Going Global With StarMedia Chief Fernando Espuelas
(FORTUNE Magazine) – Most multinational corporations start small, building market share at home first, then steadily branching out abroad. But most multinationals are not run by entrepreneurs like Fernando Espuelas, the 33-year-old chairman and chief executive of StarMedia Networks, a Spanish- and Portuguese-language Internet portal that offers everything from free e-mail to online shopping.
In little more than three years Espuelas and his company co-founder, Jack Chen, have taken StarMedia from a six-person startup in a rundown house in Connecticut to Latin America's leading Internet company. It has a market cap of $3 billion, more than 700 employees, and offices in nine countries. And although it's still in the red, StarMedia managed revenues of $20 million in 1999, up 249% from 1998.
In a recent interview, Espuelas talked with Fortune about how he has achieved such phenomenal growth and how he hopes to maintain it despite increasing competition.
From steady paycheck to startup. "For a year and a half, things were desperate. I had always worked for an established company, so it took a while for me to realize that in a startup situation, there is no business or market momentum. So if on Tuesday you decide to stay home, that day the company essentially does not exist, because nothing will come in the door unless you go out the door. It was a little frightening, but each day was an opportunity to move forward."
Raising cash and consciousness. "We were able to raise about $400,000 from friends and family. But when we started raising money from venture capitalists, it was very difficult. We had four or five dozen meetings, and nobody understood. Traditional Latin American investors did not get the Internet, and traditional Internet investors did not get Latin America. Then, in 1997, a week before we ran out of money, we met people who understood both at Chase Capital Partners. Other investors lined up after that, and we've raised more than half-a-billion dollars since."
Growing pains. "You don't go from 100 people at this time last year to 700 people now very smoothly. There are always growing pains. People who are successful in one thing at a certain stage of the company may not be successful doing the same thing at another stage. We've had to find ways to have people scale up and grow. But having a large work force means we can do multiple projects simultaneously, not linearly."
The importance of being first. "Yahoo is an object lesson for us. It did a brilliant job, but so did Excite--only Excite did it a year later and has never caught up. We were first in Latin America, and part of our job is to increase the distance between us and our competition. That's why we continue to invest and become partners aggressively with others. On the Internet you either speed up or you die."
Crossing e-commerce borders. "We knew international shipping would be a huge issue. So one of the very first things we did was to create an exclusive partnership with a logistics firm so that our [U.S.-based] merchant partners could ship to virtually any address in Latin America at a very reasonable cost. The next stage of our logistics agreement will soon allow our regional merchants to ship anywhere in Latin America and the U.S."
Being Goliath, dealing with Davids. "Since our 1999 IPO, more than 400 Internet companies have sprung up in Argentina alone, and we know competition is cropping up. But they can't suddenly press a button and be bigger than us or have better brand awareness."
The Latin American plans of AOL Time Warner (parent of FORTUNE's publisher). "To be honest, they're not that critical to us. AOL is a great ISP, and until very recently most of Yahoo's users in the U.S. were coming from AOL. So to the extent that AOL is successful in Brazil, able to drive down the price of Internet access, and able to bring millions more online ... hey, we're cheering for them. And when we're not, we're hiring from them. Last January we hired away AOL Brazil's former president, making him our chief operating officer."