing?
Bxblue has been growing more than 20% per month for the past year thanks to a strong investment in technology and a focus on user experience. We spent two years building the self-service for users and developing the connection with banks, so that users could compare and find offers in real time and do all registration and delivery as quickly as possible. We completed this integration in October 2019, the same month that Iporanga entered the business. Iporanga partners Guilherme Assis and Leo Teixeira, were already close to us. I make a joke saying that Bx is the best investment they have ever made because since they joined Bx, the company grew ten times.
4. “Public Payroll Credit” market. Can you please tell us a little bit about the market?
The Public Payroll Credit is a type of personal credit line where the repayment of the debt is deducted directly from the borrower’s payslip. It can be a private payroll credit when money is lent to a private company employee or public payroll credit when the borrower works for the government. The “Public Payroll Credit” market has always been super competitive because it is the cheapest personal credit in Brazil — and it will continue to have this prominent place. Few people know it because it is a very ‘niche’ product for civil servants and retirees (that actually represent 95% of the payroll market). But it is a sector that serves 37 million people — the same size as the formal workforce in Brazil. The payroll credit niche in Brazil serves more people than the entire population of Canada. It represents 74% of Brazil’s personal loans, while the other forms of personal loans represent the remainder 26% of the market. We are talking about a large and attractive sector because of the rates charged. We have partner rates in our marketplace close to 1% per month. With the drop in basic interest rates, the rates by partners on the platform also fell.
5. Looking at the history of Bxblue and the milestones reached, what do you think were the success factors to get where the company is now ?
To summarize this answer: A lot of technology, an exceptional team, some incredible investors, the acceleration at YCombinator, amazing partnership with banks, user empathy and, of course, big market need.
We met incredible partners and banks along the way who, from the beginning, took part in this journey, who understood that we operated in a different world and according to different rules. We reduced the partner’s operating cost and passed this service onto the user at lower rates. We also operated with commissions below the offline market.
Since the beginning it was clear to Bx that one of the most important things to do was to help and address the user’s pain, by creating a reliable destination for him — and this empathy explains a lot of our growth. Proof of this is that our NPS has been above 90 points for more than three months.
6. And how did Iporanga Ventures enter the business?
Guilherme and Leo were already close to us. On one of those trips to São Paulo (Bx is from Brasilia), I booked a coffee with them, commented that the integration was ending and that we would start operating the self-service and take a leap. It was a conversation from entrepreneur to entrepreneur, Guilherme was running Gorila (Guilherme is partner at Iporanga and also runs a wealth management startup called Gorila) and had just raised a big round. A week later they suggested that we need some cash injection, since we would need to grow this business after two years of integration.I thought it was very cool because they helped us when there were still no signs of Bx growth, it was a vote of confidence before the curve going up like we have now.
7. Looking ahead, how do you see Bx in the years to come?
Our positioning is to create a safe place for people to find the best financing options to realize their dreams, be it a reform, a trip, buying a house or earning a diploma. We see credit as an engine for growth. The world needs credit to make leaps, companies need credit to go further, and people use credit to develop their potential. We are very comfortable and happy to create a place where people can count to achieve their greatest goals. Bx f has already become this place where retirees and civil servants go when they want to take the next steps in their lives. We will always remain close to our users, making these dreams possible.