Samuel Carvalho's Praso is profitable with 100 staff, serving 10,000+ Brazilian restaurants in a $50B wholesale market

wild time. Was it highly caffeinated or was it not caffeinated enough? It seemed like it just got steamrolled by Red Bull and Monster eventually. Uh it'd be interesting to dig into the story of Soie and what happened there, but uh we will have to do that another day because we have Samuel Grum uh Pro creating an AI powered infrastructure for wholesale commerce covering procurement, credit, and workflows for SMBs. Welcome to the show. How are you doing?

Good. How are you?

We're good. Good to meet you.

Uh please introduce yourself and the company.

Yeah, of course. Um well, I'm originally from northeastern Brazil, city called Receipe. Um I ended up going to Stanford for undergrad but dropped out and came back to Brazil and started Prozzo.

Okay.

Um and we're tackling a major problem in Brazil and trying to build the new infrastructure for wholesale.

What? And and when you say infrastructure that could mean everything from like warehouses to warehouse management system to e-commerce software. Uh help me understand uh what what infrastructure means in this context.

Yeah, for sure. We're trying to build it end to end. So um the idea here behind the business is that while retail has seen a lot of digitization in the last 10 20 years in Brazil or in other countries across the world, wholesale um in our view has been left behind. Um and these small and mediumsiz businesses are still procuring the same way that they were 20 30 years ago. Distribution hasn't changed. We're basically building a tech enabled uh wholesale commerce player

um where we deal endto end. So we deal with manufacturers um and we help them reach small and medium-sized businesses in a more efficient datadriven way.

Sure. So is is Alibaba reasonable comp here? I feel like uh that's that's where a lot of people meet wholesalers and suppliers uh if they're operating in China at least.

Yeah. Um but we're only tackling Brazil. So we deal with Brazilian suppliers and Brazilian merchants. Uh we started out with food and beverage.

Okay. uh which is the highest frequency category with the most number of merchants. Uh so today we serve a little bit over 10,000 restaurants um and just in northeastern Brazil so far but

only restaurants if you look at restaurant procurement is an over uh $50 billion a year market

uh but if you go to other verticals of commerce which in Brazil Yeah. Um if you go to LATAM it's double the size so about hundred billion dollars a year.

Yeah.

Um and if you go to other verticals than restaurants um

the market just multiplies by five or six. So it's a it's a massive market. We're starting out with restaurants.

Yeah. Uh what is the secret to getting 10,000 restaurants on board? Is this like cold email, phone calls, sales reps, advertisements? Like what's the funnel look like to actually grow? Because you're operating this two-sided marketplace. I imagine that demand generation is top of mind at all times.

Yeah, I think that the trick with serving small and medium businesses is that they have high natural attrition. Um so the way to grow um in an efficient way is having very low CAC. M

and the only way you can grow at a very low CA is if merchants love your product and they will refer you to other merchants. Uh so basically today about 40% um of our customer acquisition is salesled. So we have sales reps uh just reaching out to these merchants and um onboarding them into Prazo but 60% um of our merchant acquisition comes through either organic or merchant referrals or uh channels which are more productled. How do you uh is disintermediation a problem for you? Like how do you stay? I imagine that there's transaction fees for finding and working with a supplier if you're a company that's on the platform. Are is there a fear of someone meets a great supplier for their food or beverage product and then they start dealing with them directly? Is that an issue?

Really? Um and the reason for that is that we're serving these very small merchants. Um so the biggest challenge for a manufacturer to serve them is not it's one of them might be reaching them

but they couldn't do the logistics by themselves which is why we do the logistics as well and we also do the credit.

So often times a manufacturer they don't want to get into these small merchants because the drop size for delivery is very low and they can't do it in an economical economic way.

500 Coca-Cas and it's like and I want credit.

Yeah.

Exactly. and they want credit as well. And manufacturers are in general,

one they're not very good at assessing credit risk of a small merchant, but second uh they're not senior in the in the merchants payment stack, right? Um at Prozzo, since we're serving them as a one-stop shop and we are getting more and more share of their procurement, we are becoming more and more senior in their payment stack. So, as we grow and we become more relevant to these merchants, our delinquency rates just go much lower. uh do you think you'll have to raise a lot of money to underwrite more more credit products or uh is there a banking system that you can plug into and sort of uh use like another fintech uh you know ally to sort of service that?

Yeah, today we already use a a partner for financing uh but I I don't think we would have to raise a lot of money for that. And the good thing about our business is that we we don't believe in offering very long uh credit uh to small merchants because they're very volatile, right? So we have to offer short-term loans.

So our average loan is about 10 days.

So we we turn that three times a month. Um and that helps a lot in keeping a low um outstanding balance but compounding at a very high rate.

Uh the company overall is already profitable. Uh so we've raised uh funding to date but we've become profitable. Thank you.

Congrats. How big how big is the team?

About 100 people.

Whoa.

When did you start this then?

Um I started the company about 4 years ago. Um and moved back to the northeast of Brazil. Um today we only operate in two cities in northeast Brazil.

Yeah.

Uh so there's major opportunity uh for growth from there. uh these two cities combined

um are only 4% of Brazilian GDP. So we haven't uh we have an opportunity to tap like a 25 times

a bigger market just in Brazil without even expanding to other countries in lifetime.

Mhm. Uh do you feel a little bit like ankal fellowship class? We we had the youngest ever teal fellow. You seem like maybe a 10 year age gap with him. Is that is that correct?

Yeah. Yeah. Well, uh, not that much because so I I got into Stanford a little bit earlier. Uh, so I had skipped, uh, grades in school, so I got into Stanford. I was a little bit younger. Um,

but um, I think I might be the oldest in this class. So I'm going to call you the elder, the wise.

I'm usually the youngest wherever I go to uh somewhere, but in this group um, I'm I'm definitely the oldest.

Well, it'll keep you keep you aggressive. Can you uh zoom out for us? And Oh, sorry.

Yes. I I had one more question around uh what do you think the path for this business is? Is this eventually come and IPO in America? How how deep are kind of Brazilian capital markets? How do you think about scaling?

Yeah, for sure. Um yeah, most of our investors are US-based. Uh so it definitely uh helps a lot to raise venture funding here and I think ultimately we would want to um IPO in the US. But if you look at this, there's just a major opportunity. Um, if you I think the market potential is even bigger than food delivery. Uh, so for example, I food, which is the largest food delivery uh player in Brazil, is uh controlled by Prozus. Um, it's an over10 billion market cap company. Um, and we think there's an opportunity to build something even bigger. Uh, but uh, while I food goes in the consumer space, we go B2B. Um and we think there's an opportunity to build um a multi-billion dollar profit company. So um such a massive market and there's a long way to building it.

Yeah. Last question for me was I believe zooming out. Can you uh get us up to speed on the Brazilian economy broadly and you know China's been growing very quickly. America's at the risk of like some stagflation in you know gas prices are high. Uh there's some economic growth. It's heavy in data centers. uh and we we've been tracking the American market, but how are things going in Brazil broadly? Like what is the economic outlook?

Yeah,

I would say it's not great.

However, the way we generally put this is that u compared to the other emerging markets,

sure,

we are better. So, they're all they're all in a very bad position. So, relatively we are better. So, that's why like if you look at the Brazilian stock market has been going up.

Sure. Uh but it's mostly because I think investors want to invest in emerging markets, have

um relatively uh worse places to put their money. Yeah.

Uh but I think Brazil tends to um grow a lot in the next uh maybe decades. And the reason for that is too I think

um especially energy. Uh so like demand for energy will probably like go up a lot in the next uh few years. And Brazil has sort of a very uh big renewable matrix. Um and we have a lot of opportunity for energy. So I think that uh helps a lot. Over 50% um of our energy is hydro. I think over 70% is a renewable.

That's crazy.

Um

yeah. Um and the second thing is we have one of the largest reserves of rare earth metals um in the world which I think is very strategic as well. So I think Brazil is a very well positioned country. It just needs uh great leadership to take it to the next phase. Well, we're glad you're taking the helm and uh they're lucky to have you.

Yeah, super impressive.

Well, thank you so much for coming.

Come back on the show next time you guys have a big milestone. Maybe a profitability milestone like your first, you know,

first 8 figure

IDA quarter or something like that.

Be fantastic.

Yeah, I can see it in your future.

Well, have a great rest.

We'll talk. Thank you very much. Great to Great.

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