How Edrizio De La Cruz raised over $13M in venture funding for his Fintech startup
This article is part of Rebel One’s “Investor & Founder Series”, a series of recorded interviews with CEOs and investors recently launched by RBL1, a leading venture capital firm and investor network based in New York City. You can view RBL1’s investor training programs and new content here. Written by Brian Ou
Edrizio De La Cruz, CEO and Co-Founder of Arcus, shares with the Rebel One network his journey as an entrepreneur, his experiences at Wharton and JPMorgan’s investment banking division, and how his unique background influenced his path in founding Arcus.
Arcus is a Fintech company that aims to power the future of finance and digitize banking for underbanked communities across the Americas. With over $13M in venture capital funding and backed by institutions like Y Combinator, Kapor Capital, and Maverick Capital, De La Cruz’s Arcus is one of the most successful Latinx founded startups in the VC space.
Sergio Marrero, our host and Founding Partner of Rebel One, dives into De La Cruz’s experiences, how COVID has impacted the VC space, and how VCs can do better to support women founders and founders of color.
Here is a short summary of the 34-minute interview:
Sergio: Can you talk about how you started your journey?
A: I think I have one of the most odd backgrounds in tech. For some context, I’m the co-founder and CEO of Arcus which currently has a team of sixty people and bases in two cities.
Out of college, one of the best jobs you can get is as an investment banker, but banks weren’t exactly hiring former airplane mechanics that went to community and city college. I didn’t let that stop me, and was able to intern as an investment banker at UBS. I did 100-hour weeks with a smile on my face. I then went to JPMorgan and then Wharton for my MBA. There, I was able to just focus on my education, and was able to see the value of education and how important it is to surround yourself with people smarter and brighter than you are.
After business school, I was really passionate about giving back, and that’s why I found Arcus in 2013.
Sergio: Can you share a little more about how COVID has impacted Arcus?
A: Because of the nature of our product, we haven’t been that affected since people still have to continue paying bills. Some of our big clients like banks are delayed and have to rearrange their priorities, but other than that we haven’t been too adversely impacted.
COVID forces everyone to rethink the office, and realize how not that difficult it is to be fully remote. I am personally big on face-to face and in-person, but theoretically, you can run a business through being mostly remote.
Sergio: Can you talk about raising capital and how your background influenced that?
A: Raising capital and entrepreneurship in general are pretty complex since there are no manuals. It’s the same with VCs, people pitch to them and they “figure it out.” This is hard because the way all of us are educated is very structural. You go from first grade to second grade, your grades are A-B-C-D, and you go to school from certain times. That’s how accelerators like Y Combinator add so much value, by providing a structure and process. The second important component is pitching. It requires years of practice and reps until you become a natural at it.
Raising capital during COVID throws a wrench in the process of developing that process. Now, everything’s virtual and since communication is 80% non-verbal, it’s harder to develop that trust and pitch when you’re doing it through Zoom. VCs are supposed to be the most bullish people in the world, but with the pandemic, social injustice, and President Trump, investors are a bit more hesitant on writing checks. I think this year you’ll see half the checks you saw last year.
When I first did investment banking, it was a very prestigious and white-shoe job compared to being an airplane mechanic. After a meeting on the first day, I had a mentor pull me back and tell me that I was a minute late, had cuffed links, wore clothes that were too flashy, and didn’t take notes. I said, “Well, so what? The other intern was also late, also had cuffed links, and also didn’t take notes.” And he told me one thing that I’ll always remember, “You don’t have the privilege, so you have to be twice as good. The other intern looks like everyone else here, you don’t look like anyone else, so you have to be twice as good.”
Before that, I was pretty naive, and hadn’t experienced “third-degree racism.” However, thanks to SEO (Seizing Every Opportunity), it totally changed my life. Most founders of color don’t have a SEO in their life when they’re becoming an entrepreneur.
When a VC is investing in a company, they’re investing in you up until Series B. I’d say that’s 50% of their investment rationale. They ask themselves, “Can this person win?” VCs are very good at pattern matching and when you don’t look like past founders they’ve invested in, they think they’re taking on a huge additional layer of risk. I think a lot of founders of color don’t understand this.
Silicon Valley has had a lot of problems with diversity because they said, “If you’re good, you’ll find a way. Markets are efficient.” I’d say Silicon Valley is still in the late 80s in terms of diversity. They’re still trying to adjust their understanding that this is an issue. Black and brown folks represent 30% of the population, but only 1% of venture capital funding? There’s a systemic problem in Silicon Valley that I think will take decades of work to fix.
Sergio: How do we make more change faster?
A: There’s been a lot of dialogue, but it doesn’t make a difference. VCs need to start writing checks. Invest, hire, and buy. That’s how dollars circulate within a community.
Sergio: What are some of the most exciting trends in the Fintech space?
A: In Latin American, there’s a huge tidal wave towards digitization because 51% of people in Latin American are underbanked. We think this digitization will be a constant theme for the next couple of years as long as people remain at home and pay electronically.
Sergio: So what’s next for Arcus?
A: So recently we participated in the Visa Everywhere Initiative, a competition which we won. Since Visa’s biggest competitor is cash, and they only make money when there’s a non-cash transaction, there’s a clear alignment with our mission to bankify the underbanked. For us, who want to expand to the rest of South America, working with someone like Visa makes a lot of sense since they’re already there.
Sergio: Thank you for spending your time and sharing your insights with us.
A: Of course.
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If you’re interested in learning more about Edrizio’s experiences, you can watch the full interview here. If you are a motivated investor or young professional like me, I would highly recommend checking out RBL1’s Youtube channel for more videos on how entrepreneurs and investors are changing the world.
Thank you for reading and stay safe!
