Yusef Jacobs, CEO and founder of Graviti
Photo courtesy of Yusef Jacobs
Yusef Jacobs is transforming microfinance, giving people access to life changing devices with a simple idea: even those who don’t have a lot of money will pay for what they really need.
Jacobs, 28, launched Graviti, a buy now, pay later platform for basic home appliances for the non-banking community of Mexico.
With Graviti, people on low incomes can buy solar water heaters, refrigerators, and washing machines even if they don’t have the cash to pay for such a device or get access to credit.
“We measure whether this customer really really needs a certain product. And if he really really needs it, he will pay well for it,” Jacobs told CNBC.
Graviti puts internet-connected meters on the devices to collect data on how the customer is using them – and turns them off remotely if a customer defaults on their payment.
“Traditional microfinance institutions charge late payments when a customer defaults on their payments,” said Jacobs. “In Mexico, interest rates are being raised to over 100 percent a year … which is crazy. And that only overwhelms the customer and increases the debt.”
A solar water heater installed on a house bought with Graviti.
Photo courtesy Graviti
Instead, Graviti gradually reduces functionality when customers fail to pay.
“If you default on your payments, say a week or two, we can basically use these control meters to control the flow of hot water from the water heater and may be limited to a certain amount of gallons per day. If you keep repeating your payments If we default, we should possibly stop the flow of water completely, “says Jacobs.
This hypothesis is confirmed. According to Jacobs, Graviti has a 1.21% default rate on loans.
For comparison, the credit card default rate in the US was 3.15% in March. This is based on data from the S&P Dow Jones Indices and Experian released in April. The auto loan default rate in the United States was 0.48%.
Jacobs, who is from Mexico City and lived there all his life, launched Graviti with solar water heaters in late 2019.
“We acquire the customer, we take on the underwriting of the loan, we approve the loan,” says Jacobs. “Then we basically link that customer and credit to the retailer holding the product and the retailer goes and installs the product. We prepay the retailer for the product. Then we do the payment of the credit to the customer . “
The solar water heaters are a more climate friendly option than the liquefied gas that most people have used before.
Graviti has since added more energy efficient devices and aims to expand to other Latin American countries in the future.
“Our customers said, ‘Okay, now I have hot water. Do you have washing machines? I have to hand wash my clothes. Or do you have refrigerators? I have no way of keeping my food cool? Or do you have electric ovens? or gas stoves? ‘”says Jacobs.
There is a huge demand: only 37% of adults in Mexico have a bank account according to the most recent data available from the World Bank.
Graviti, which currently has 20 full-time employees and 6 part-time employees, is not Jacob’s first start-up.
In his sophomore year at the Universidad Iberoamericana Ciudad de México in 2014, where he was studying physics, Jacobs started a company called Vitaluz, which was powered by solar energy. The company was officially launched in 2017 after Jacobs graduated from college.
“We basically offered electricity to families who didn’t have access to the grid,” says Jacobs. He discovered this need while working with a chemical company that designed ecological brick-making kilns for low-income communities.
In 2018 Jacobs sold Vitaluz to an investor and country house producer in Mexico, Grupo Mia.
Graviti makes money by charging a commission to the equipment dealers it works with including Whirlpool, Acros, Daewoo, Mabe, to name a few. It also makes money from the interest rate it charges clients on the loan.
Earning money and being profitable is necessary in order to have access to devices for all the people who need them.
“We want to reach millions of new customers every year, and the path to that is to really build a scalable, profitable business,” says Jacobs.
Financing through a virtual network
Jacobs raised a total of $ 3 million for Graviti.
The bulk of that, $ 2.5 million, was raised by Graviti in a round that was completed in April with the help of a network product from San Francisco-based Bank Mercury.
“Someone like me … I’ve built my network, I can go to my friends or people who have invested in my previous businesses and get a round of funding quickly closed,” said Immad Akhund, CEO and Founder of Mercury. a bank for startups, says CNBC. “But someone like Yusef, it’s a lot harder to break in.”
Immad Akhund is the CEO and founder of Mercury, a San Francisco-based bank designed for startups.
Photo courtesy of Immad Akhund
So Akhund launched Mercury Raise, a service that connects Mercury Bank clients looking to raise money with investors interested in finding quality entrepreneurs to invest their money in.
Akhund was born in Pakistan and moved to London where he grew up at the age of nine before moving to Silicon Valley in 2007 when he joined Y Combinator and stayed to pursue his start-up dreams.
“As the founder of an immigrant, I thought it was really important to support US companies but where the founders are not based in the US, because it was like that for me in the early years,” Akhund told CNBC.
As of February, Akhund had 745 applications from startups looking for capital, and a jury of outside judges is helping to narrow the list down to around 50 companies that investors agree to review and invest if You want.
Graviti was one of those 50 featured companies, helping it raise $ 2.5 million from a variety of investors in San Francisco, Los Angeles, San Antonio, and New York City through digital meet-and-greet video meetings at Zoom and in April Collect Google Meet.
The pandemic “opened up education to this whole world [funding for their start-up] online via zoom, “says Akhund.” Many investors before that point would be very reluctant to make a commitment without ever meeting someone. That’s basically in the past, especially at the seed stage, “he says.
“That allows for a much more efficient market,” says Akhund. “We’re not getting people to fly over the world. It used to be all right, I’ll make a round of funding, I’ll spend three months on it, I’ll fly to San Francisco, see who I can meet there. Maybe I have to I went to New York to see if there are any other investors there. “
“In hindsight, it feels crazy that people put all this effort into getting a $ 1 million round of funding.”