A billion-dollar company is about to be born out of corruption. Before we go into the detail, let’s look at what a billion-dollar organisation looks like today. One of the most successful companies I can think of is Alibaba.com. Alibaba is a company that many of you may not have heard of even though it is considered the largest e-commerce businesses globally.
Their business is simple. They give suppliers the tools to reach customers around the world through an online platform. They provide customers a “one stop shop” to review thousands on suppliers, order safely and track purchases online. Alibaba is focused around Business to Business (B2B) rather than Businesses like e-Bay that is Business to Consumer (B2C). Similar to e-Bay they too allow purchasers to provide feedback that is available for anyone to see globally.
The demand for bulk orders has been extremely popular in the USA, Europe and Asia in the past 5 years as we see more people develop an entrepreneurial flair in the wholesale retail space. In fact there are hundreds of thousands of merchants around the world today that purchase goods from Alibaba to sell on e-Bay. This deman is evident in their growth as they now have over 500 million customers, operate in over 200 countries and their company is worth over 400 billion USD.
Alibaba’s CO-founder Jack Ma has indicated that world dominance in the B2B space is on their agenda, however there is a significant roadblock in several hundred locations around the world. In particularly, penetrating the Latin American market has seen many challenges.
THE PROBLEM
Latin America, including countries like Russia, Papua New Guinea and the continent of Africa are some of the most corrupt places on Earth. Till today the Corruption Perception Index indicates that there has been extremely low to no progress in ending corruption in these countries and continents. In many cases being an activist, advisor or journalist openly against corruption is risky and can be life threatening.
For a small to medium business, this means that the opportunity to grow, scale and succeed is reduced significantly as it would require strong relationships with suppliers, sellers, clients and 3rd party services which is regularly impacted by corruption.
Many countries like the USA, Canada, Australia, Sweden or Norway are generally protected in many ways from petty and large-scale corruption and therefore wouldn’t have experienced corruption to the degree that Latin American businesses do. However, in Latin America this is a strenuous, lengthy and demanding process which requires professional services that many businesses don’t utilise due to the costs involved. In many cases “perceived” long term business relationships can end sooner due to some form of corruption. A common (However tame in the scheme of things) example in the wholesale industry, corrupt business owners will pay for a number of small orders (Goods) successfully, however will then order and receive a significantly larger order without paying.
THE SOLUTION
Solution 1 – The easiest solution would be to embed Alibaba into Latin America. This would allow transparency, it wouldn’t be controlled by any one country or government and money would be locked up in Escrow before being released. The question we have to ask ourselves is “Why isn’t Alibaba servicing Latin America as we speak?” Here are a couple of reasons;
- Inflations rates differ per Latin American country, which is managed by governments
- Dealing with Latin American governments with its own set of priorities and don’t want local capital moving abroad
- So many different fiat currencies to work around
- Most of Latin America has a high level of corruption including some government officials still in office
- Trading models that Alibaba use in Europe, US and Australia won’t work in Latin America
Solution 2 – Another solution would be to use Latin Americas B2B directories that include lists of businesses. While this is an extensive list of businesses, it fails to offer;
- Transparency/ negative or positive feedback on the service or product received
- Businesses are not assessed on criteria i.e. Customer service, time to fill the order, deliver time, quality of product
- They don’t offer a direct online payment system to the product you want to purchase or an extensive catalogue of products a business sells
- You are still utilising a traditional style of doing business which requires an invoice process and post payment with no holding system like Escrow
Solution 3 – UTEMIS is a company with an ambitious idea that could change the Latin American Landscape if they manage to implement their business model successfully. They are currently in their start-up phase and from my review of their whitepaper, it is evident that they are looking to mirror the type of service that Alibaba.com provide around the world. UTEMIS was founded by Dr. Juan Pablo Vazquez Sampere (CEO) who is known in some parts of the world as an expert in disruptive innovation and corporate entrepreneurship. His team is made up of professionals with industry experience and business success.
Their main goal is to decentralise (Using the blockchain) the reputation of businesses using their platform, which would allow for a company’s reputation to be posted publicly and viewed by customers around the world. Customers can then make a judgement call on whether or not they will purchase from a supplier. While it seems like a basic idea, transparency is critical in an environment of corruption.
The UTEMIS platform is planned to allow businesses to deal directly with each other including payments using Escrow. A positive step that allows Escrow to lock up the payments in advance, and then release the funds once the customer has received their item/goods or service. The other positive point to this project is that it uses its own cryptocurrency to allow liquidity between businesses. This is important when youre dealing with a large amount of different currencies.
MY CONCERNS
- No due-diligence on businesses joining the UTEMIS platform. I guess you have to start somewhere
- Governments in Latin America will have something to say. Unless UTEMIS can take an “UBER” approach and force their hand
- With a marketing spend of $120 they have received (As of March) just over $300,000 in their ICO, however they are planning to employ x300 sales people by May/June/July 2018. Operating costs maybe a little thin which may lead to a headcount reduction
CONCLUSION
It is evident that Latin America has a long journey to eliminate corruption and it is up to the people within the Latin American nations to think of innovative and disruptive ideas that can avoid and eliminate corruption. UTEMIS has identified a Niche in Latin America that is a fantastic start towards making B2B relationships more honest and transparent with their dealings. It also helps that their business model is based on a successful, proven and tested business model of a company like Alibaba.
If they deliver on their whitepaper, their platform should be a “one stop shop” for business networking, business reporting, funding, business transparency, liquidity between Latin American nations and tracking. If they can get around my initial concerns above, then I’m confident that their business will become a billion-dollar organisation that is truly changing the world and people’s lives. The business model of UTEMIS is desperately needed in LATAM. I’ll be watching this one closely over the next 6 months.
If you decide to invest in their ICO, remember to research the company and founding members. Do your own extensive research.
VIDEO LINK – Interview with UTEMIS CEO and Founder Dr. Juan Pablo Vazquez Sampere https://youtu.be/5EkN3cVma7I
UTEMIS – https://www.utemis.com
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