NuBank and the Future of Finance

Nubank's Early Beginnings and Rapid Growth

The initial workspace for Nubank, a modest rental house on California Street in São Paulo’s Brooklin district, represents a compelling start to the company’s narrative. While not originating in a typical Silicon Valley garage, this small, single-bathroom property—where a team of 30 individuals dedicated extensive hours to launch the company’s first credit card—equally embodies a spirit of entrepreneurship and determination.

However, as Nubank’s journey progressed, the team outgrew this initial location, and subsequent offices as well. This necessitated a move to a larger, eight-story building in São Paulo, which now accommodates a significant portion of the company’s 3,000 employees.

Achieving Decacorn Status

The startup attained a valuation exceeding $10 billion in under a decade, and its growth trajectory continues to accelerate. During a January interview with CEO David Velez regarding Nubank’s $400 million Series G funding round, he highlighted the company’s impressive customer acquisition: “Our customer base expanded from 12 million in 2019 to 34 million through organic, word-of-mouth referrals.” By September of the previous year, Nubank was adding 41,000 new customers on a daily basis.

In the five months following that interview, Nubank successfully onboarded an additional 6 million customers, bringing the total to 40 million. Consequently, the company’s current valuation stands at $30 billion.

which nubank will own the financial revolution?

Challenges and Competition

This success wasn’t achieved without significant challenges. Nubank’s three co-founders—David Velez, Edward Wible, and Cristina Junqueira—faced crucial strategic decisions regarding scaling the business while maintaining its leadership position in the neobanking market. Sustaining this lead is becoming increasingly difficult.

Nubank’s expanding range of services and broader geographic reach have made it a prominent target for competitors. Numerous new companies have emerged, following the path Nubank initially forged.

The Road Ahead

While the story appears to be progressing towards a successful conclusion, similar to many popular films, further developments are needed to reach the final outcome. The future will reveal whether Nubank can continue its impressive growth and maintain its position as a leader in the financial revolution.

Foundational Challenges and Keys to Advancement

As Nubank expanded, the founding team recognized the increasing necessity for strategic decisions to establish structure within the organization.

By 2018, the company encompassed a workforce of thousands and served millions of customers, yet still operated without a dedicated Head of Human Resources. Initial growth had occurred in a relatively unorganized manner. Junqueira noted that delaying the recruitment of an HR leader was a significant early error, hindering their scaling capabilities. She stated, “[Highly skilled] personnel consistently represent our primary constraint.”

The company subsequently identified Renee Mauldin to address this need. Echoing the story of Wible’s discovery by Velez during a sailing trip in Indonesia, Mauldin was undertaking a sabbatical in Vietnam when Nubank extended an offer to entice her back into the realm of high-velocity startups.

Mauldin’s prior experience included serving as Chief Human Resources Officer at Twitter and Global Head of People and Places at Uber, providing her with substantial expertise in scaling startup environments – precisely what Nubank required at that juncture.

Furthermore, the opportunity to join a rapidly expanding company within an emerging market aligned with Mauldin’s remaining career aspirations. “Engaging in fintech within a developing nation enables a more substantial impact,” Mauldin explained, highlighting her immediate attraction to the position.

Michael Chu, a senior lecturer at Harvard Business School and author of a case study on Nubank, observed that “David pioneered and solidified the concept of attracting top talent, irrespective of their geographical location. This is reflected in the adoption of English as the official [corporate] language.”

This perspective aligns with how Nubank investor Doug Leone of Sequoia Capital articulated the core components of the company’s success:

The caliber of the initial five team members.
A relentless drive for accelerated progress.
A steadfast commitment to maintaining stringent credit standards, even during periods of growth.
An unwavering focus on customer satisfaction.

Leone characterized the company’s expansion as “nothing short of remarkable.”

Recognizing the Need for Transition

The function Junqueira held at Nubank underwent significant changes as the company matured, evolving from a credit card issuer to a full-fledged bank and, ultimately, a diversified financial services provider. Despite her extensive contributions, she modestly identifies herself as a “co-founder.”

However, there are instances where a company’s growth surpasses an individual’s existing expertise and capacity for adaptation.

A Pre-Established Understanding

Early in their collaboration, Wible and Velez established a principle: if either of their roles became beyond their capabilities, they would prioritize the company’s best interests. This understanding materialized for Wible in the current year.

Wible Steps Down as CTO

Nubank announced this spring that Wible would be relinquishing his position as CTO. His replacement is Matt Swann, who brings a wealth of experience from previous leadership roles at Bookings.com, StubHub, and Citi’s Global Consumer Bank.

This transition was prompted by Nubank’s expansion into Colombia and Mexico. The leadership team quickly recognized that entering these new markets presented challenges unlike any they had previously encountered.

The Complexities of International Expansion

International expansion inherently presents numerous difficulties. These are amplified when dealing with the intricacies of personal finance for diverse demographics and navigating unfamiliar banking regulations.

From a technological standpoint, Wible faced the task of developing a new strategy to adapt the company’s platform for these new regions, including translating products into Spanish.

Seeking Specialized Expertise

Following a $400 million Series G funding round in January 2021, Wible and Velez determined the need for a leader with the specific knowledge to propel the company forward. This individual would also need a proven track record of scaling a large organization. Velez also noted Wible’s desire to return to coding, as he had transitioned into a full-time management role which he found less fulfilling.

A Shift in Responsibilities

The decision was made for Wible to remain a co-founder while resuming coding activities, with Swann assuming the responsibilities of CTO.

Velez’s Continued Leadership

Considering Wible’s departure from a formal C-level position and Junqueira’s lack of one, questions arise regarding whether Velez will eventually relinquish the CEO title. Nicolas Szekasy of Kaszek Ventures believes this is unlikely. He asserts that Velez possesses a rare combination of strategic vision and operational proficiency.

Szekasy states, “He was the ideal leader from the outset, remains so today, and will continue to be the right person for the role for years to come.”

A Developing Fintech Environment in Brazil

David Velez’s ambition to transform the banking sector in Brazil has been instrumental in Nubank’s growth. However, the company is no longer operating in isolation, as numerous others are now capitalizing on the substantial market possibilities.

While Nubank strives to maintain its leading position, several other Brazilian fintech companies are actively competing to identify and address remaining service gaps.

Targeting the Unbanked with Specialized Solutions

Unlike Nubank’s broad approach, alt.bank concentrates on providing a credit card specifically for individuals without access to traditional banking services in Brazil. Having recently secured $5.5 million in Series A funding, the company has meticulously designed its product to cater to the needs of Brazil’s 11 million illiterate citizens.

For example, the app’s interface utilizes color-coding to facilitate credit card management for those who cannot read.

PicPay: A Multifaceted Financial Platform

PicPay, on the other hand, submitted an IPO filing for $100 million on the Nasdaq in April. The company functions primarily as a comprehensive financial services platform.

It offers a credit card, a digital wallet comparable to Apple Pay, a peer-to-peer payment system akin to Venmo, and integrates e-commerce and social networking functionalities. Notably, PicPay does not currently provide traditional bank accounts.

FinanZero: Simplifying Loan Access

Securing a loan remains a significant challenge for many in Brazil. Several fintechs are focusing specifically on overcoming this hurdle, setting aside other complexities. FinanZero is one such example, enabling individuals to apply for personal, car equity, or home equity loans without charge and receive a decision within minutes.

A crucial aspect of FinanZero’s model is that it doesn’t directly originate the loans. Instead, it collaborates with approximately 51 banks and fintechs that handle loan underwriting. Since its inception in 2016, the company has raised a total of $22.85 million.

Future Growth and Investment

The Brazilian fintech landscape is constantly evolving. As Nubank expands its international presence, increasing numbers of venture capital investors are turning their attention to the Brazilian ecosystem.

This heightened interest could lead to further funding for emerging startups in the coming years, fostering continued innovation and competition within the sector.

Leveraging Achievement for Further Expansion

Securing funding continues to present a significant obstacle to growth within the region. Carlos Garcia, founder and CEO of Kavak – a Mexican unicorn specializing in pre-owned, certified vehicles – articulated the challenges, stating that establishing a business in Latin America necessitates constructing multiple ventures due to systemic inefficiencies.

Garcia explained that his own enterprise operates as a composite of four distinct entities, notably including a financial arm designed to facilitate customer payments for its reconditioned automobiles.

This observation resonates strongly with Nubank’s trajectory, which began with a single offering but was purposefully designed for continuous expansion. Nubank aspired to emulate the diversified success of Disney within the Brazilian fintech landscape.

Consequently, the company prioritized obtaining the necessary capital to consistently innovate across various sectors and geographic locations.

Recently, Nubank announced a $750 million extension to its existing $400 million Series G funding round, spearheaded by Berkshire Hathaway and a consortium of investors. This extension elevates the company’s valuation to $30 billion, a substantial increase from the $25 billion valuation recorded in January.

The additional funding swells the total Series G raise to $1.15 billion, positioning it among the largest funding rounds ever secured by a Latin American technology firm.

This substantial capital infusion has empowered Nubank to broaden its service offerings and attract skilled professionals from across the globe. Beyond its presence in Brazil, Mexico, and Colombia, the company has established a corporate presence in Argentina.

Furthermore, Nubank maintains a team of Clojure engineers based in North Carolina and a dedicated development group in Germany.

The North Carolina location was established through the acquisition of Cognitect, a Clojure consultancy, in July 2020. This acquisition not only rapidly expanded Nubank’s technical workforce but also granted the company greater influence over the evolution of the Clojure programming language, which serves as the foundation for its platform.

As Wible conveyed to TechCrunch, “Nubank is currently the world’s largest organization utilizing Clojure, measured by the number of engineers employed.”

A Vision for the Future

While some anticipate Nubank’s rapid global dominance, Velez envisions a different path: diversification into multiple financial services, he explains.

His primary objective is to establish Nubank as the benchmark for exceptional customer service, subsequently extending this standard to all revenue streams. The company’s foray into life insurance serves as a straightforward illustration – and a successful test – of this strategy. “Life insurance was introduced last year, exceeding our 2021 targets within two months. Over half of the customers acquiring life insurance were first-time policyholders,” Velez stated.

He aims to replicate the growth trajectory observed in companies like Amazon. The reasoning centers on how Amazon has redefined expectations for shipping speed and convenience, leading consumers to demand two-day delivery regardless of the vendor. Velez intends for Nubank to similarly establish a new standard for customer support.

“The aspiration is for customers, following a negative experience when purchasing an airline ticket, to question why the service isn’t comparable to Nubank’s,” he articulated.

However, can Nubank consistently maintain its leading position in the market?

“The digital era is undeniably upon us, but Nubank represents a disruption of the fundamental business model; it is pioneering a novel approach,” observes Chu from HBS, highlighting Nubank’s impact on the Brazilian banking landscape. He attributes a significant portion of Nubank’s appeal to the dynamism and innovation demonstrated by its youthful workforce. A key question arises: what happens as these employees mature?

“Sustaining a playful mindset is crucial to maintaining that cultural advantage. The core challenge lies in building a successful model and then evolving beyond it to accommodate the growth of your employees while continuing to foster innovation,” Chu explains.

He posits that this is a critical question for all mission-driven organizations to address as the global landscape evolves. “This explains why Barnes and Noble couldn’t compete with Amazon, and why Itaú couldn’t become Nubank. Nubank is evolving into the new Itaú. The question is, once Nubank *is* Itaú, will it be capable of fostering the next disruptive force from within? Or will a challenger, like David, emerge to propose a significantly improved solution?” he asks.

Maintaining the initial conditions of a business during its early stages is inherently difficult. Individuals evolve, and with age, it becomes increasingly challenging to contribute the same level of energy, originality, and fresh perspectives.

Chu believes that a company’s greatest competitor, upon achieving significant success, is often itself. “It’s essential to prevent stagnation. When they operated from that small house, they were unconstrained by anything other than their ideas.”

These ideas now represent a valuation in the tens of billions of dollars, and an initial public offering has been widely anticipated. Nubank has forged a new future, extending its influence beyond its founders and employees to benefit Brazilians, Latin Americans, and individuals worldwide.