In today’s episode of Funding & Disrupting, host Keith Herman interviews José Luis Silva Vázquez of venture capital firm Dux Capital and Brian York of Cubbo.
Show notes:
- Why Dux was created and where the name came from
- Dux’s portfolio, what sets them apart, and how they decide whom they invest in
- How Dux and Jose Luis came to know Brian and Cubbo
- Why Brian decided to start Cubbo in LatAm and how they are innovating the supply chain
- Why Brian likes working with newer VC’s like Dux
- The importance of having a great team
- Cubbo’s pivot away from a self-storage concept
- The due diligence process with Dux
- Brian’s advice to tech founders if they want Dux as an investor
- Jose Luis’s advice for tech founders in the early stages of raising capital
- How to get in contact with Jose Luis and Brian
José Luis Silva Vázquez
José Luis Silva Vázquez is the Co-Founder & Managing Partner of Dux Capital. Dux is an early-stage venture capital firm investing in US-based Latinx founders. They provide funding to groups that have been historically underinvested, overlooked, and underrepresented.
Brian York
Brian York is the Co-Founder & CEO of Cubbo. Cubbo is a Latin American technology company that fulfills e-commerce orders for direct-to-consumer brands. They are building the largest urban warehouse fulfillment network throughout LatAm, which allows them to be the only solution in the region able to do same-day fulfillment. Cubbo’s software is fully integrated with e-commerce platforms, including Shopify, V-TEX, Mercado Libre, and many more. Their headquarters is in Bogotá, Colombia and they are operating in Bogotá & Mexico City.
Dux Background
Jose Luis has been friends with fellow Dux Capital Managing Partner, Daniel Santamarina since they were kids. When Jose Luis came back from doing his MBA in Spain and Singapore at IE Business School he came back to Mexico. Daniel had a background in entrepreneurship and Jose Luis had a background in investment. They decided the best way to blend those two passions was by creating a capital fund. Dux was the name they picked because it means “leader” in Latin. They started as an investment bank to help entrepreneurs but quickly decided they wanted to move into the venture capital space. Since the start, their main goal has been to help the Latin community, and they are currently raising their second fund. They brought Susana Espinosa de Los Reyes on as a partner because she is very intelligent and is one of the few female partners in the Latin community. Jose Luis says Susana is a linchpin for Latinas in the industry.
Dux Portfolio
In fund one Dux did 17 investments and 1 exit. They get around 15 to 20 start-ups reaching out per week. In this second fund, they are going to write 20 checks. That will bring them up to about 40 start-ups in their portfolio. On average they invest around $1 million in venture capital, but sometimes go as low as $100,000. Dux aims to be a long-term investor so their first checks flow into additional checks as the companies develop. Jose Luis tells us a good venture capital firm reinvests in the best companies in their portfolio, and 50% of the Dux fund is reserved for that kind of follow-up investing.
How Dux decides where they invest
The Dux team quickly learned they could not manually handle the large number of start-ups reaching out to them with their team of nine, so they did what they knew best and invested in technology. First, founders that are reaching out to Dux go through an intelligent tech filter. It leads them through a series of questions where a decision tree tells the Dux team if that start-up fits their parameters. If it does, then a human interaction starts with a panelist reaching out and setting up the first meeting. If all the boxes are checked in that meeting, the founders advance to the first internal committee meeting. After that, the committee decides if they want to continue and send a terms sheet or stop the process.
The Role of Specialized advisors
Dux operates on the idea that the partners are the ones that should ultimately determine the investments. However, they do consult advisors that specialize in specific industries to help them make that decision. Cubbo Co-Founder & CEO Brian York is one of the advisors for the fund. After consulting advisors, they make the decision to move forward with due diligence or stop the process. If the due diligence is good then they start investing venture capital.
How Dux and Jose Luis came to know Brian and Cubbo
Jose Luis was introduced to Brian around 2016 by a mutual friend. The two quickly connected on a personal level. Jose Luis learned Brian was currently in his 4th start-up, Liftit. Unfortunately, at that time Dux was not ready and couldn’t invest in the company even though they wanted to. However, they maintained their relationship over the coming years and eventually developed a friendship. When Brian exited Liftit he started Cubbo. Brian invited Dux to invest and they jumped on the opportunity.
The story of Cubbo
Cubbo is an eCommerce fulfillment business operating across LatAm, specifically in Mexico, Colombia, and Brazil. They focus on warehouse operations and receive inventory from local and international brands. They take that inventory into their warehouse where they pack and ship as the orders come in. By integrating with multiple carriers in multiple countries they are able to handle customer service as well.
Previously, Brian built a truck delivery business called Liftit which is now the largest last-mile truck delivery platform in LatAm. He started it in 2016 and that was his first exposure to the supply chain. Eventually, they expanded to 18 cities and 5 countries. Brian tells us the space for eCommerce fulfillment is relatively new. There are a handful of players across the region and they compete against traditional shipping companies. Those traditional companies are more optimized for fulfilling retail and typically have a big lack of technology. On the other hand, Cubbo is optimized for “pick and pack”.
What sets Cubbo apart?
One of the differentiators for Cubbo is their warehouses are inside the cities. For example, the first one was in Mexico inside an abandoned gymnasium. This proximity allows them to pick, pack, ship, and deliver on the same day. Another important difference is the amount of resources they allocate to partnering with brands globally. Just recently they partnered with Dossier, a high-end perfume brand. Dossier had never done LatAm sales before but really wanted to expand. Dossier sent Cubbo 16,000 units of perfume and in the first month, they did 2,000 orders. They are currently ramping that up to about 1,500 orders per day.
Why start Cubbo in LatAm?
Brian was born in Bogata and adopted to the south of Boston. He went to LatAm originally to reconnect with his biological family. He had already created 3 start-ups in San Francisco, so right off the plane, he was determined to launch a start-up in Columbia. That is when he started Liftit. It was 2016 and not a lot of people wanted to fund companies or work in that region. However, once Brian was living there it became obvious to him that there was a ton of opportunity in the market.
Rappi had just gotten over a billion-dollar valuation in Columbia and Brian could feel something was happening. Fast forward to today and the scene is much different. Investment dollars are flowing in and there is a large network of talented entrepreneurs in the region. Brians predicts there is a long way to go and the next 10 years are going to be huge for the region.
Other notable business founders making moves in LatAm include David Vélez with Nubank and Simón Borrero with Rappi.
Cubbo’s first meeting with Dux
Brian says he loves meeting with new venture capital investors like Dux and Jose Luis. They are starting their first fund so they are like entrepreneurs building it as a start-up. On the flip side, old funds have more bureaucracy. With new emerging managers there is an edge because they are hustling to prove themselves. When Brian met Jose for the first time, Jose “oozed the hustle”. He was doing business development, meeting new people, and growing the brand. The first meeting was an in-person breakfast in Mexico with a lot of the time spent catching up on life, and school.
What did Jose Luis like about Cubbo?
Jose Luis tells us the main thing that appealed to him about Cubbo was Brian. He was drawn to Brian’s personality and his team. For Jose Luis, it’s all about the team. He says you can have an awful product with an amazing team and they will make it happen. Fortunately, Brian had a great product and a great team. Jose Luis saw a person with common values and an amazing opportunity in front of him. Cubbo developed a great product and attacked that opportunity. For Jose Luis, it was a no-brainer with a combo of team and product.
The first idea for Cubbo
When they first started talking, Brian had only a rough idea for Cubbo. The original idea was the same urban location strategy but for self-storage services. Brian pitched a rough idea about finding and transforming space for self-storage services and Jose was already excited to partner with him. Brian agrees with Jose Luis that he was betting on his team. Even if the product isn’t great they know they will figure it out. Cubbo did self-storage for a few weeks then pivoted.
Due Diligence with Dux
Cubbo still had to go through the due diligence process, but it was light because at the time all they had was a concept and a pitch deck. The Cubbo team did a total of 3 calls with Dux: one phone call with Jose, followed by a zoom call to bring in the other partners, and one final zoom call with Dux’s full investment committee of 10 people. The whole process was relatively fast and simple. It was mostly getting information on the team and understanding the people Cubbo was putting around the project.
Brian’s advice to tech founders if they want Dux as an investor
Brian tells us Dux is easy to reach out to. He advises founders to reach out to Jose directly. Alternatively, look for common connections on LinkedIn or befriend one of their other portfolio companies for a warm introduction.
Jose Luis says it’s important for the Dux team to be easy to reach because they see the entrepreneurs as the rockstars, not the investors. Dux always wants to respect the founder’s time and the process by being very communicative and open.
What is Dux’s role with portfolio companies?
Jose Luis says the Dux team are fundamentalists. Meaning they always try to invest as a leader and lead the round. They are “very active but non-invasive” investors. They talk daily with the companies, typically take a seat on the board, and try to help with strategic decisions. For example, if a company in their portfolio is doing an M&A Dux will want to participate in that decision. However, if the company is going to hire an engineer Dux doesn’t want to be involved since that is a day-to-day decision and the founder is the best one to decide that.
Communication expectations
Dux will always have either a Slack or WhatsApp connection with their companies. They communicate monthly and quarterly to get information to report back to investors, similar to the way public companies do quarterly and annual audits and reports.
Advice for tech founders in the early stages of raising capital
Hustle. When Jose Luis raised his first fund, he saw about 700 people, and about 25 of them invested. He advises tech founders to expect the same. That work got him 7.5 million dollars and it was enough to build the Dux brand and invest in 17 start-ups. Jose Luis says to remember that venture capital firms see a lot of companies so it’s important to be patient, hustle in the market, and understand the thesis of the firm before you reach out.
Contact Infomation
José Luis Silva Vázquez can be contacted by email at jl@duxcapital.vc or on LinkedIn
Brian York can be contacted by email at brian@cubbo.com or on LinkedIn