Feb 13, 2024

Herbert Schulz: Navigating the Fintech Wave, From Santiago to Global Success

Lessons from the ledger: Navigating change and challenging the status quo

Herbert Schulz: Navigating the Fintech Wave, From Santiago to Global Success

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Herbert Schulz's narrative is a story of personal success, but it’s also a blueprint for turning challenges into catalysts for innovation. Through his journey from being expelled and then readmitted to university, to founding one of Latin America's pioneering fintech startups, Herbert's career is one of resilience, adaptation, and foresight.

Entering the fintech industry in 2006, Herbert's tenure at Capitaria laid the groundwork for his understanding of the financial sector's intricacies. However, it was his leadership at Becual and subsequently at Radar where his ability to spot market gaps and innovate solutions came to the fore. Radar's inception, driven by the real-world problem of inefficient financial operations, illustrates how personal experiences can illuminate widespread industry challenges. Herbert's approach to solving these problems is a testament to the power of targeted innovation in creating scalable solutions.

His engagement with On Deck Fellowship and FinteChile further emphasizes the significance of community and collaboration in the entrepreneurial journey. These platforms not only facilitated connections with like-minded individuals but also provided Herbert with insights that refined his business acumen. Implicit in his participation is the lesson that continuous learning and networking are invaluable tools for business leaders in any field.

Moreover, Herbert's venture into creating a SuperApp for SMEs in Latin America through Dank, and its subsequent acquisition, showcases strategic thinking and execution excellence. It's a narrative that speaks to the potential of addressing niche markets with comprehensive solutions, highlighting the importance of understanding customer needs and industry trends.

In essence, Herbert Schulz's journey is a compelling case study in leveraging personal challenges and industry insights to foster innovation, underscoring resilience, adaptability, and the continuous quest for learning as cornerstones of success in the modern business landscape.

So what can we learn from Herbert Schulz's story? It's not just about the accolades or the successful exits. It's about seeing the potential in the problems we face every day, about not being afraid to rethink the way things are done. It's a reminder that sometimes, the most extraordinary journeys start with a simple step towards reimagining the ordinary.

Reconciliation of cash flows is a significant pain point for treasurers. How does Radar's technology streamline this process, and what benefits can businesses expect to see from implementing your solution?

Radar empowers companies by providing clear visibility into their cash flows. This, in turn, facilitates well-informed decisions regarding liquidity acquisition and strategic investments of corporate capital. By enhancing the payment experience for customers and reducing costs, Radar enables businesses to operate more efficiently and effectively.

Our reconciliation engine elevates the efficiency of treasurers' cash flow reconciliation processes by offering automated suggestions and matching operations. This advanced system seamlessly integrates the bank account data source with our clients' ERP systems.

Furthermore, our expertise extends to developing machine learning systems that extract valuable insights from historical matches. This empowers us to create customized business rules that precisely align with the unique needs of our clients.

With your experience as a 3-time founder, including a successful exit, could you highlight some key lessons you've learned along the way that have contributed to your success in the fintech industry?

The first key lesson for entrepreneurs is recognizing that successful companies are characterized by exceptionally talented individuals. It's crucial to understand that teams shape companies, not the other way around. While attracting top talent poses a significant challenge due to intense competition, it's imperative not to lose sight of the fundamental idea that exceptional and skilled individuals have the capacity to construct extraordinary companies.

The second lesson is to consistently initiate product development with a client-centric approach rather than a self-centric one. Entrepreneurs often develop an attachment to their products and may mistakenly assume what the client needs, wants, or desires based on their own experiences. As an entrepreneur, it is essential to exercise caution and avoid falling into this trap.

Throughout each iteration and developmental phase of a product, it is critical to validate that it effectively addresses and improves upon the specific needs of the client.

You've been involved in fintech since 2006. How have you seen the fintech landscape evolve over the years, and what trends do you think will shape the industry's future, especially in areas like open banking and financial automation?

Indeed, I have been involved in fintech since 2006, and I must acknowledge that the industry has undergone significant changes since then.

During that time, discussions about startups or the consideration of creating and working for them were virtually nonexistent. Even in Latin America, talented individuals aspired to be recruited by prominent corporations. However, the landscape has evolved, and today, everyone is eager to be part of startups, particularly in the fintech sector—a highly appealing field.

The next exciting phase involves witnessing successful exits that reward not only founders but also early employees. Those who received stock options in the early stages are now able to sell them, reaping the rewards of their dedicated efforts. Additionally, we find ourselves in a stage where entrepreneurs are actively investing in new startups, creating a virtuous circle that fosters growth within the ecosystem.

Last but not least, open banking and financial automation are noteworthy trends. Brazil, Mexico, and soon Chile have taken significant strides in this direction. However, there remains a considerable amount of uncertainty regarding how these developments will evolve and be legally implemented in each country.

Expanding on your role as an Assembly Member at the Chilean FinTech Association, could you discuss some of the initiatives or projects you've been a part of and how they're contributing to the growth of the fintech ecosystem in Chile?

The first and most crucial initiative I was involved in is the Fintech Law in Chile. It has been a long journey since 2014, even before the Association existed.

I actively participated in and supported the drawing boards that defined this law, engaging in discussions related to open banking. Currently, we are still working on its implementation. In fact, there are more drawing boards scheduled for December, focusing on this matter and the establishment of an open financial system in Chile.

Nevertheless, a significant challenge for the industry is attracting global talent to the local ecosystem. Specifically, how these individuals can contribute to innovation and support financial advancements in Chile. Undoubtedly, achieving this requires substantial investment, and unfortunately, there are few Chilean venture capital funds.

Your experience with DANK, a SuperApp for SMEs in LatAm, is impressive. Could you elaborate on some of the financial solutions you provided through Dank's platform and how it helped SMEs simplify their operations?

In Latin America, it is common for SMEs to receive payments in 30, 60, or even 90 days, especially when dealing with large companies or corporations. This delay significantly impacts their cash flows and budgets.

To address this challenging situation, we introduced DANK.

The first product is an automatic and 100% online factoring system that eliminates all the paperwork involved in requesting credit. DANK empowers companies to anticipate their next invoice payment without compromising their cash flows.

The second product is a payment solution designed to facilitate easy transactions for SMEs. With DANK, they can generate a payment link and collect payments from their clients through transfers or debit/credit cards.

Both solutions were developed with a mobile-first approach to effectively tackle two major pain points for SMEs.

The acquisition of Dank by Sartor Finance Group must have been a significant milestone. Can you walk us through the decision-making process and the factors that led to this acquisition? What do you believe attracted Sartor Finance Group to your company?

DANK was launched in 2019, and a few months later, the COVID-19 pandemic emerged. Companies in need of credit or down payments traditionally approached financial institutions through face-to-face interactions, involving signed documents and paperwork. Therefore, a 100% online solution became highly attractive, and we experienced significant growth during that period.

Another critical factor contributing to our success was the advanced technology that underpinned DANK. Our solution automated the credit risk assessment process, delivering results within minutes rather than hours or days. The algorithm extracted information from tax and credit bureaus in Chile and various sites to evaluate risk without requiring clients to submit additional documents.

Going back to your university journey, being expelled and then successfully re-entering, earning an excellence scholarship, and graduating in the top 4% is quite remarkable. How did these experiences shape your mindset and approach to challenges in both your academic and entrepreneurial pursuits?

My university experience was divided into two very distinct stages. During the first 4 years, I lacked clarity about my purpose and studies, resulting in a lack of academic commitment and, eventually, my expulsion from the University.

This experience led me to join the workforce at one of the first Chilean fintech companies, Capitaria, in 2006. I gained firsthand experience in the world of fintech and entrepreneurship at a time when these topics were just emerging.

The founding team of this company successfully attracted exceptionally talented individuals, triggering a significant shift in my perspective. This change motivated me to return to the University and transform my academic approach.

Upon my return to the University, the concern persisted about whether I could succeed with sufficient effort. The doubt about whether I possessed the necessary talent to excel became a challenge. I decided to dispel this uncertainty by immersing myself in my studies, seeking to prove to myself that I was capable.

This experience taught me that focus and dedication can overcome obstacles, a lesson I apply to this day in my entrepreneurial ventures and future projects.

As someone actively participating in working groups for financing and open banking, could you highlight some of the challenges and opportunities you've identified in these areas, especially in the context of the Latin American market?

From my participation in working groups on financing and open banking, I highlight two fundamental conclusions. Firstly, the ongoing challenge remains to convey to both regulators and traditional industry players the importance of applying a principle of proportionality in their dealings with fintech companies. It is crucial to recognize that a fintech firm with a small team cannot adhere to the same compliance standards as a bank. However, it should still adhere to proportional standards tailored to its size and associated risks.

Secondly, there is a continuous effort to evangelize throughout Latin America regarding the inevitability of innovation and technology adoption. Instead of attempting to impede this progress, traditional players have the opportunity to forge alliances and synergies with fintech companies that are inherently digital or have a strong digital component.

I foresee numerous opportunities for banks to form strategic collaborations with fintechs, enabling them to cater to a broader spectrum of clients or enhance the services for their current customers, thereby strengthening existing relationships. Undoubtedly, in the coming years, we will continue to witness advancements in this direction, with the greatest opportunities lying in ongoing progress and collaboration.

Given your extensive experience in the fintech sector, what advice would you offer to aspiring entrepreneurs looking to enter the industry or launch their own fintech startups?

Based on my experience in the fintech sector, I advise early-stage entrepreneurs that the fintech world offers abundant opportunities, especially in Latin America. It's an incredible space to be in today. It is crucial to address a problem directly and establish a close relationship with your clients.

Looking for early-stage investors, it is valuable to seek collaborations that generate synergies and connections with potential clients. However, it is essential to exercise caution with investors who impose unconventional conditions and aim to acquire a significant percentage of the company in its early stages. While that capital may facilitate product creation, there is a likelihood that, at some point, growth limits may be encountered due to initially misguided decisions.

The key is to maintain a focus on the client and on the product, and create something extraordinary that addresses their needs, not just what you have in mind. Additionally, it is crucial to be cautious with investors who, due to lack of experience, might impose conditions limiting long-term growth.

Could you share a particularly memorable challenge you faced while building and growing either Radar or Dank, and how you and your team overcame it?

One of our initial challenges in creating Radar was automating payouts. We sought to establish partnerships with banks, recognizing their crucial role in this process. However, we faced the dilemma that banks showed interest only when we had clients, yet our challenge was how to acquire clients without a banking alliance. Faced with this dilemma, we chose to start with a payment service directly from our pre-funded bank accounts, allowing for a quick launch and accelerated growth.

Subsequently, we initiated discussions with banks, achieving our first alliance soon to be unveiled in Chile. Additionally, we are in negotiations with three local banks in Mexico to offer payment and bank reconciliation solutions to companies in Mexico City. We tackled the challenge by overcoming prejudices and mental limitations, testing solutions to launch the startup quickly and efficiently.

What is your one guiding principle in both life and work?

“Always be learning”, that’s my guiding principle as an entrepreneur, husband, father and any other role I have in my life.

Image courtesy of Herbert Schulz

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