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How Boitas.com Became the Largest B2B Food Platform in Mexico

Raul Maldonado @ boitas.com (YC W'21)

Interview with the founder of boitas.com, a Y-Combinator startup from W’21 batch, a B2B e-Commerce platform for SMBs in Latin America.

Boitas.com raised $2M in the pre-seed round from top firms (YC, Magma Partners, Wollef, HMC, and other Angels).

A Screenshot of the Y Combinator profile of Boitas from the YC startup directory

Screenshot from YC presentation of boitas.com startup

Read Full Interview Here:

Could you please tell us who you are and what your startup is?

It's always good to share experiences with other founders. I believe young founders can learn a lot from these interviews, from failures, from successes. It's great to have the space. 

Boitas.com has experienced many pivots, a topic we'd like to discuss, as founders often fear changing their business models. Initially, we might start with a promising idea, only to realize that our product does not align with market needs. Failure to achieve product-market fit can stem from a lack of willingness to pay or a narrowly defined target market. These aspects are crucial to consider in product development.

Understanding that pivoting towards a greater opportunity is acceptable is also essential. In our case, drawing from my background, I opted to establish a B2B marketplace utilizing a forward stock approach. My decade-long experience in China, developing thousands of products—ranging from auto parts and furniture to oil, gas, and electronic goods—has been instrumental. I observed that supermarkets or importers often return unsold products to warehouses, where they lack digital visibility. This overstock, challenging to sell directly to consumers due to the time-consuming nature of individual sales, often remains unsold.

For instance, consider this scenario: you import 10,000 Yeti water jugs to Mexico and attempt to sell them to Walmart. If Walmart sells 8,000 and returns 2,000, you're left with an overstock of 2,000 units occupying warehouse space. Selling these individually to consumers is inefficient, as it would take an excessive amount of time. This realization led us to establish a marketplace for selling overstocked items at below-cost prices to businesses. Thus, we created Mexico's first overstock wholesale marketplace.

And we were doing great. We launched in August, and when we launched, it took us four months to reach $250,000 in sales in GMV, which was great. We were profitable, making money, it was amazing because we were cheaper than bringing products from China that are already in Mexico. Without the hassle of delivering, you have a lot of people willing to put their products there because there was nothing like it.

When we got into YC, they asked the right questions. As far as I remember, when we talked to the partners, they asked us, "Okay, Raul, this is a great business, a good marketplace. But how can you scale this to a $100 million business?"

The hard part about marketplaces is this: You need to balance demand and supply. When you cannot support the supply because you depend on the overstock of different importers, the product is not really scalable. That was the first challenge we faced. We were going to do a B2B marketplace, and we understood that the supply could not be sustained or stable. We were not able to grow it. And this scares off a lot of investors.

If you are not able to survive, then you will never grow to a $100 million marketplace. There's also this perspective that if you do the same idea in the US, maybe it would work out. Maybe if you do this in Spain, it won't work. So, the market has a good influence on the business model. It's something to consider. We were doing this in Mexico and Latin America. So, that was our first challenge. To be able to support the demand, we needed to have a stable supply, right?

So, we decided to explore ideas. Okay, what can we explore? In which industries can we try? There are five or six most important metrics in B2B marketplaces. That's it. Those are the unit economics, the most important metrics the founder should focus on. 

The first one is CAC (Cost of Acquisition) - how much it costs you to acquire a customer. The second one is AOV (Average Order Value). The third one is the margin that you can get when selling a product. Then there is the frequency. How often will this customer pay? And then, the size of the market. When you have more data, you can measure the lifetime value (LTV). With these six metrics, you're able to decide if your startup can succeed in that particular industry or not.

We tried exploring eight different industries for six months. Beauty, hardware tools. We tried dentists, restaurants. We explored all these different SMEs that we know have frequent consumption, and a good AOV (that we didn't know), and we understood what the demand was. In some cases, it was big enough. In other cases, it was small. After that we tried to base our decisions on data, that’s how we started understanding which ones made sense for us to explore.

Screenshot from boitas.com marketplace

Screenshot from boitas.com marketplace

First, we went to the barber shops. In Mexico, there are only 68,000 of them. They buy once a month, and their AOV is only $50. It costs $20 to acquire a customer, but the purchase frequency is low. The AOV is very low. The CAC is high. So, it didn't make sense to launch in this industry. There are not so many barbershops, in the end. 

Then we tried beauty, and what we realized was that normally, beauty companies, in this case, the brands, spend a lot of time and money educating the customers. If we wanted to get into it, we needed to spend a lot of money and time as well. We understood that the brands already put a lot of effort, put a lot of money into educating the final customers. Beauty salons, nail salons, hairdressers, and all these consumers need support. We decided that we didn’t want to spend a lot of money on something we didn't understand. Besides, they were asking for brands. We didn't have them.

Then, we started exploring a different industry, hardware shops. It's a huge business because every hardware store has a lot of products. AOVs are high, but you need to have more than 100,000 SKUs in some cases. Let’s say there's one little knot. You need a bolt, and then you need many different sizes for the bolt, resulting in a lot of SKUs. So, if you're not experienced in this industry, it's really difficult to enter. Then, you have to become a distributor of the importer or brand owner, and then it's another kind of skill that you need to have.

We kept exploring lots of industries. Once we reached restaurants, we understood that it was a huge opportunity, the biggest one for us. Why? Because we understood that they needed the product to be able to run their business. So, it was a critical supply product. We realized that we can create models to predict consumption because normally, their supply needs are pretty stable. We were able to predict consumption based on the type of restaurants and based on the location.

Screenshot from boitas.com marketplace

Screenshot from boitas.com marketplace

It is remarkable that we discovered certain regions in Mexico boast an impressive 50 Japanese restaurants, each offering around 10 staple products such as rice, soy sauce, salmon, tuna, and pho. These items are consistently in demand, providing an opportunity to predict consumption patterns. Typically, these restaurants procure the same products at the same time, allowing for the creation of technology to forecast consumption trends. Leveraging this insight, businesses can optimize their wholesale purchases, thereby reducing costs.

It's akin to a group buying model, and what appealed to us was the consistently high Average Order Values (AOVs), occurring 2 to 3 times a week. This system saved considerable time and effort for restaurant owners or procurement personnel, who would otherwise spend 5 to 10 days a week sourcing supplies from places like Sam's Club or local markets.

This efficiency not only translated to time savings but also financial benefits for the restaurant owners. Recognizing the potential, we decided to focus on the restaurant industry. As we delved deeper into this sector and fine-tuned our business model, we realized that while profit margins may not be initially high, achieving a certain volume enables purchasing from Certified Providers (CPs), subsequently leading to increased margins.

The next steps involved establishing warehouses and implementing last-mile delivery to ensure a high level of service. Consolidating orders required sourcing products from different CPs, facilitating the delivery of multiple items in a single order.

Things were progressing well, prompting us to secure funding. Armed with a clear roadmap for our tech product's growth and customer acquisition, we navigated successfully until 2022. Unfortunately, that year posed a challenge as we found it difficult to raise capital. The market took a downturn, and investors who were once active suddenly withdrew. Despite having a substantial team, we faced the harsh reality of not being able to fund our planned roadmap, sustain the team, or fulfill deliveries.

This situation underscores a crucial lesson for any founder, especially in the creation of a marketplace, in our case, B2B. It's important to have a comprehensive understanding of the financial requirements to run and grow the business, as well as sufficient funding for the future. In our optimism during 2021, we hesitated to dilute our ownership due to high valuations, expecting a similar scenario in 2022. However, the market dynamics shifted drastically, catching us off guard. What was once a scenario where investors were eager to invest in our company turned into a challenging period of being unable to secure capital. It was indeed a tough experience.

Can we say that in the case of B2B marketplaces, the two most important things for sustained growth are unit economics and solving the chicken-and-egg problem, the liquidity problem of marketplaces?

Yes, I agree. However, I believe that, in addition, a robust go-to-market strategy is crucial. This is often overlooked by founders, given the inherent difficulty in acquiring customers for a marketplace.

Another variation of Screenshot from boitas.com marketplace

Screenshot from boitas.com marketplace

Consider the example of a TikTok campaign targeting the restaurant business. Despite achieving moderate views on a TikTok video, it remains a challenge to reach the decision-makers responsible for procurement. It's crucial to identify effective ways to engage these decision-makers who influence purchasing.

Sometimes, resorting to traditional methods, such as employing salespeople, becomes necessary, or at the very least, understanding and implementing small, effective hacks.

Take, for instance, the existence of restaurant unions in each state in Mexico. Engaging with the presidents of these unions, delivering a compelling presentation on cost-saving measures, and offering free seminars can attract a significant audience interested in optimizing their restaurant operations. Subsequently, you can pitch and sell your product.

It's crucial to identify these creative strategies and employ them to capture a wider audience. This principle holds true across various industries and is contingent on understanding the specific market dynamics. In the U.S., for instance, reaching customers online might be comparatively easier.

It's surprising to note that, in some cases, a substantial number of customers can be found on Facebook marketplaces and groups, making these platforms integral to your business channel.

Therefore, integrating technology into your sales channels is key. This approach not only enhances reach but also contributes to a better conversion rate.

How did you approach your initial customers? 

Once we settled on the restaurant industry as our focus, our initial step was to map out all the restaurants in each area.

Starting with Monterrey in Mexico, we used Google Maps to drop pins on every restaurant in the region. Our goal was to identify the most concentrated areas of restaurants in specific zones.

From this mapping exercise, we pinpointed three areas as particularly promising. We then deployed individuals to visit these locations and engage with restaurant owners. We set up a simple check-in system to ensure better control and track conversion metrics. For instance, we monitored how frequently business owners were present during visits. If a business owner wasn't there, the person could move on to visit multiple restaurants in one day.

From our visits, we found that 50% of the time, business owners were absent. Within that 50%, 10% weren't interested in our services, while the remaining 50% were open to receiving a quotation.

Understanding this timing and the conversion funnel provided valuable insights. For those not interested, we delved into the reasons. Some were content with their current suppliers, offering us information about potential competitors.

Occasionally, procurement personnel, rather than the owners, were present. They sometimes expressed reluctance, noting that interfacing with suppliers was their responsibility. They were afraid that boitas.com would take their jobs away.

To better tailor our approach, we thought of strategies such as attending events where restaurant owners congregated. By sponsoring these gatherings, we could connect with 100 decision-makers in one place, engaging them face-to-face and experimenting with different approaches. These small hacks were at the core of our outreach.

So hiring somebody to just knock on the doors versus your own version of doing things doesn't scale, right?

Yes, door-to-door sales don’t scale. But it was the best way for us to get a good understanding of their businesses and the industry.

You need to design products that avoid causing friction for users. Friction, in this context, refers to the barrier between technology and the user that negatively impacts their experience. In our case, the initial feedback from visits was positive. We discovered that users preferred to place orders not through a B2B marketplace but via WhatsApp.

Therefore, we adapted our approach to align with user preferences. We incorporated a chat button on WhatsApp, enabling users to place orders seamlessly. This approach not only saved them time but also streamlined the process for us.

The rationale behind this shift was recognizing that users desire simplicity. The conventional process of navigating a marketplace, creating an account, and managing invoices was seen as cumbersome. Understanding this, we developed a product that aligns with the user's preference, where the sales channel or ordering channel is WhatsApp. This doesn't negate the possibility of integrating it with a marketplace; rather, it's about catering to user habits, ultimately boosting customer engagement and frequency.

In Latin America, platforms like WhatsApp hold significant importance due to their widespread use.

You can initially develop a stand-alone product for either the supply or demand side of the market. Then, as you gain traction, transitioning to a marketplace becomes feasible, akin to how OpenTable and Eventbrite started. Initially, they crafted something highly specific for the supply side, eventually building a product on top of that as they gained traction.

That's why feedback is really important. That’s why went with the traditional door-to-door approach, it's better to talk to your users in person. You need to make their lives easy. Otherwise, they won't be willing to pay.

In your case, was it more difficult to hack supply or hack demand?

I believe that in any marketplace, if you approach someone and say, "I'll help you sell more," they'll likely respond positively. That offer is always on the table. The crucial part is to focus on the person paying for the service or goods.

Concentrate on that person, and address their issues. Supply, I think, is the straightforward aspect. Everyone wants assistance in selling more—brands, distributors, wholesalers—everyone is interested. I've observed many founders concentrating on the supply side and becoming concerned. There's a notable case study, diapers.com, where they sold products online, generated demand, and then bought from Walmart, even at a loss per transaction. That's okay. The key is to discern patterns, identify your customers, understand the price they're willing to pay, and then move to wholesale. In their case, they initially bought from Walmart, and as they amassed volume, they eventually became a distributor.

What were the main bottlenecks in launching and scaling the marketplace?

Think about it—whether you're the CEO or anyone else, raising capital is tough.

And you know what else is tough? Building the product correctly. At the start, it's about finding the right balance between developing the product, getting commercial design involved, and having everyone in the cloud on board. That's why, in my opinion, the most crucial thing when designing a product is having everyone work together.

Here's the catch—you might not realize it, but oftentimes the tech team just focuses on their part without grasping the customers' feelings. We learned this the hard way initially.

So, what did we do? We decided to bring the CTO into the mix with the sales team. We had him sell products, face rejections in busy restaurants, and even pack orders in the warehouse every day. This way, he got a firsthand understanding of what the sales team goes through day in and day out. It took us a while to figure this out because, you see, technology isn't always deeply involved in the sales process, and they may not directly talk to customers.

Once they understood this connection, building became easier. But let me tell you, one of our early challenges was building something that wasn't really needed, and that was tough.

Would you say that it's important to keep the team physically together in one place?

No, I don't think everyone needs to be physically together. For instance, our CTO was in Mexico City, and we were in Monterrey, and it worked fine. We kept communication lines open. What's crucial, especially in the initial stages of building a product, is having the team frequently collaborate and share experiences. This helps them grasp the real problem they're solving, making the process much smoother. But it doesn't mean everyone has to be in the same location.

A hybrid model works well.

Meeting in person is beneficial, especially when you're not familiar with your team. We faced this challenge with many developers scattered around the world. As a CEO, having those initial meetings with your core team is important. It's a chance to know them, understand their families, and build relationships. In Latin America, relationships are built on trust and commitment—it's more than just a company.

What was your MVP?

The initial iteration of our product was essentially a complete marketplace.

When you say MVP, are you referring to the first version of the product or the pre-product? In our case, it was the entire marketplace.

This was our initial creation, and we didn't shy away from coding. In fact, we utilized WooCommerce for our e-commerce structure. It had a setup where suppliers could sign in, and users could log in. Before venturing into Y Combinator or anything else, our MVP was built on WooCommerce (Wordpress). We invested around $4,000 into it, providing an easy way to test and see what would happen. And you know what? We did really well.

Why did you apply to YC? 

We've observed Y Combinator companies achieving remarkable feats and decided to apply. It's not just about being inspired; it goes beyond that.

The mentorship is great, the network is valuable, and you're surrounded by very smart individuals. There's a diverse mix of people from various backgrounds working on fantastic ideas.

Engaging in conversations with them yields a lot of valuable feedback. It's a good community because everyone is ready to help. This fosters the sharing of knowledge and approaches, with a multitude of amazing people exchanging ideas.

Being a part of this provides access to opportunities, contributing to the development of a better company, and having good investors... the Y Combinator experience is amazing.

So, as far as I understand you, you got in on your first try, right?

Yeah, we did. Went into the Winter '21 batch. 

Would anything change about your startup without YC?

You know, there are many things you can change in how you approach technology. Instead of rushing to invest or building an elaborate product, integrating a huge CRM, or spending on marketing, it's crucial to figure out what product you're creating and for whom. Even if you only have 10 or 20 users, you should aim to build a product that people genuinely love. That's a key principle at Y Combinator: "Build products that people love."

Otherwise, you're just under pressure. Sometimes, there's a constant push for growth, and the pressure can feel overwhelming. Growth is often associated with spending money, but I don't believe it's sensible because, in the long run, you might run out of funds before building a product people love. So, it's better to try to understand your users as early as possible.

Invest time in understanding what problem your solution solves. Ensure people love it and have a clearly defined customer base. Gradual growth will follow, especially in the beginning. Once you establish a certain base, you can employ growth hacks and other strategies. However, initially, I think it's crucial to spend more time understanding the problem you're solving and ensuring your initial users love your product.

Achieving product-market fit might sound cliché, but I believe it's genuinely important. If you're not reaching product-market fit, it's okay to pivot. It's okay to try different things.

What is PMF?

There are numerous definitions out there, and one of them is about meeting demand.

Product-market fit, I believe, is something you feel. It becomes evident when you observe the same customers returning. In the world of B2B, you begin to notice that customers are returning, expressing happiness, and providing feedback. It's a great experience.

You start noticing that they come back due to their satisfaction with the product or service you're offering. Once you hit that point of exponential growth, people start referring you, and others organically seek to understand your product-market fit.

Do you recall 10 or 15 years ago when Apple users passionately discussed their MacBooks? It was always like a religion. They acted as salespeople because they were genuinely happy users, recommending the product everywhere they went.

So, when people start referring to your product without expecting a referral fee, that's when you've truly reached product-market fit.

The primary reason this project couldn't proceed was the lack of funding and the changing market conditions—a downturn. It wasn't about our business model or PMF. Once we clarified the business model we aimed to follow the key factor, one of the crucial steps for us, was securing funding. Unfortunately, we couldn't.

What was your roadmap at that time?

One crucial thing, especially in the restaurant supply business, is fragmentation. Many suppliers, lots of problems, and often bad service. Having a single supplier helps restaurants save a lot of money. Typically, a restaurant might start by ordering just one type of product, like meat or compostable glasses. As you provide good service, they begin ordering more and more products. It works well, and when you track customer behavior over time, you see growth.

For us, the key was acquiring more customers to generate enough volume and make the service financially sustainable. Our goal was to achieve a break-even point without relying on external capital. So, instead of expanding rapidly to many cities, we focused on one city first. We aimed to establish a solid business model that makes money, and then raise capital to expand to other cities.

Learning from our first city, we realized it took about 6 months to open a new warehouse. Reaching a certain volume was crucial. Our strategy was to reach that volume initially, and then use the profits to open the next warehouse. The plan was to stabilize each business before expanding. We focused on increasing the AOV per customer and retaining them, emphasizing good service and providing tools for their needs.

In your case, what were the key expense drivers as you started scaling? 

The CAC was good. We weren't worried about spending money to get customers because all the metrics, such as frequencies and AOVs made sense economically. The challenge was optimizing the cost of assets.

Imagine you have a warehouse that can handle 5,000 orders a month. If you're only processing 1,000 you're losing money each time. It's not until you hit around 2,500 that you can optimize and break even, reaching the point where operational costs are covered. So, with every order, you're incurring losses until you reach that threshold. And the same goes for the last mile of delivery. If a truck can handle, let's say, 10 or 20 orders. Initially, you create efficient routes, but you need enough orders to lower the cost.

These two factors are crucial: the cost of serving an order and the cost of delivery. 

Is there any way to make your startup less fragile and sensitive to downturns in investments?

I believe, that when delving into technology, if I were to start anew, my emphasis would be on the technology itself, eliminating all capital expenditures.

I wouldn't invest in warehouses, and skip the planning for last-mile delivery—no physical assets. I'd opt for an extremely asset-light model. The primary focus would be on the technology. 

When thinking about the technological approach, always keep in mind what problem you're solving. From my perspective, for any customer, you need to address three things: help them sell more, help them save money, or enhance their efficiency in what they're doing tenfold.

If you align with one of these aspects, I believe selling your product will be much easier. I would maintain that focus throughout the development of technology products.

How did Y Combinator change you?

I feel that YC gives you a personal connection with really smart people. You kind of feel that you're not the smartest in the room, and that's cool; it keeps you humble. Everyone, even those building satellites, self-driving cars, or rockets, is down-to-earth. It's amazing what people are achieving in the world.

It's an eye-opening experience, offering confidence and a network where you can ask questions. No question is considered dumb, providing a lot of support. You can talk to people who've been through it, like creating a B2B marketplace—some succeeded, some failed. It makes the startup journey less lonely.

For me, it changed my life. Now, whenever I think of building new companies, I know who to ask and where to ask.

YC gives you a broader perspective. It doesn't let you be afraid of building something bigger. When you see others doing great things, you realize you have the same capacity. You can do it, and it opens up possibilities.

Marketplaces are hard. Choose a niche, focus on that niche, understand what you're solving, and I think that's it. Don't over-build products.

Don't spend a lot creating a product that people will never use because it's over-engineered, and overproduced. And actually try to talk to your users. Never assume that you understand them. Most importantly, there's a book written by one of YC's founders called "The Mom Test."

I think this is a book that is really helpful. It helps you understand how people face a problem or solve the current problem and then helps you understand how to approach it. So happy to share our story, and great talking to you. I hope it helps.

Learn More About the Founders:

Serial Entrepreneur & Startup Owner | MBA | Product developer | x-border and trading business expert | China trading specialist | Experience selling to AAA customers and clients

Co-Founder of Boitas.com. We are building a B2B platform that automates SMB sales process through a WhatsApp Commerce technology.

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