Felipe Cerón (MBA ’22) interviews Andrés Ossa (MBA ’21) on his journey to raising $1.4M in order to revolutionize logistics
Moving sucks. I would wager good money that most people hate it (if you do not agree please let me know because I have many fun jobs for you). It takes time, it is stressful, and it might gain you a candid fight with your partner about pivoting couches that don’t fit in the elevator.
Mudango, a Startup home-based in Chile comes with a solution. Andrés Ossa (MBA ’21) co-founder, portrays it as an all-encompassing Uber for moving services, mentioning: We are end to end, so that makes us responsible for everything, from setting the price to delivery.
It has existed for around four years and its origins take us to truck drivers. Ossa started out envisioning a solution to the ever-exhausting problem of moving. He wanted to standardize and add long overdue tech to an industry that is becoming ever more critical as Millenials jump around the globe. Like many successful entrepreneurs, he went straight to the source. He spent months interviewing and networking on the supply side, namely truckers. The end product was a database that would be their initial value proposition to future client movers.
A key insight he distilled was that truckers work like a pyramid in relation to how demand gets captured. The pyramid is very rigid and vicious cycles are merciless. The most successful truck drivers are at the top and the unsuccessful at the bottom; work is handed downstream as it overflows from the top.
It was easier for the team to first engage low to mid pyramid. Besides being receptive to their ideas, truckers also recommended friends to get in on Mudango.
What was in it for the truckers at the beginning? Ossa would invite them to lunch with no strings attached, offering a double promise if they joined Mudango: increase their customer base and make it more stable (two key issues truckers face in Chile, and probably everywhere). Along with the job, they would have a more structured process and technology for control and quality.
For a big part of its existence, Mudango was a “lifestyle business” for the founders, meaning they did not quit their original traditional jobs. According to Ossa, the fact that they had severely limited time and bootstrapped for growth forced them to automate as much as they could. They could not give themselves the luxury of hiring additional people. This will turn out to be a blessing in disguise.
As the venture grew, they were able to improve their value proposition, adding tools for drivers, such as calendars to plan out their working schedule. At the same time, they were getting traction on the demand side by generating confidence in their service and taking advantage of word-of-mouth marketing. Unit economics turned positive after a year and they were EBITDA positive by year three, no small feat for a new venture.
Their funding came from friends and family, angel investors, and a pre-seed of 300k. Additionally, his co-founder decided to dedicate himself full-time to Mudango, so they got into an arrangement in which Ossa helped him out with part of his salary. They started scaling through their limited funding which grew by winning a couple of startup tournaments.
When they had enough positive customer reviews, a 30% conversion rate (credited to their bot Sofía), and a gross market value hit one million dollars, they decided to expand to Colombia.
In parallel, they started talking to VCs to expand their funding but were rejected on the grounds that the market was too small. Adapting to this, the team decided to expand horizontally towards storage.
It made sense to move to storage because they could leverage a number of capabilities they had reaped in the first part of Mudango growth:
- Big and expanding trucker base, with proven on-boarding: This is applicable to other types of logistics in which the supply side has not been innovative and is afraid to try something new. We know how to show we are part of a solution, and this is a great deal in this industry.
- Highly automated and standardized processes paired with powerful AI to guide consumers (key consumer-relevant moving features include parking, time, sizes, packaging, and protection).
- Solid CAC and SEO capabilities.
We asked Ossa a couple of questions regarding his success with Mudango.
How did you come up with the idea?
We were interested in logistics, particularly somewhere we could innovate. The moving business was a perfect candidate because it is very pen and paper in Chile. It is very untapped in terms of standardization and innovation.
What have been your greatest failures?
The market was very broken and unstructured and at the beginning, the truckers determined the price. We found that at times our listings would be 3x-4x the lowest price in the market, but there was no assurance of quality in those prices, so it was hard to determine what was the correct price, and at the beginning, we didn’t get it right. We decided we had to be end-to-end, meaning that we had to put the price ourselves to get some notion of standards.
Another failure was that we had truckers that didn’t deliver, making our service look bad. We had to come up with a blocking system. This one time a customer’s window broke and his sofa got damaged. We had to pay for it and fix it in the most economical way possible. We went as far as phoning the company that had produced the sofa to understand how to restore the fabric! The trucker of course left forever and didn’t care about paying, because we were not a big part of his business. As we grew and became more relevant for truckers, this problem started disappearing.
Lastly, in terms of funding, we realized that our execution and business model weren’t aligned with our financing needs. It took us two years to talk to VCs only to realize that we didn’t fit their needs in terms of size. If we had known this sooner maybe we could’ve been more assertive in our decisions.
How did you get over them?
When we had our initial biggest failures what kept us moving was our commitment to not failing our team. When we first had to hire someone only two people (without professional backgrounds) responded to the ad, and the one that we ended up hiring was a great addition. When we experienced these sets of failures we thought we couldn’t just close shop and fail him, he depended on Mudango. We changed his life and he changed ours. For context, he is now the boss of 15 people, we made him a partner, and one of my goals is to finance an MBA for him.
In relation to the VCs, we had to make a decision, whether we needed a different funding partner or we should expand in some way, tapping into a bigger market. We chose the latter.
How has HBS helped you? What are its best resources?
HBS works as a net of support for entrepreneurs, in which you can take more risks than you normally would.
The school has a lot of easy-to-access resources, fellows, i-lab, and access to angels and VCs. Faculty is also great leverage, we were helped particularly by the Machine Learning faculty and Marketing Professor Eva Ascarza. Additionally, Section H was very entrepreneurial, which motivated me and at the same time allowed me to feel part of a startup community.
Another resource that we used is the Entrepreneur in residence, which is basically alumni that are doing startups and offer hours for counseling. Matias Recchia (MBA ’21) helped me understand that attempting to raise money with VCs without a big enough project is a massive mistake.
Last but not least I saw deferring as a great gap semester opportunity to focus solely on Mudango.
What’s different from being a LATAM entrepreneur to an American one if you are at HBS?
Problems in LATAM are offline, easy to see at first sight, very tangible, and mostly infrastructure-caused. There are many things to improve. They are easy to find, just jump, love a problem and solve it. In the US, I feel you have to invent something completely new. Opportunities are not so visible in plain sight.
Also important to note is that in less developed countries you jump through stages. For instance, in China, they moved straight from cash to cell phone payments. LATAM is more similar to China than the US in this sense.
On the other hand, in terms of financing in the US, there are much more resources and structure.
What’s the best part and the worst part of being an entrepreneur?
[The best part is] mainly the team. I like seeing how the team grows and having the power to mold the culture and make it cool. It is also very gratifying to see how thankful the team is for the opportunity to succeed and grow in an environment that we built.
Thanks to Mudango there are relationships that would never have happened, for example, one employee is a rapper that had to skip school because he needed to get a job. He is now best friends with another employee that comes from a completely different reality, with a college degree in one of the higher-end schools in Chile. They would never have met if it weren’t for Mudango.
I don’t like the fact that it feels like an emotional rollercoaster, and having the worst salary compared to your peers is not the greatest feeling.
What’s your advice for aspiring entrepreneurs?
Just jump into it. There is so much reading you can do, but the best school for entrepreneurs is doing. You would be surprised about the number of cheap ways you have to test ideas. Go for it!
Also, I think it is important to keep in mind that entrepreneurship will be enjoyable only for people that love learning.
We will definitely be rooting for Ossa and his team to revolutionize logistics in LATAM and, why not, make a difference in the entire world!
Felipe Cerón (MBA ’22) is a Chilean who previously worked in consulting and retail. He is a musician, and he is an avid fan of film and television. Having a laugh over a beer, getting in a challenging workout, and reading inspiring books are among his favorite pastimes. While he thinks sparkling water is the best beverage ever created, he is also currently the owner of the most luxurious home bar in SFP