Welcome to our Innovators Creating Prosperity series, spotlighting organizations across the globe that are positively impacting economic development.
According to the International Labor Organization, more than 130 million workers in Latin America are part of the informal sector. This means these workers neither have access to social protection nor workers’ rights. In addition, most of them are unable to access financial services to invest in their businesses.
Providers of home and office improvement services, such as plumbers, carpenters, electricians, and other specialists are examples of professions that, until recently, have largely remained informal despite existing laws that mandate people to register their business, pay taxes, and abide by various regulations. On the flip side, affordable and convenient home and office improvement services have proven elusive due to a lack of transparency and predictability.
It was in this two-sided struggle that Matias Recchia and Andres Bernasconi identified vast untapped opportunity. In 2013, the co-founders launched IguanaFix in Argentina, an on-demand home- and office-improvement provider that connects professionals with consumers and retail stores.
In the six years since the company’s launch, the IguanaFix platform has raised over $20 million, generated more than $25 million in revenues, and attracted more than 20,000 contractors who now enjoy the benefits that formal work offers. The company has now expanded to Mexico, Brazil, and Uruguay, and boasts more than 35,000 monthly transactions. Given that half of the 120 million households in Latin America are estimated to forgo home improvement services due to frustrations with the system, IguanaFix stands to improve the lives of millions.
In this interview with Matias Recchia, we ask what led him and his co-founder to create the company, how they deal with working in a difficult business environment, and what advice they have for other entrepreneurs in emerging markets.
1. Where did you get your idea? How did you know there was opportunity?
My idea came from personal experience when I moved back to Argentina after living in the United States. The process of finding professional home improvement service providers was incredibly difficult. I soon found out that there were no convenient, transparent or efficient home improvement service providers available. To me, this struggle represented a huge opportunity.
Theory Insight: What Matias recognized was an unmet need. Unmet needs like these make fertile ground for market-creating innovations.
2. What was your initial target market?
Our initial target market comprised of middle-class customers and small- and medium-size enterprises that needed efficient and reliable services. Interestingly, we also found that many of the service providers could become important customers as they also had unmet needs.
Theory Insight: In many emerging markets, millions of people in the middle-class bracket are what we call “nonconsumers”—due to price, inconvenience, or skill, they’re literally unable to “consume” many products and services. In this case, Matias identified vast nonconsumption of professional home improvement services in Argentina and recognized that there was a market to be created here.
3. What did your target market do/use before your innovation was available?
The market for home- and office-improvement service providers was extremely informal and fragmented before IguanaFix. Argentinians relied solely on word of mouth when they needed painting, plumbing, and other services. Word of mouth was no guarantee of good service. From the service provider standpoint, IguanaFix introduced predictability to their work.
Theory Insight: Before IguanaFix many people in Argentina relied on workarounds for home and office improvement, which are an indicator of unmet needs. Matias understood that if IguanaFix could provide a better solution than these workarounds, the company could impact many lives.
4. Where did you raise funding, and what advice would you give others regarding fundraising?
Initially we raised funds from angel investors. After proving out the model and growing to a couple of thousand transactions monthly and a few million dollars in revenues, we raised institutional funding from Temasek & Qualcomm Ventures.
Emerging market entrepreneurs looking to raise money should not only articulate the unit economics of their business, but also why the countries where they plan to operate offer growth opportunities. Emerging market investors, in comparison to investors in more developed economies, are often concerned about macroeconomics in addition to the viability of an entrepreneur’s business model.
5. Innovators often feel that the lack of an enabling environment in emerging markets—poor infrastructure, inadequate institutions, and little government support—is insurmountable. How did you overcome this challenge?
Starting a company in Latin America is extremely bureaucratic and can be quite expensive, but it isn’t insurmountable. We just had to be patient and focus on the long-term impact of our work. This helped us as things didn’t always go as smoothly or quickly as we’d like.
We believe that over time, we can transform how business is done in Latin America. For instance, IguanaFix now engages in regular conversations with policymakers to explain the major pain points we’ve had.
Theory Insight: There’s no denying the fact that doing business in an emerging market can be difficult. However, our research has found that when a new market is created, the market often pulls in the institutions needed to function—low-performing though they may be at the onset—and strengthens them in the process. As IguanaFix grows this market, the company will continue to influence the government to improve its bureaucracy.
6. What can other innovators take away from your experience? Is there anything you’d do differently?
One of our biggest learnings is how much we needed to communicate the value proposition of IguanaFix, to both the service providers and consumers we hoped would participate in this new marketplace. If we had to do it over, we would have invested more in educating our clients.
At the end of the day, innovators can break down old habits and create new ways to meet people’s needs. With time, trial, and error, and a focus on ensuring every stakeholder profits from a new innovation, everything is possible.