Building a High-Growth Startup From Brazil: Revelo CEO Lachlan de Crespigny (Part 3)

Sramana Mitra: What happens next? This was still in 2015?

Lachlan de Crespigny: Right at the end of 2014. We ran a three-month test and if it worked, we’d decide whether we want to start this business. We started and the second one worked. The biggest next step was, we raised a seed round in the middle of 2015. We weren’t really sure what we were going to do with the money at that time but we knew that we had a business. We knew it was scalable and we knew that it was a big attractive industry.

The month after we raised that seed round, the entire Brazilian economy collapsed. It was the worst recession in 60 years. Nobody was hiring. Companies were going out of business left, right, and center. That slowed things down.

Sramana Mitra: How much seed did you raise?

Lachlan de Crespigny: $700,000. By the time we raised it, we made about $100,000 in revenue.

Sramana Mitra: What kind of investors were these?

Lachlan de Crespigny: They were Brazilian investors mostly. We were lucky with the timing in that one of Brazil’s big internet successes had just raised a round and cashed out a group of angel investors. It was the first time in about 10 years that any internet investor in Brazil had ever got their money back. They were excited about this return. We got lucky in that we became one of the beneficiaries of that. It was a group of 8 to 10 founders, angel investors, and investment bankers.

Sramana Mitra: What happens when the recession hits? You do have some money in the bank.

Lachlan de Crespigny: We’ve now had to do this two significant times. One was in the early days when the recession that hit in late 2015. Then the second was during the pandemic when our sales dropped to 80%. It became very difficult to see the business that we were in growing. In the first recession, we made mostly bad decisions.

We had decided that we wanted to be a venture-backed company. We used the rationale that I had learned in business training which was to extend our runway for as long as possible and grow the company for as long as possible. When we go raise our next round of funding, we’ll have a larger company. That turned out to be a bad approach. We had a much better approach during COVID.

Sramana Mitra: What did you do the first time?

Lachlan de Crespigny: We raised the money to invest in growth and bulk up our team. We didn’t do that. We went much more slowly. We grew much slower. We didn’t build out our professional technology team. We still didn’t build a website. We still didn’t eliminate the bugs on the platform. We didn’t automate the steps that could have been automated.

The reason it ended up being a mistake is we set up plans to raise a Series A round. We took so long to get to a point where we looked ready for a Series A that it killed the momentum. People assume that there must be a problem if we waited that long. There was this huge two to three-year gap that we took. In our minds, we were building a bigger business, but in investors’ minds, it’s not funny why someone waited that long.

Sramana Mitra: What was going on in these three years?

Lachlan de Crespigny: The business was growing, but it was still very small. We were, more or less, doubling but off of a very small base. We should have invested more in marketing, tech, and some salespeople to accelerate growth. We thought we were doing a good job but, when I look back, we should have been more aggressive.

This segment is part 3 in the series : Building a High-Growth Startup From Brazil: Revelo CEO Lachlan de Crespigny
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