How Cargamos Reached Nearly $1M a Month in Revenue Delivering Last Mile for 20 E-Commerce Brands in Mexico (Interview with Co-Founder Ivan Ariza)

Introduction and What Cargamos Does

Nathan Latka

00:00Hey, folks. My guest today is Ivan Ariza. He's building a cargamos.com delivery stations for any brand. He's an entrepreneur. He's had an exit under his belt and again now focused on cargamos. Ivan, you ready to take us to the top?

00:14Yeah. Okay. So what does cargamos do? Tell me about a customer who's paying you.

Ivan Ariza

00:20>> In cargamos, we are trying to bring any brand to the new cloud logistics. So we empower these brands by creating a lot of, creating a big network with micro fulfillment centers and enable all these location for that guys.

Nathan Latka

00:37And so are these real estate investors buying these micro, like these facilities, you're empowering them to help them run them as a micro like warehouse?

Ivan Ariza

00:46>> Actually, are trying to repurpose that use of the space right now. So we take use of the space and we repurpose to convert in this space and turn it into the micro fulfillment stations.

Nathan Latka

00:59You're doing that personally as a company?

Ivan Ariza

01:02>> Yeah, our company, it takes both. We take an approach in infrastructure. So we handle the infrastructure as well and the software in a business as Are software buying

Nathan Latka

01:11the real estate?

Ivan Ariza

01:14>> No. We don't buy. We we we leasing the real estate, but actually, we make an an approach like we work with with their buildings, with the landlord. So our approach is when we increase the package that leave the station, we're going to pay to the landlord. So we don't know pay any leasing or we don't buy the stations. We only take the space and repurpose it.

Pricing Model and Cost per Delivery

Nathan Latka

01:39I understand. Tell me about price. What do customers pay you on average to use your technology?

Ivan Ariza

01:45>> Look. In Mexico, you usually need to pay $6 to to deliver a package from from Mexico City to Mexico City. Our proposal is to decrease the price by a big magnitude. So right now, our customers are paying more or less $1 to $1.5 per delivery. So the location more closer to the end customer help us to deliver this mission.

Nathan Latka

02:08But who's paying you? These are companies paying big contracts, right? Or is the individual consumers paying a dollar?

Ivan Ariza

02:14>> Today, there are high volume e commerce brands that I they send us the package and we we help we that big brands to deliver the package. Our first strategy is approach the big brands, the big brands.

Nathan Latka

02:26But yeah. So that's what I'm asking. What does a big brand pay you on average per month to use the technology and do these deliveries?

Revenue Figures and Monthly Run Rate

Ivan Ariza

02:34>> Look. Right now, we are working with the number 5345, the biggest e commerce right now in in in Mexico. So right now, we are delivering for that guy's thousands of orders. So they pay pay package that we deliver more or less $1 to $1.5. So right now, our figures are close to $1,000,000 per month.

Nathan Latka

02:59Got it. So all in, you're making a million dollars per month right now?

Ivan Ariza

03:03>> Yeah. Close to to do that. Yeah.

Nathan Latka

03:05I see. Can you break a million per month by the end of December?

Ivan Ariza

03:09>> Yes. We are trying to to break that number and we are hoping to do in December 1 $1,200,000 per month.

Nathan Latka

03:17And Ivan, if you're doing a million right now, what were you doing exactly a year ago? Do you remember?

Ivan Ariza

03:24>> A year ago, we were selling more or less 20% of our current revenue right now.

Nathan Latka

03:30Okay. So call it $200,000 per month.

Ivan Ariza

03:32>> Yeah.

Nathan Latka

03:33Now is this your revenue or is this total volume and then you take a small cut of the million?

Ivan Ariza

03:40>> We take a a good cost for I mean, our sales, it's $1,000,000. We take and we we sold our deliveries and all the operation that we are handling right now, but we we take it now. We take everything, but it's not our profit. It's just net revenue.

Gross Margin and Cost Structure

Nathan Latka

04:00Yeah. So what I'm saying is if you're doing a million dollars per month, that's your top line revenue. Do you have any big costs or is it you have SaaS margins of 83%, 84%, 85%?

Ivan Ariza

04:09>> No. Our margins right now are close to 28%. So that's our revenue right now.

Nathan Latka

04:16What are your biggest costs there?

Ivan Ariza

04:20>> The labor,

04:23>> the stations, and that's it. That's the most biggest one.

Nathan Latka

04:30Well, sorry. What's your gross I mean, your labor and headcount, that would be bottom, bottom line. But when you look at gross revenue, right? So not net revenue, but gross revenue, is your gross revenue like 20%, your gross margin 20%?

Ivan Ariza

04:42>> No. Yeah, it's not. Our gross margin is 28%. Yeah.

Nathan Latka

04:47Okay. So you're processing a million dollars of volume of which your gross revenue, your top line revenue is something like $280,000 per month. And then after you pay all your employees and stuff, then you maybe have profits at the end.

Ivan Ariza

05:00>> Okay. We are not making profit right now. We need to pay engineers and a lot of people, but right now we are not making money.

Nathan Latka

05:07I'm sorry. You're misunderstanding. Let me try and rephrase this. The million dollars you're doing per month, is that volume of, like the value of the packages flowing through your system or is that your revenue? Is that cargamos revenue?

Ivan Ariza

05:21>> It's the cargamos revenue, money.

Nathan Latka

05:24Okay. Got it. So you're at a 12,000,000 run rate today, but why are margins only 28%? Most software margins are 85%.

Ivan Ariza

05:35>> Okay. I'm not sure if I understand, but the company, what we are doing right now is we take package and we deliver package. For each package that we take and deliver, we ask for every package and one, two dollars per package.

Nathan Latka

05:52All the package that we are delivering right now, all the whole package right now

Ivan Ariza

05:56>> and all the other components in the company that are doing logistics, we are asking to our clients, and they are paying us right now $1,000,000 If we break in our unit economic, that number, we're gonna see that our numbers, it's more or less in the gross margin, we are taking 28%.

Nathan Latka

06:17Why is that so low though? That's my question. Most software companies, their cost of goods sold is under 20%. So their gross margin is 80%. You're saying you have 80% cost basis on that million in revenue you're doing. I'm trying to figure out what those extra costs are that most software companies don't have.

Infrastructure vs. Software Business Model

Ivan Ariza

06:37>> Ah, okay. Yep. I got it. We are not that completely software as a service company. We are not just a software as a service. We are paying

06:49>> the leasings, we are paying the labor in the middle, we are paying service partners. So we are more similar like maybe a store in The United in The US or maybe DHL. So we are not completely a software as a service company. We are both. We are infrastructure and software as well.

Nathan Latka

07:09I see. That helps. So last month, how much total did you pay for your leases?

Ivan Ariza

07:18>> The leases is not the big component. The big component is the labor in between. I mean, we pay any courier once they once he makes a deliver. We pay service partner as well with they, we pay a totally bill that, that has the the location and the labor as well for the autonomous So Ivan,

Nathan Latka

07:46how much did you pay couriers last month?

Ivan Ariza

07:50>> Last month, we paid

Nathan Latka

07:54maybe

Ivan Ariza

07:58>> 60% of that number.

08:00>> So $600,000 Yeah.

Nathan Latka

08:01I see. That's your biggest cost.

Ivan Ariza

08:05>> Yeah. That's my biggest Got

08:07>> it. Okay. That makes more sense now.

Nathan Latka

08:09Okay. Great. When did you launch the business? When did you write the first line of code?

Founding Story and Fundraising History

Ivan Ariza

08:15>> November 2019.

Nathan Latka

08:23And have you bootstrapped the business or did you decide to raise?

Ivan Ariza

08:27>> We bootstrapped the business the three to four beginning months, and then we raised some money. So until now, we are raising close to 12 to 13 million dollars.

Nathan Latka

08:41When was the last round?

Ivan Ariza

08:43>> Three months ago.

Nathan Latka

08:45And you raised 13,000,000 in one round?

Ivan Ariza

08:48>> Yeah. It was our seed round. Yeah.

Nathan Latka

08:51You raised $13,000,000 in your seed round, and that was three months ago?

Ivan Ariza

08:55>> Yeah.

Nathan Latka

08:56Did you do a pre seed round or no?

Ivan Ariza

08:58>> No. The pre seed round was the money that all the founders and close friends put in the company.

Nathan Latka

09:05Many co founders?

Ivan Ariza

09:07>> We have both and it's we are joining a fourth that is not disclosed. We cannot disclose the name. Right now, we are bringing a big name in logistics to the company, but we are three three guys right now working really hard in this.

Nathan Latka

09:21Okay. So the three of you the three of you got going in 2019, you did a pre c route pre seed round back then of 1,300,000, didn't you?

Ivan Ariza

09:30>> Yeah.

Nathan Latka

09:31Okay. And then after that in 2020, you did another part of the seed round for 2,000,000. Correct? Correct. And then in total in 2021, you raised 2,000,000 early twenty twenty one and 7,000,000 just recently. Right? Right. Got it. So what I what I'm trying to understand is what's so what makes this so expensive? Why do you need so much money to build this business?

Capital Needs and Infrastructure Costs

Ivan Ariza

09:54>> Look, across Latin America, if you think about big locations, for example, fulfillment centers, if you look at Amazon, for example, you're gonna find that a single location could cost even more than $1,000,000 So, right now in Latin America, we don't have these locations in place. We need to create some big locations, some automatization and put a lot of effort creating the buildings,

10:28>> locations that we need to enable this infrastructure to a last mile. So it's quite expensive in this infrastructure side. In the software side, it's quite similar to other companies, but we need to raise money because we need to implement that capability to the market.

Nathan Latka

10:44That makes sense. The 7,000,000 that you just raised a couple months ago, Ivan, what valuation did you raise that on?

Ivan Ariza

10:50>> The valuation, we don't have valuation right now. We are close to Series A, so we only raise money through convertible notes, but the the the amount is not on this closing right now.

Nathan Latka

11:03Okay. Most people in their seed round, if they're raising on a note, there's a cap on the note. Did you have a cap?

Ivan Ariza

11:10>> Yeah, we have a cap, but we don't disclose that amount at this time.

Nathan Latka

11:14Most folks, when they're raising that seed round though, they're selling about 20% of the business, right, at the cap. Right? So, I mean, are you sort of in that standard range?

Ivan Ariza

11:24>> Yeah. We are we are yeah. We are quite in the standard of the range.

Nathan Latka

11:28Got it. So that would have then put you at around a 30,000,000 cap on that on that 7,000,000 note?

Ivan Ariza

11:36>> Yeah. More or less. We are quite higher than that, but yeah.

Nathan Latka

11:39Well, now you're raising a series a at higher than that. Right?

Ivan Ariza

11:42>> Yeah.

Nathan Latka

11:43Why are you raising a series A now? What do you need the capital for? More more leases? More logistics?

Ivan Ariza

11:49>> Yes. We are starting a stage where we need to put up more money. We are We want to connect

11:58>> a lot of drivers, couriers, trucks, locations across the industry. So we need to put a lot of money in software, new locations to connect all these points that right now are disconnected. So, we are we we we want to connect the last mile that is actually really, really fragmented industry right now.

Nathan Latka

12:22So you're raising a series a or looking at it. How much will you target to raise?

Series A Raise Target

Ivan Ariza

12:27>> Right now, we are targeting to raise more than 20 to 30 million dollars.

Nathan Latka

12:32Okay. So so somewhere between 25 and $30,000,000. Who's your biggest competitor in Mexico?

Ivan Ariza

12:42>> In Mexico, we are seeing maybe DHL, FedEx, Estafeta, all the guys that are doing domestic deliveries. Mhmm.

Nathan Latka

12:53Got it. And tell me more about team size today. How many folks total?

Team Size and Driver Network

Ivan Ariza

12:57>> Our team size today is more than 100 people, 105 people. And if we look at

13:12>> the autonomous driver, we are talking about more than 10,000 drivers in our network right now.

Nathan Latka

13:17And Ivan, how many engineers?

Ivan Ariza

13:21>> The engineers, it's more or less half of the company right now.

Nathan Latka

13:26And the 10 k drivers that you just mentioned, are they all full time on your payroll or are they contractual as you have orders that you need delivered?

Ivan Ariza

13:34>> It's like it the the the model is really similar to Uber. So we we bring people and they they decide when to work or when when they want to work or not.

Nathan Latka

13:45But last month, you had 10,000 drivers deliver at least one package.

Ivan Ariza

13:51>> That's not the active base. The active base is more or less 30 to 40% of the base. That's the amount of drivers that we are

Nathan Latka

14:02So you had 4,000 drivers last month deliver at least one package?

Ivan Ariza

14:06>> Yeah.

Nathan Latka

14:07And you paid them

14:08and you paid them about $600,000, you told me earlier. So the average driver is making about a $150 a month?

Ivan Ariza

14:15>> No, no, no. No, no, no.

14:19>> Okay, okay, okay, okay. It's not only drivers. When we talk about service partners is the whole equation. The equation include

14:33>> micro fulfillment stations, include the people that are making, sorting, routing, all that happen in a micro fulfillment station.

Nathan Latka

14:42How many delivery drivers delivered at least one package last month?

Ivan Ariza

14:48>> More or less, 3,000 drivers.

14:53>> 3,000 drivers. Okay.

Nathan Latka

14:54So you told me earlier that $600,000 of your expenses last month go to the drivers, those 3,000 drivers. Right? Yeah. So if we divide those, the average driver is making about $200 a month through your platform. Is that accurate?

Ivan Ariza

15:09>> $200 above. Yeah. Could be. Yeah. More or less.

Nathan Latka

15:14Yeah. 3,000 drivers times 200 each is 600,000 in total expenses. But point being, that's not their full time salary because they're only working with you part time. Other times they'll go deliver for other people. Is that right?

Ivan Ariza

15:24>> Yeah. Exactly. They work for another companies. They work for Uber, Rappies. That's the force that we have right now. It's the people that work for a lot of I see.

Nathan Latka

15:37And so in October, how many It sounds like you delivered about 800,000 individual packages. Is that right?

Ivan Ariza

15:47>> How many?

Nathan Latka

15:48About 800,000.

15:51800,000. 800,000.

Ivan Ariza

15:52>> Yeah, more or less. Because you charge a dollar to a dollar 50 and you're doing a million bucks a month.

16:02>> We have another components in the equation. We just don't deliver package. We handle as well fulfillment, Then we handle as well other e commerce operations. So yeah, in the midst, we are delivering less than a 100,000 orders right now per month.

Nathan Latka

16:21Okay. Less than a 100. You're personally delivering less than a 100,000, but you make money through packages, not just delivering them. You do other things as well. Management in the warehouse, things like that.

Ivan Ariza

16:30>> Yeah.

Customers: 20 E-Commerce Brands

Nathan Latka

16:31I see. How many unique brands are you working with? E commerce brands?

Ivan Ariza

16:36>> Right now, it's more or less 20 brands working

Nathan Latka

16:40Okay. 20 brands. 20 brands, $1,000,000 a month in revenue. Obviously folks can sort of calculate that each brand is putting, call it $50,000 through you guys. So enterprise motion here, what's the next thing? What's the next product line you guys are launching?

Next Product: Full Fulfillment Suite

Ivan Ariza

16:55>> The next product that we're gonna launch is an a complete suite for fulfillment. We want to move the fulfillment to the next stage. So we want to break the package and all the merchandising, all the inventory for our mentions. And we want to put in the last mile. When we talk about last mile, I mean, want to bring that inventory to the next five miles from you. So, that's our next move. So, once we have all

17:27>> the data integrated that we are delivering to our network and all that things, our next move is when I put the micro fulfillment to micro fulfillment around the cities.

Nathan Latka

17:38Very cool. Ivan, we're rooting for you, man. Thanks for coming on. In the meantime though, let's wrap up with the famous five. Number one, what's your favorite business book?

Famous Five Rapid Fire

Ivan Ariza

17:45>> My favorite business book,

17:49>> Blue Ocean Strategy, maybe was the first time that I approached the strategy.

Nathan Latka

17:54That's Number two. Two, is there a CEO you're following or studying?

Ivan Ariza

17:57>> Elon Musk.

Nathan Latka

17:59Number three, what's your favorite online tool for building cargamos?

Ivan Ariza

18:03>> Slack.

Nathan Latka

18:05Number four, how many hours of sleep do you get every night?

Ivan Ariza

18:09>> Last night, two hours. Two? Yeah, my daughter just came to this world. So, last night I just stayed two hours and I have already three other daughters. So, right now we have four daughters that are consuming quite time in the night for me. But now it's the, it's just this week.

Nathan Latka

18:31What's the average?

Ivan Ariza

18:33>> The average is about five, six hours.

Nathan Latka

18:37Okay, six hours.

Ivan Ariza

18:38>> You're married with four kids.

Nathan Latka

18:39And Ivan, how old are you?

Ivan Ariza

18:41>> 41.

Nathan Latka

18:42Last question. Something you wish you knew when you were 20.

Ivan Ariza

18:47>> Starting this business early.

Nathan Latka

18:50Guys, there you have it. Cargamos on a tear launched in 2019. They did a 1,300,000 pre seed round and then did another 2,000,000 on that round in 2020 as they scaled to 200,000 a month in revenue. Now doing 1,000,000 a month in revenue, but they pay 600,000 of that million out to their delivery drivers. They're tackling last mile delivery in Mexico for 20 very large e commerce brands delivering hundreds of thousands of packages per month and

19:12also managing fulfillment. Looking at raising a large round that closed a 7,000,000 seed earlier this year, sold about 15 to 20% of the business. 105 on the team as they look to continue to scale. Ivan, thanks for taking me to the top.

Ivan Ariza

19:24>> Thank you, Nathan.

Nathan Latka

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