If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about Elenas.
- Latin America is made for social commerce. The region has a GDP almost 2x that of India, with a GDP per capita closer to China's. Internet and social media usage are high, while e-commerce is low. These dynamics favor businesses like Elenas.
- Social commerce companies benefit from low CAC. Because social commerce companies leverage existing connections, they're able to acquire end customers at a fraction of the cost of a traditional e-commerce player. That’s particularly true when it comes to acquiring customers in rural, low-income environments. Elenas' acquisition is particularly impressive with this group, boasting a CAC of $1.
- Capital constraints can foster efficient growth. Though Latin America has become a hotter market for startup funding, this has not always been the case. The benefit of low capital availability is that it can breed efficiency. Elenas has succeeded in reaching tens of millions in profitable GMV, having raised less than $9 million.
- Social commerce and fintech are a good match. Since Elenas already handles payments on behalf of its customers, it's in a good position to manage other financial interactions. We may see the company handle payments, loans, and other services.
This piece was written as part of The Generalist's partner program. You can read about the ethical guidelines I adhere to in the link above. I always note partnerships transparently, only share my genuine opinion, and commit to working with companies I consider exceptional. Elenas is one of them.
It took Pinduoduo less than two years to become a unicorn. Despite entering China's e-commerce market late, long after Alibaba and Tencent had built their empires, it took "PDD" just 21 months to reach a valuation of $1.5 billion. A little more than a year later, PDD went public, boasting 300 million active buyers and 1 million merchants. Today, the business is valued at $61 billion and is one of the sector's dominant players.
Success of this magnitude is not easily distilled, and yet, great businesses tend to have a revelation at their center. If Pinduoduo's rise can be explained by a fundamental insight, it is this: shopping is social.
Intuitively, we know this to be true. Societies ancient and modern have organized themselves around centers of commerce; bazaars, markets, and malls act not only as a loci of transaction but also of connection. E-commerce's early movers mostly neglected this reality. When you navigate to Amazon or Flipkart or Alibaba, there is no sense of personal contact – only an endless, faceless aisle to be perused. Pinduoduo recognized this absence and reversed it. In doing so, the Chinese business became the face of a new kind of online buying: social commerce.
Rather than abstracting human relationships, social commerce businesses lean into them. For Pinduoduo, that meant incentivizing customers to get their friends to join them in making a purchase – by turning a single order into a bulk one, customers unlock discounts. Meesho, an Indian business, takes a different approach. The platform provides infrastructure for individuals to sell existing products directly to their friends. In this construction, the seller uses extant social connections to build a book of business. It has worked extraordinarily well, with Meesho raising at a $8 billion valuation.
While Pinduoduo and Meesho have fundamentally altered the complexion of their national markets and established dominant positions, many other promising geographies appear untapped. Indeed, the Global System for Mobile Communications Association (GSMA) estimated the total social commerce opportunity today to be worth $700 billion.
Latin America seems particularly promising. The region boasts a massive addressable market, relative linguistic homogeneity, high GDP per capita, widespread internet usage, low e-commerce penetration, and long-standing cultural preferences for direct buying. In short, it looks designed for a Pinduoduo or Meesho-esque disruptor.
After studying the business for several months, I believe that Elenas has the ability to become Latin America's social commerce giant. Leveraging a playbook similar to Meesho's, the company has reached annualized gross merchandise volume (GMV) in the tens of millions of dollars, growing more than 70x over the past two years. It has done so with limited venture funding and is now unit economic profitable. Mind-bogglingly, the company is run by a twenty-four-year-old CEO with close to a decade of experience. One tenured advisor referred to him as the most natural leader they'd ever met. If the best startups tend to be outliers, Elenas sits at the far edges of the bell curve by several different measures.
Elenas’ legacy may not be defined by any of these attributes. What makes the business most special is the impact it is having on the lives of low-to-middle income women on the continent. By aggregating access to products, software, and logistics they have allowed those with little money to become full-fledged entrepreneurs. So far, Elenas has served more than 100,000 of these “sellers,” enabling true economic empowerment.
In today's piece, we'll explore what makes this business so powerful, covering:
- The paradoxical path of Zach Oschin. At an age when most of us are stressing about our SATs, Elenas' CEO was building businesses and holding down a full-time job. His early start has allowed him to develop managerial abilities beyond his years.
- Latin America's social commerce cocktail. It would be difficult to design a better environment for a company like Elenas. Demographic information, buying patterns, and competitive dynamics open the door for a well-run insurgent.
- Elenas' opinionated product. Oschin and his team have thoughtfully decided which parts of the buying process they want to own and which are better outsourced. The result is a product that knows what it wants to do.
- Growing with speed and control. Elenas has announced just $8.5 million in funding but succeeded in processing significant volume and onboarding more than 100,000 sellers. This is a company that has shown it can allocate capital efficiently.
- A culture of obsession. Even on weekends, Elenas' employees regularly meet with customers. Such behavior is indicative of a business that takes its user needs seriously and wants to go the extra mile.
- Fintech forks. Elenas is an essential part of its sellers' lives, acting as a business operating system. In the coming years, we can expect it to expand into fintech, potentially managing payments, lending, insurance, and beyond.
Origins: Zach Oschin's Time Turner
Having gotten to know Zach Oschin for the better part of a year, I was shocked to learn during our interviews that he is just twenty-four years old. Elenas’ CEO has the bearing, maturity, and experience of someone with a decade of experience.
As it turns out, that’s the case. Despite his young age, Oschin has been running businesses since his early teens, holding down a startup job at the age most of us are worried about getting our braces off.
The result is an entrepreneur that colleagues, mentors, and investors describe as preternaturally gifted, capable of managing through the highs and lows of company building like a seasoned founder. Let’s dig into how Oschin got started.
Oschin comes from a long line of entrepreneurs with four generations preceding him building businesses of their own. That legacy meant that Oschin grew up in an unusually enterprising environment. Rather than getting an allowance, he was encouraged to start businesses to make his own spending money.
At ten, Oschin started a local car washing business in his hometown of Los Angeles. While many of us might have been content to make a couple of bucks and call it a day, Oschin grew his enterprise over the next five years, taking over his neighborhood and employing a slew of his friends. At its height, "Westlake Washers" made a few thousand dollars in revenue – not bad for a founder barely into his teens. Oschin supplemented this income stream with another business, offering drone photography services for real estate brokers to build differentiated marketing materials.
While Oschin learned a lot from these endeavors, he soon decided it was time to work for someone else. At fifteen, he reached out to a commercial space development business, XCOR Aerospace. What began as an unpaid internship focused on youth outreach quickly developed into a real, complex job. Over the next two years, Oschin would take responsibility for building out XCOR's digital strategy, charged with managing social media communication and paid acquisition. He managed spending on Facebook and Google ads, worked with XCOR's CFO on investor relations, and was flown out to launch events in Europe – all while studying for the SATs and completing his school work.
Oschin's international experiences led him to Georgetown's School of Foreign Service (SFS). Traditionally a feeding ground for diplomats, Oschin used the program as a launchpad for further entrepreneurial adventures. He traveled to South Africa to work for a logistics startup, Pargo, before spending the summer after his first year in Colombia at a venture studio called Polymath. It proved a fortuitous decision.
Founded in 2012, Polymath is one of Colombia’s best-known startup makers. The firm was founded by Wenyi Cai, a Harvard physicist turned entrepreneur. After selling her search business, Milo, to eBay in 2010, Cai decided to help the next generation of entrepreneurs get their start. She moved to Bogotá and began incubating companies. To date, Polymath has created eight businesses and minted dozens of talented startup operators and founders.
As it turned out, one of Zach Oschin’s mentors spent time at Polymath in 2016. After a positive experience, they encouraged Oschin to apply for a summer job thinking it would be a perfect fit for someone so passionate about emerging market entrepreneurship. The only problem was that Polymath didn’t have room for a summer intern. But Cai was convinced by the message she received from Oschin’s mentor. As she recalled it, the mentor said, "There's this kid…I think he's really going to be something." She accepted an introduction and was quickly impressed by Oshin's maturity and advanced business knowledge.
Though neither Cai or Oschin could have known it, an enduring partnership was born. Over that summer, Oschin matured from an intern into a key player on Polymath’s team. Rather than return to Washington DC when summer ended, he decided to stay in Colombia to keep working.
Somehow, Oschin managed to stay in Colombia and fulfill Georgetown's educational requirements. How did he do that? How can you graduate from university and build a high-growth startup?
The best answer is that Oschin owns a Time Turner, a magical instrument that allows the possessor to travel back in time. The second-best answer is that Oschin worked hard and managed to bend the system to his benefit. He "studied abroad" at a Colombian university, CESA, and compressed as many credits as he could into short sprints, returning to America on occasional red-eye flights. While his transcript might have given the impression he was a reasonably typical college student, Oschin was a full-time employee at Polymath and budding founder.
Perhaps Oschin's greatest weakness was his scruffy Spanish. Though he had a few basics down, he would need to get a lot better if he was going to found a company in Colombia. He was thrown in the deep end, sent to conduct more than 150 user interviews in an unfamiliar tongue. In particular, he was tasked with talking with middle and working-class Colombian women to better understand their needs. "His Spanish got really good in a month," Cai recalled.
As Oschin remembered it, those early days involved "a huge amount of listening." Across hours of discussions, he began to learn how different communities made money, their challenges, and how they hoped to improve their lives. Oschin and the team tested out new products and business models based on the lessons taken from user interviews. That investigation led them to the entrenched world of "direct sales."
If you were born in America or Western Europe sometime in the past three decades, there's a good chance you might not have given direct sales much thought. The fundamental model involves a company allowing an informal workforce to independently sell the firm's products. Arguably, direct sales had their heyday in the US as early as the 1950s with "Tupperware parties" an example of the approach: "dealers" sold products like Tupperware's "Wonder Bowl" to their neighbors, earning money in the process.
While versions of direct selling still exist in the US – Herbalife continues to use a direct sales model – it has largely died out. Not so, in Latin America. For reasons we'll discuss in greater detail soon, direct selling remains popular in the region, even though it appears stuck in the past.
As Oschin studied this market, he realized it was ripe for disruption. Despite barely innovating for decades, incumbent business remained large, and demand for the products sold through these channels still existed.
Could this model be reinvented for the 21st century? How could technology enable thousands or even millions of women to run direct sales businesses more easily? What might that mean when it came to increasing household income? In summary, could social commerce work in Latin America?
Oschin had found his idea and gave it a name: Elenas. It was inspired by the Greek word for “shining or guiding light” and hinted at the feminine and communal focus of the business. He quickly set about testing the questions he'd identified. He did so by returning to many of the women he had interviewed, offering them a chance to sell a small catalog of products to their friends and neighbors. His offering differed from traditional direct sales businesses in two critical ways: sellers didn't have to keep any inventory, nor did they have to arrange delivery. To begin with, Oschin handled those tasks personally, taking Ubers across Bogotá to deliver orders.
It didn't take long for Oschin and his team to realize they had hit on a profound need. Even with no real product, women poured into the service, excited to have an alternative to decrepit incumbents. A few paid marketing tests demonstrated Elenas could sign new customers for as little as $0.05. "There was this huge pent-up demand in the market," Oschin said.
This traction was enough to convince Polymath that Oschin was on to something special. The incubator invested $500,000 to build an actual product. By the following year, Oschin had added a further $2 million in seed funding to finance Elenas.
It had taken the then-twenty-one-year-old just six years to go from running a local car washing business to helming a venture-backed startup on a new continent.
Latin America: Built for Social Commerce
If you were to design an environment for social commerce, you'd be hard-pressed to engineer better dynamics than those that already exist in Latin America. While high-powered insurgents might have emerged in India and China first, LatAm seems like an even neater fit in many respects. That's a consequence of the region's demographics, consumer purchasing behavior, and competitive set.
To see how favorable Latin America is to social commerce, we should ask ourselves a series of questions:
- Is this a large market?
- Does the population have money to spend?
- Is there enough connectivity for a technological solution?
- How much retail spend is already online?
It's tempting to think of India and China as almost singularly large markets outside the United States. While there are good reasons to reach such a conclusion, doing so ignores the scale of the Latin American market. (Of course, such a comparison is not perfect given that we are juxtaposing nations with continents.)
According to The World Bank, India has a population of 1.38 billion people, a GDP of $2.66 trillion, and a GDP per capita of $1,927. China has a marginally larger population of 1.41 billion people, a higher GDP of $14.72 trillion, and a much greater GDP per capita at $10,434. Latin America and the Caribbean have a population of 652 million, combined GDP of $4.73 trillion, and a GDP per capita of $7,245.
What does this mean? Effectively, Latin America boasts a massive regional population – 47% of India's – with a GDP that's 1.77x higher. LatAm ends up looking a lot more like China than it does India on a per capita basis, meaning that there should be significantly more spending capacity. As another reference, LatAm's GDP per capita is close to double Indonesia's, another emerging market darling.
We have answered our first two questions with this data: LatAm is a large market with a relatively prosperous population.
So, how does it stack up technologically? Roughly 68% of LatAm is connected to the internet compared to 71% in China and 41% in India. When looking at the number of mobile phones per 100 people, China leads with 117, LatAm boasts 100, and India comes in at around 84. (Crazily, Indonesia sits at 130!). Social media usage is also high with 82% of LatAm’s population leveraging platforms like Facebook and Twitter.
Our third question is answered: in terms of connectivity, LatAm is relatively well-positioned. It sits at similar levels as China which has supported many internet giants.
Before addressing our fourth question, we should clarify what we're looking for. Taking the perspective of a social commerce entrepreneur, would we want LatAm to have established e-commerce habits?
In short, no. Businesses like Elenas and Meesho operate by bringing offline commerce online. Part of their genius is that they require little to no behavioral change on the part of either buyer or seller – consumers make their purchases from their local salesperson just as they might have done before the advent of the internet. If e-commerce penetration were extremely high, that would suggest consumers had established online buying behavior, undercutting the need for an offline-friendly approach. Of course, social commerce businesses can still thrive in environments with relatively high e-commerce penetration. And indeed, some level of activity is probably a helpful proxy for digital-savvy that might be important. However, if we're choosy, low rates are better.
That is the case in Latin America. The retail sales that occur online are low at 4.9%, a figure that falls even further when studying rural, low-income groups on the continent. India sees 7% online sales while China leads the world by this metric at 46.3%. Indonesia cracks the top five at 20.2%.
From a demographic perspective, LatAm was made for a play like Elenas: it's a sizeable emerging market with a comparatively prosperous population, high connectivity, and low e-commerce penetration.
Unique buying behavior
It seems almost paradoxical that LatAm's e-commerce penetration should be so low when internet adoption is relatively high.
What explains the region's disconnect here?
One critical factor may be the "trust gap" between consumers and e-commerce players. Unlike other regions, Latin American buyers distrust tech players like Amazon or even local giant Mercado Libre.
Elenas investor Michael Shoemaker remarked that LatAm has a strong culture of "trust and solidarity." His take seemed particularly salient given Shoemaker's experience co-founding e-commerce company Linio Group and serving as Uber's GM for Central and South America. That translates into purchasing habits, with recommendations and referrals playing a considerable role; if you need a plumber, you don't start by looking online; you ask your neighbor.
The trust gap is not restricted solely to e-commerce. Oschin pointed out that so much of the region being unbanked or underbanked is another example of this phenomenon.
The ubiquity of offline buying channels has also slowed e-commerce adoption. Consumers are used to visiting their local tienda or favorite direct seller to make purchases. The persistence of the direct sales model is a particular quirk of Latin America. Indeed, several Elenas employees remarked how they had grown up around this model. VP of Product, Andres Palacio, said he remembered "growing up as a child, traveling with my mom who was showing products around other towns." Felipe Mejía, VP of Growth, shared a similar story, recalling how many family and friends had used this approach. "It's very much a part of Latin American culture," he added.
Allen Taylor, Managing Director of Endeavor Catalyst, shared this view. To his mind, social commerce businesses like Meesho and Elenas are not radical departures from the status quo. Instead, they represented an evolution, using technology to remap existing social networks that had existed for hundreds of years.
The significance of direct selling is reflected in its market size. Industry reports from the World Federation of Direct Selling Associations (WFDSA) indicate total revenue of $24 billion in the region; an earlier report suggests that LatAm accounts for over 14% of global direct sales. While the total addressable market has remained mostly flat, the number of direct sellers has increased. In 2020, WFDSA estimated 15.63 million direct sellers in the region, up from 13.39 million the year prior.
Such figures compare favorably to other emerging markets that have supported social commerce plays. While Meesho has risen to a purported valuation of $8 billion in India, the country has a direct selling market of just $2.2 billion. As Rajul Garg, an investor in both Meesho and Elenas, remarked, "[Latin America] exhibits the behavior of re-selling even more than India."
As with the region's demographics, consumer behavior seems ideally suited to a social commerce approach.
Room to maneuver
Perhaps the final reason Latin America seems primed for a high-growth social commerce startup is that no business has established itself as a dominant player. That's not to say there's no competition. If Elenas succeeds, it will need to steal share from large incumbents and insulate itself from sharp-elbowed newcomers.
Indeed, the largest direct sales business in the world hails from Brazil. Founded in 1969, Natura has established itself as a leader in the beauty category, controlling brands like Aesop, The Body Shop, and Avon. The firm boasts a market cap of $6.8 billion and earned $1.85 billion in revenue in its most recently announced quarter. Other key players include beauty company Yanbal, home product provider Betterware, and cosmetics purveyor, Belcorp. Each is valued north of $1 billion.
Though these businesses have strong name recognition and large workforces in the tens of thousands, they have done little to innovate on the fundamentals of their offering. That Elenas was able to make such a splash by taking care of inventory and delivery illustrates this point. If incumbents enter the fight, they would need to build new core competencies in technology and disrupt much of their supply chain.
Other social commerce insurgents have come to market over the past few years, though the best-funded players have focused on the grocery category. Facily has raised $502.4 million to try and win the Brazilian market, with Favo raising $32.5 million to execute a similar tactic. While China has perhaps a dozen or more social commerce unicorns and India has Meesho, Latin America doesn't seem to have a giant of its own – at least outside the grocery space.
Elenas finds itself in an envious position: addressing a massive market populated by sleepy incumbents and relatively early challengers.
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Product: An opinionated solution
Our story thus far has illustrated how Elenas was created and why the market may need it. Now, it's time to unpack what the company does. In the process, we'll learn why Elenas seems to be a product with a sense of perspective, choosing what parts it wishes to own and which elements should be outsourced.
The Elenas app serves as the hub for a seller's business. Let's walk through how the platform works with an example.
Imagine we want to start a direct sales business of our own, Fox Beauty. We'd download the Elenas app on the Google Play Store to get started. Once up and running, we could quickly and easily create a company account, adding Fox Beauty's logo and other information.
Next, we need to decide what we want to sell. To do so, we can browse the product range on Elenas' marketplace, adding those we like to a digital catalog. The products we choose become the contents of our store. Since Fox Beauty is focused on cosmetics, we might select a range of face creams, lipsticks, specialized makeup mirrors, and perhaps a high-powered hairdryer.
It's time to sell. We can solicit sales across various platforms, including WhatsApp and Facebook, sending our catalog or individual items to friends and contacts. When potential customers open these links, they'll see relevant product information and pricing details. Using our personal relationships with these people, we can make tailored recommendations and suggestions. If we want to, we can also adjust pricing with complete visibility into how our margins are impacted. For example, if a friend decides they want to buy a year's worth of makeup, we could choose to issue a special bulk discount, knowing what that would mean for our bottom line.
Now, let's imagine our friend decides that they want to make a significant purchase thanks to our discount. Accepting payment with Elenas is as simple as sending a link – the buyer can decide on their end whether they want to pay online or in cash upon delivery. Once this has been agreed upon and an address has been collected, Fox Beauty doesn't have much else to do except make sure our customer is happy. To that end, we can share a tracking link so that both of us can see where the order is and when it will arrive.
This is the story of a single transaction. But over time, as owners of Fox Beauty, we can be expected to return to Elenas many times over. It's the place where we will track our earnings, find new products, and build new catalogs. In many respects, it serves as a kind of Shopify-lite, built for emerging markets entrepreneurs selling within their communities.
Elenas has taken an opinionated, differentiated approach to inventory. Three of the companies' choices look particularly pivotal:
- Elenas is a marketplace. It doesn't hold any inventory. Rather, it connects direct sellers with vetted product providers.
- Elenas focuses on higher-ticket, non-perishable products. You will not find groceries on the company's platform. Instead, sellers can choose from beauty, personal care, home goods, clothing and accessories.
- Elenas focuses on breadth. While traditional direct sales businesses offer a limited range of products, Elenas takes the opposite approach to good effect.
The most crucial element of Elenas' approach to inventory is that it holds none of it. Rather than building warehouses or taking on product risk, the company operates a marketplace. Selection comes from almost five hundred different manufacturers. This direct approach allows Elenas to secure higher-quality products more economically.
Elenas works with its partners closely, thoughtfully choosing the products it sells. Only those below a specific price point and above a particular quality bar make the cut. As Eliel Chang, VP of Supply Chain, explained, established brands tend to be an uneasy fit given the price premium they tend to charge. The sweet spot seems to be generic versions of products with established demand. Beauty appliances, kitchen essentials, and home decor items are all favorites.
As Elenas has expanded, it has built the leverage to secure preferential terms from its vendors. Chang estimated that 95% of the company's providers are exclusive to Elenas, creating a supply moat for the business.
Building that kind of defensibility would be significantly more challenging if Elenas focused on the grocery category. As mentioned earlier, well-funded players like Facily and Favo have focused on food products. That's a reasonable strategy given the size of spending that goes to groceries and the recurring nature of purchases, but it comes with clear disadvantages. Average order values (AOVs) are low, and delivery costs as a percentage of AOV can be high (often unsustainably so). For these reasons, grocery delivery businesses prioritize density – increasing the number of orders within a given area – rather than breadth. Finally, the products themselves are commoditized, making seller recommendations ineffectual. As Oschin said, "You don't need me to tell you what kind of banana to get. It's a banana."
Elenas takes an axially different approach. It offers SKUs with a higher ticket price that can be shipped cost-effectively and benefit from social recommendations. The drawbacks of Elenas' model are that order frequency is lower and total spend on a category like cosmetics is likely to be much lower than grocery. But by taking this approach, Elenas unlocks significant advantages. Since delivery costs as a percentage of AOV are much lower, Elenas can serve a much larger area. Because items are non-perishable, the speed of delivery is less important. And since products are non-commoditized, seller recommendations hold weight.
While no approach is right or wrong, Elenas' seems well-calibrated to the region's consumer behavior. As we'll learn, this approach also has the benefit of being extremely capital-efficient, allowing Elenas to reach profitability much faster than if it were focused on groceries.
If Elenas differs from other insurgents in terms of product focus, it sharply contrasts with incumbents when it comes to the breadth of its selection. Elenas has undertaken considerable experimentation to determine what products it should carry. Over time, Oschin and his team realized that seller businesses tended to grow as selection expanded. Women selling cosmetics benefited from developing their catalog with fitness equipment and toys, for example – increasing their addressable market and the lifetime value of an individual customer.
This behavior might sound intuitive, but it represents a departure from the traditional direct sales model that pushes a relatively narrow, static set of products. Typically, incumbent providers offer a couple of hundred SKUs within a given category. Meanwhile, Elenas offers 80,000 products across ten categories.
The impact of this shift is profound for Elenas and the seller. Wenyi Cai noted that the company's selection was an essential driver of seller retention. "Our most important differentiation isn't that we're digital," she said. "It's that we support many more categories and SKUs than traditional direct sales companies."
Jeff Bezos once noted that "making your own power doesn't make your beer taste better." His point was that companies often focus their efforts in areas that have no discernible impact on the product they sell.
Elenas seems to believe in this maxim. Rather than vertically integrating a supply chain, the company prefers to outsource its logistical needs. By doing so, Elenas can focus its resources on improvements that sellers and consumers can tangibly feel.
Outsourcing this task doesn't mean Elenas is out of the picture. Indeed, few things can spoil a new purchase like a lost parcel or significant shipping delay. Elenas has built extensive internal technology to optimize routes and provider selection, and gives clear, accurate data to both sellers and buyers. It also collaborates closely with the logistics businesses it works with.
For example, as part of its launch in Mexico, Elenas began working with a logistics provider, 99Minutos. As Oschin explained, the two teams worked together to optimize delivery rates and costs, helping Elenas gain a fast foothold in a new market. When it came time for 99Minutos to launch in Colombia, Elenas returned the favor, giving the provider its local business, bootstrapping its demand.
If Elenas can build similarly close relationships across Latin America, it may never need to develop its own logistics offering. It certainly seems to be the right approach for the time being.
Traction: Efficient growth
Despite raising comparatively little money, Elenas seems to have found scalding product-market fit, evidenced by its extremely low customer acquisition costs, spiking GMV, favorable unit economics, and seller love.
Elenas is proof of something we intuitively know to be true: personal recommendations hugely impact our buying behavior. Receiving a product referral from a friend is much likelier to result in a purchase than seeing the same item appear in a Facebook ad.
Oschin's company is a massive beneficiary of this tendency, particularly when it comes to acquisition. Traditional e-commerce businesses spend around $45 to acquire a customer through paid search advertisements. Pricing increases to $66 when looking at display advertisements. Companies may attain lower CACs via platforms like Instagram and Facebook, though that tends to require frequent, persistent experimentation. Confidential sources have suggested that acquisition costs for Latin American e-commerce businesses can range between $26 and $80.
Elenas acquires end customers for less than $1. It can do so because sellers are a highly effective acquisition channel, mass acquiring dozens of family members and friends. Thanks to the "pent-up demand" Oschin mentioned, Elenas can acquire sellers for about $10.
The result is one of the most effective acquisition machines in digital commerce.
Strong GMV growth
In two years, Elenas has grown annualized gross merchandise value (GMV) over 70x. It's done so while opening up a new national market in Mexico and weathering political unrest. Last summer, protests swept Colombia, monopolizing public attention and snarling supply chains. Despite that disruption, Elenas persevered and prospered.
As expected, the majority of this volume came from Colombia, but a successful Mexico launch in May of 2021 and triple digit month-over-month growth has driven the new market to already represent a quarter of the company's sales.
As alluded to, the company has succeeded in reaching these impressive heights with just $8.5 million in venture capital raised.
As Jeff Weinstein, Partner at FJ Labs, said of the company, "The capital efficiency is there…The amount they've burned to get where they are is not crazy at all."
How does this compare to other players in the space? Meesho has announced $1.1 billion in venture funding and seems to have reached an annual GMV of roughly $6 billion. (Given the way Meesho's GMV has been reported, it may be higher; funds raised may also be greater.) That would suggest the creation of $5.45 million for every $1 million raised.
Though not perfectly analogous, Faire provides another comparison. The US business is a wholesale marketplace selling to small businesses, albeit more formalized ones. The company has reached an annual GMV of $1 billion with $1.1 billion raised, effectively creating $900,000 in GMV for each $1 million in venture funding attained.
Pinduoduo appears to be a clear outlier. The Chinese company's S-1 filing reveals a staggering annual GMV of $41.8 billion with just $1.1 billion raised in the private markets. For every $1 million in venture funding, Pinduoduo created $38 million in GMV.
Elenas may not quite be at Pinduoduo's levels, but it compares favorably to other leaders in social commerce and e-commerce.
Positive unit economics
While Elenas has invested in growth, it has done so while keeping an eye on its unit economics. According to Weinstein, the company has relentlessly improved its cost structure, upgrading a negative gross margin to an expanding, positive one in just a year.
How has the company managed this? Primarily by reducing costs and driving larger bundles and basket sizes with experienced sellers. Over the past nine months, Elenas brought down logistics costs by over 25%; the firm's gross margins increased by 400% over the same period. Moreover, Elenas grew its basket size by almost 40%. In the coming years, Elenas expects to further reduce shipping costs through tech optimizations, and by growing volume.
These positive order economics contribute to healthy seller growth and lifetime-value metrics. Combined with a low acquisition cost, Elenas sellers grow monthly sales by an average of 6x over their first year of working with the company and top sellers have a more than 98% month-over-month retention rate.
“Our success is directly aligned with the growth and development of our seller base,” Oschin said. “Investment in training and supporting each micro-entrepreneur as they launch their business creates massive impact while driving a healthy growth cycle.”
Elenas may have started in Bogotá, but it now stretches far beyond the boundaries of Colombia's capital city. In total, Elenas operates across 610 Colombian and Mexican towns and villages.
Fascinatingly, Elenas has built an especially strong following in secondary and tertiary markets, with 68% of deliveries occurring outside of Colombia's top five largest cities. These regions have historically been underpenetrated by e-commerce businesses. Thanks to the product selection, low shipping costs, and the outsourced logistics network Elenas has built, the company can effectively service hard-to-reach regions. This represents a significant advantage, allowing Elenas to grow in low-competition environments and amass a large base. Much of Meesho and Pinduoduo's traction follows a similar pattern with each thriving outside of India and China's largest metropolises.
Elenas' push into Mexico in the summer of 2021 represents its most audacious geographical expansion. It was a move that proved both deceptively challenging from one vantage and surprisingly simple from another. Unlike Colombia, Mexico doesn't have a single logistics player that covers the entire country. That meant Elenas had to piece together a constellation of providers – a process that took considerable effort.
Remarkably, though, that seems to have been the only meaningful tweak Elenas needed to make for its model to work. "We achieved product-market fit in Mexico without many changes," Cai noted. Sellers had similar profiles and needs as those Elenas served in Colombia, and products proved popular across national markets. Better yet, order frequency and GMV figures per seller look even better in Mexico than in Colombia. Elenas will hope this remains true as it moves across the rest of the continent.
Perhaps most importantly, Elenas is working for the women it serves. (While the company also supports male sellers, the vast majority is female.) It has rapidly grown its seller base to over 100,000, paying out millions of dollars in commissions.
Top sellers earn hundreds of dollars a month via Elenas, a sum that can make a real difference in low-income households and in countries with a depressed cost of living. Many don't have other ways to earn money. Sources I spoke with noted that gig economy companies like Uber and Rappi had enabled men to make ancillary income but weren't a fit for most women. Elenas acts as a counterbalance, giving the female population a side hustle of their own. While selling with traditional catalogs is an option for this population, Elenas offers the chance to earn multiples more without incurring inventory risk.
A prime example of the impact Elenas can have comes in the form of Andrea Maldonado. Before finding Elenas, the twenty-four year old mother of two was earning minimum wage as a cleaning lady. On just $200 per month, Maldonado struggled to pay for housing, food, or even the transport to make it work.
Elenas has transformed her financial circumstances. Using the smartphone she already owned, Maldonado began selling to friends and family members within her network, proving to be a gifted salesperson. She has grown her practice to span home goods, beauty products, and beyond, and runs a WhatsApp group to remain in close touch with clients, sharing discounts and other promotions. To date, Maldonado has sold $61,000 in Elenas products, earning $20,000 in personal earnings. It is now her primary source of income.
This is far from an isolated incident. Felipe Mejía, VP of Growth, remarked that he frequently received messages from sellers outlining the impact of Elenas. For example, one woman told Mejía that selling products through Elenas had allowed her to care for her family while her husband recovered from illness. VP of Supply Chain, Eliel Chang shared how one grateful seller sent him a basket of herbal medicine when she realized he was under the weather, writing a note that read, "Eliel, I need you to be very well."
Few companies I have studied have a user base so thankful for its services. Such appreciation is a testament to how Elenas transforms the lives of those it empowers.
Already, Elenas has made savvy moves to create defensibility. The result is a company that has clear moats, despite its relatively young age.
Perhaps Elenas’ most visible moat is its product selection. The company offers access to high-quality products at affordable prices that can’t be found elsewhere.
How does Oschin’s team do that? It comes down to two factors: Elenas’ decision to go direct, and the large, engaged seller base it has built.
Firstly, Elenas looks to avoid middlemen, working directly with manufacturers in China or regional distributors. By taking this tack, the company cuts down on unnecessary mark ups and gains a better understanding of the products themselves. It also positions itself for scale, removing potential bottlenecks within the supply chain.
The second reason Elenas excels at product selection is the base it has built. Manufacturers know that partnering with the company allows them to tap into an army of highly-networked salespeople – an extremely attractive proposition. With this leverage, Elenas is able to secure product exclusives and special discounts. This advantage is likely to compound: as Elenas’ aggregates more sellers, the more volume it will be able to deliver to suppliers, who will be incentivized to cut increasingly favorable deals.
For this reason, a newcomer to the space would likely struggle to compete with Elenas, at least from a product perspective. Oschin’s company has done the work to build SKU and pricing advantages that should accumulate.
Rather than operate its own logistics business, Elenas partners with others. The way it does so is unusually hands-on and an indication of how the business looks to build infrastructural moats through software.
Specifically, Elenas tightly integrates with a range of logistics providers so that it can direct shipments most efficiently. That might involve shifting a package from one provider to another, or bundling shipments for maximum savings. This versatile command center gives Elenas flexibility and creates positive redundancies – if one logistics business is backed up, it can pivot to another.
Doing the work here has yielded positive results. Despite operating in one of the most challenging logistical markets in the world – Latin America is a mountainous continent – Elenas has extremely broad coverage. Moreover, this extends into some of the most rural areas of Colombia and Mexico that e-commerce businesses have struggled to service.
Along with its logistics integration work, Elenas has also prioritized building a robust payment system. With many areas relying on cash, the company needed ways to accept in-person compensation alongside online remuneration. It’s another example of how Elenas has created an advantage that is difficult to replicate – true software infrastructure extending across two countries.
Because of the model Elenas employs, it benefits from social moats when it comes to the end consumer.
Traditionally, e-commerce buyers are promiscuous, switching between different platforms. If the same television is available on both Amazon and Walmart.com, it’s likely you’ll choose whichever offers the best price. (Indeed, part of the reason Amazon created its Prime program was to create lock-in to combat this user behavior.)
Elenas is unlikely to suffer from this problem thanks to its seller base. While traditional e-commerce platforms are faceless, sellers are not – they’re people, sharing products with others in their social circle. They leverage tangible, real-world bonds to recommend products and guide the buying journey. Fundamentally, they are differentiated rather than commoditized, and as such are likely to have higher buyer retention. If you’re looking to buy a television and you can choose to purchase it from Amazon or your friend using Elenas, it's likely you’ll pick the latter – perhaps even if it's slightly more expensive.
All to say that if Elenas can keep serving sellers, it has every chance of having extremely high retention of end customers. New companies trying to compete with similar products for that base could struggle to make a dent.
Combined, these three moats demonstrate the elegance with which Elenas is executing. Rather than chewing through excessive capital without creating enduring advantages, the company has acted with impressive foresight, building for its future.
Team and culture
In addition to offering a robust product, Elenas seems to benefit from strong leadership and a highly engaged culture.
There's only one place to begin: Zach Oschin. Every source I spoke with emphasized how special Elenas' CEO is.
As mentioned earlier, Michael Shoemaker is an investor and board member at Elenas with an impressive track record of building businesses in Latin America. As a co-founder of Linio and GM of Uber, he has had the opportunity to work alongside some of the world's highest-caliber operators. Yet, by his estimation, Oschin seems to have impressed him most. "He is, of all the people I've ever met, the most natural leader/operator," Shoemaker told me. From a man in the orbit of Travis Kalanick and Oliver Samwer – flawed but extraordinarily successful leaders – this is a remarkable testament.
In particular, Shoemaker highlighted Oschin's intelligence, humility, and willingness to accept counsel. Those traits combine to create someone Wenyi Cai described as "an incredible balance between EQ and IQ."
Rajul Garg, founder of Leo Capital, noted a resemblance between Oschin and Meesho's CEO, Vidit Aatrey. Both men are rational, product and metrics-driven builders, according to Garg. As a backer of both businesses, Garg is uniquely positioned to make such a comparison.
My experiences with Oschin have confirmed the portrait painted by his team and capital base. He is an unusually thoughtful, even-keeled executive with a subtle gravitas and evident drive. As Mejía, who has known Oschin since his earliest days at Elenas, said, "He's always been this super hungry guy, since forever."
Oschin's acceptance into the Endeavor network is a further indication of his impressive leadership abilities. According to Managing Director Allen Taylor, the organization accepts just 1-2% of applicants. Members include the founders of Rappi, Flutterwave, Careem, and Kavak, among others. Taylor said of Oschin's induction, "It's a bet on him." Only the brave or foolish would take the other side of such a wager.
Elenas has established strong management outside of its CEO. Nine senior executives have previously worked at leading LatAm startups, consulting firms, and CPG companies, giving Elenas a breadth of relevant experience. Oschin pointed to Natalia Gomez as a particularly influential leader. Gomez serves as the country manager of Colombia and brings formidable expertise to the table. Not only did she lead Rappi’s e-commerce vertical between 2017 and 2020, Gomez ran sales at both Linio and Groupon.
Edwin Fuentes is Elenas’ CTO, having filled the same role at a prominent domestic startup, Fitpal. Before that, he worked as an engineer at Imaginamos, the development shop that birthed Rappi. Andres Palacio joins Fuentes as VP of Product. Before joining Elenas in early 2021, Palacio was a Director of Product Management at a global agency, Huge. Elenas seems to have a team capable of overseeing many years of further growth.
Many of the most impressive businesses I've studied take an almost fanatical interest in the customers they serve, with Stripe, Nubank, and Coupang chief among them. Elenas' devotion in this area is the defining aspect of its culture.
Every employee I spoke with seemed to have a sincere, intense connection to the company's mission and the sellers it serves. This starts with Oschin, who is "very close to our users," according to Mejía, a proximity that can be traced back to the CEO's months of customer interviews. It’s also influenced by the fact that the majority of the employees are women, providing a closer insight into the typical customer.
Elenas has maintained this proximity even as it has grown. For example, when the company started scoping out launching in Mexico, it began by talking to users. Mejía recalled he and Oschin crisscrossing Mexico City in Ubers to speak with working women. In these conversations, the pair established the needs of this cohort and gauged demand for Elenas' product. When the product formally launched, many of these women became the market's first users and success stories.
Mejía still receives frequent Whatsapp messages from the women he has helped earn money through Elenas. Eliel Chang, who told me the story about the seller who sent him medicinal herbs when he was feeling unwell, noted that he spends every Saturday visiting sellers to understand their needs better. Elenas is a business that goes to uncommon lengths to understand and listen to its customers.
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Though Elenas seems to have picked a deft model for its market, that does not mean the business is bulletproof. Changing buying habits, increased competition, and limited capital availability could curb Elenas' trajectory.
We noted that Latin America's e-commerce market is restricted by a "trust gap." Consumers are suspicious of new technological platforms and often prefer to make purchases directly from a friend or tienda.
Will this distrust last forever? As e-commerce platforms become more commonplace and younger generations amass buying power, we can expect a greater share of purchases to be made online. Given it thrives by leveraging existing, real-world relationships, this would be a net-negative for Elenas in its current incarnation.
It may also present an opportunity. Meesho has tweaked its approach to more directly serve consumers in the last year. Rather than make purchases solely through local women, Indian consumers can now visit Meesho's web platform and purchase directly. This can be a complicated maneuver to pull off in that it may indirectly undercut direct sellers. So far, though, Meesho seems to have thrived by making such an adjustment, establishing itself as a mainstream e-commerce store as well as the pre-eminent enabler of working saleswomen.
Could Elenas take a similar approach? Jeff Weinstein of FJ Labs described it as a "logical next step when you reach a certain scale."
For now, though, there seems to be plenty of share in the direct selling space to devour. When I asked Oschin how he expected the market to develop, he responded simply: "Will more people buy directly? Yes. Will direct selling disappear? No."
Earlier in this piece, we suggested that Elenas faced weak competition. Incumbents were sluggish, and no one insurgent had established a stranglehold. While these observations remain true, they only tell part of the story. Elenas may face limited direct competition, but the matter is complicated once you widen the aperture.
Traditional e-commerce businesses like Mercado Libre (Meli), Amazon, Magazine Luiza (Magalu), and SEA Group's Shopee can not be disregarded. While they don't rely on the same social commerce mechanics as Elenas, they are much larger and better resourced.
While Oschin's company may be small enough to slip under their radar, for now, it is unlikely to stay that way. The efficiency of Elenas' customer acquisition and ability to win users in regions that have traditionally been hard to reach will pique interest and prompt a countermove.
We've seen this play out in the Indian market with Flipkart's introduction of Shopsy. The social commerce app is a facsimile of Meesho and appears to be aimed at a similar user base. Time will tell how effective this attempted incursion proves.
Elenas will want to be alert to potential competition but will recognize that they are operating in a massive market that technology has barely touched. There is more than enough space to build a multi-billion dollar business.
Elenas has done an impressive job building a relevant, influential investor base. Oschin noted that the team has picked its backers carefully, calibrating for those with deep social commerce experience and expertise building in Latin America. Elenas’ approach has produced a cap-table that includes early Meesho backers, Leo Capital, and Meesho itself. FJ Labs, a fund with long-ties to Latin America, is also an investor as are a suite of operator-angels, notably Bitso CEO, Daniel Vogel, Kavak COO, Fede Ranero, and Cornershop’s LatAm GM, Marinus Van Gestel.
While Elenas’ existing base should mean its well-positioned for future rounds, the company does operate in a market that has relatively low capital availability. In 2020, Latin America saw $4.1 billion of capital deployed to the asset class, representing 1.6% of the global total. Of that sum, Colombia received 11.5%, or roughly $450 million. This goes part of the way to explaining why the country has produced one unicorn so far: Rappi.
Elenas’ success raising from global investors demonstrates its ability to break out from the local capital environment. Expanding into Mexico is likely to further increase the venture aperture given the country received close to double Colombia's funding.
Securing the support of a deep-pocketed firm like Tiger Global or Coatue might be a savvy addition for Elenas. For one thing, such a partnership could provide the firepower for Oschin to approach Latin America's largest market: Brazil. In addition to presenting a massive opportunity, the Portuguese-speaking nation is the recipient of 60% of LatAm’s venture funding.
To maintain the company’s remarkable growth, Elenas will need further investment, including from those capable of financing pan-continental ambitions. Despite the complexities of the Latin America fundraising environment, current indications suggest Oschin has the ability to attract a war chest.
Establishing itself as the OS for Latin America's small business owners gives Elenas plenty of optionality. In the coming years, we might expect the company to build out a financial stack and deepen its seller tooling.
Tens of thousands of sellers are earning income through Elenas. According to Oschin, 50% of them didn't have a bank account before joining the service. Many still may not have accounts of their own, directing their earnings to a family member instead.
Elenas is working to address this need. In partnership with one of Colombia's leading banks, the company plans on rolling out an internal wallet that gives sellers better control over their earnings.
We can expect this to be the first step of many in fintech. Elenas has the potential to leverage its position to become the de-facto financial solution for Latin America's informal direct sales economy, providing loans, credit, insurance, and payment services. For example, a seller might receive money in Elenas then use the app to pay for essential services like internet and electricity. Or perhaps, as a seller's earnings grow, they might wish to access growth financing; Elenas would have the best visibility into an applicant's ability to come good on such an advance.
Expanding its fintech features not only opens up revenue opportunities but improves the health of Elenas' core business. Sellers with better financial health are likely to stay for the long term and increase their earnings.
In time, Elenas may also want to offer fintech features for the end consumer. For example, the company could offer a "buy now, pay later" solution, available at checkout. While sellers would receive funding upfront, Elenas would effectively issue a low-fee loan to the buyer. Such a solution could prove a win-win-win, increasing sellers' conversion, giving buyers flexibility, and adding income for Elenas.
In a sense, Elenas offers a Shopify-esque solution to Colombia and Mexico's sellers. Set up your store and start making money – we take care of the rest. There are meaningful differences, of course, including the fact that many stores on Shopify manufacture their products or sell their own brand. Moreover, businesses on the Canadian platform are typically soliciting customers online rather than leveraging a direct sales model. Nevertheless, there is a shared core between both firms.
Could Elenas lean into this over time? It's unlikely to be the right fit for all users, but it does seem like it could be a powerful addition. Top sellers would extend their reach with the help of an Elenas-built webpage featuring their various catalogs and products. Such an addition would help sellers drive new purchases without having to conduct hand-to-hand sales, increasing their leverage.
Elenas could feature these stores in an eventual consumer-facing application. Doing so might solve the tension between serving customers directly while also empowering sellers, ensuring that the company's core user base had traffic directed their way when possible.
In all likelihood, Elenas won't need to make such a play for it to become a massive business. Nevertheless, it demonstrates the powerful position in which the company sits and the potential that remains.
It seems a matter of time before Latin America has a social commerce giant of its own. The opportunity is too large and the conditions are too favorable for a company not to capitalize. In Elenas, the region has a promising upstart. Not only does the startup elegantly map to existing buying behavior, it has shown an ability to grow without bloat, to win without waste. If Oschin and his team can maintain their impressive trajectory, Colombia may soon have a second unicorn.
The Generalist’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. Our work may feature entities in which Generalist Capital, LLC or the author has invested.
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