Growing a search fund acquisition to IPO in Brazil - Jan Riehle, B4A

Jan Riehle is the CEO of B4A, a leading Brazilian beauty marketplace with over 700,000 active users. An INSEAD ’09D, Jan began his career in M&A and private equity in Switzerland before joining Springstar, a German-Swiss venture builder, to manage their Brazil operations.

In this episode we cover: 

• How he acquired and merged two struggling beauty companies (Glambox and Men’s Market) into what is now B4A (00:00:24; 00:05:28) 
• His approach to restructuring and achieving breakeven in just four months by integrating company cultures and cutting fixed costs (00:11:39; 00:12:21) 
• How B4A grew 10x in size and revenue, leveraging subscriptions, micro-influencers, and B2B services (00:19:41; 00:28:02) 
• His thoughts on AI’s impact on labor, business efficiency, and why every employee at B4A is expected to use AI tools (00:28:02) 
• His long-term vision for B4A, including potential international expansion, IPO, or SPAC exit (00:36:18)

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Transcript

00:00:00 NICK LALL
Hello and welcome to the INSEAD Emerging Markets Podcast, where we interview business leaders and emerging market experts on business innovations, market opportunities, and macro -level trends in emerging and frontier market countries. Join us for the next hour to dive deep into the world of emerging markets as we speak with top performers who are successfully investing, working, and living in these markets themselves.

00:00:24 NICK LALL
Welcome to the Enseada Merger Markets Podcast. I'm your host, Nick Law, and today we are joined by Jan Rila. Jan has an NCED 09D, and he's also the CEO of B4A. After graduating from NCED, Jan spent a year working in private equity in Europe, but then moved on to Brazil to manage Springstar, which is a startup he incubated there. And then after his time there, he founded Itaro, an aftermarket automotive marketplace, which he sold four years later. And then after that, decided to go and form a surge fund with his own capital and that of one other investor. And then after searching, he ultimately acquired two beauty brands, Glambox and Men's Markets, which he then merged together into B4A and is now growing the company to over 100 million active users. And that number is probably much higher right now because I got that from some pretty old data. And B4A is now the point where... Jan is preparing the company for his IPO.

00:00:53 NICK LALL
that of one other investor. And then after searching,

00:01:11 NICK LALL
is preparing the company for his IPO. So I was wondering if you could just start out with a brief overview of your pre -search fund life and what it was that initially led you to Brazil and why you ultimately decided to form a search fund there rather than back in Germany.

00:01:25 JAN RIEHLE
All right. I mean, before I did my MBA at INSEAD, just to go a little bit further back even, I already had been an entrepreneur in Germany at one point in my life in the internet space. And after that, I worked in M &A in private equity. Then I did... INSEAD. At INSEAD, first time I actually learned about the search fund concept. There was a class about it. Entrepreneurial potential or something. I forgot the name. But there was a class on this idea of acquiring a company post MBA. And I already kind of liked it back then. After that, I started working in private equity in Switzerland. for one year and since i kind of wanted to look at the emerging markets overall right in the beginning i was a bit open to latin america or asia i jumped on the opportunity to work for a german swiss incubator company builder back then called springstar and i started working for them in in brazil taking care of their assets here and mainly working on their exits like back then they they sold two companies and then you know basically We had a bit of good market timing back then, sold at very nice multiples. And I started to think that the market has a lot of potential, which I then started my own things back then in 2011, but not as a search fund at that point. I mean, I was still new to the market, more like in the startup space. So I started e -commerce companies in the startup space in Brazil, which from my perspective back then was... Very young market and highly attractive market at that time. Also, at that time, you had a lot of foreign capital wanting to actually own digital assets in Brazil. So it was relatively easy to fundraise back then. And I did that for a couple of years. I had some exits. One company in my portfolio got very big. We made an IPO in 2020 in Brazil with it. And in 2017, another company in the car parts space. called Itaro, I think you mentioned it, had an exit to another local distributor. And in 2017, Brazil was not so much in a phase anymore as it was in 2010 and 2011. It was not that easy to get liquidity. In fact, a lot of startups in the Brazilian market actually were suffering by not getting liquidity, right? And startups are often, in the beginning, usually not profitable. So kind of you had a lot of distressed assets in the startup space. And that kind of made me to come back to this idea when I was at INSEAD to maybe do a search fund, right? And already in the beginning, I started doing calls with US investors because the whole search fund concept, right? Back then, at least in 2017, it was more of a US concept. I think it still is, but it was even more one back then. And I kind of started seeing that the way that a search fund usually is structured, focusing... more on cash flow positive businesses in the brick and mortar space often is not 100 aligned with what I wanted to do which was more of basically using the opportunity in Brazil at that time to acquire tech businesses which were a bit struggling right so that's a bit out of the usual scope for a search fund and you asked me why didn't you started in Germany already at that time I was pretty distant from Germany I worked a huge part of my professional career in Switzerland, then in France, a little bit in Singapore. And then when I came to Brazil, I really started to actually develop a very good network of investors in Brazil and also in the market. So for me, there wasn't even the consideration of maybe doing this in Germany, right? And again, also I did it because the market at that moment seemed attractive for me for an acquisition in which I would be able to leverage. the bad times in the market to get a good pricing and that was kind of the idea um yeah i think that was your question right why did you do it in brazil and not in germany right right yeah just why brazil rather than germany or why an emerging market over developed market partly because i was here and partly because i saw the opportunity totally and you must have really believed in the opportunity given that you mostly use your own capital from what i know and not only that i mean you didn't follow the traditional

00:05:17 JAN RIEHLE
think that was your question right why did you do it in brazil and not in germany

00:05:21 NICK LALL
right yeah just why brazil rather than germany or why an emerging market over developed market partly

00:05:28 JAN RIEHLE
because i was here

00:05:29 NICK LALL
and partly because i saw the opportunity totally and you must have really believed in the opportunity given that you mostly use your own capital from what i know and not only that i mean you didn't follow the traditional search fund strategy of just succeeding some retiring baby boomer you actually went and bought tech companies that were not profitable at the time and then turned them into profitability so i was wondering if it was the the thesis of technology in brazil at that time was it beauty brands what about the two companies you chose gave you the confidence that you should be able to buy them and turn them into what you did i mean my search when i started was pretty opportunistic right

00:06:00 JAN RIEHLE
my search when i started was pretty opportunistic right It was a bit sector -focused because I wanted something that's close to innovation, something that's close to digital. I, before, had collected a lot of experience with e -commerce companies in various segments, right? In car price segment, in jewelry segment. That was kind of a bit close to beauty already, so I had some expertise there. And one of the businesses also had this direct selling aspect, which all the B4A kind of has today. So already some experience points in my path on what B4A is doing. and then it came down to opportunities that again were around right i looked at i think around 10 opportunities in the market and market size kind of also like brazil at that time was the fourth biggest beauty market in the world after the us and japan and china the next biggest one is brazil and still is today i think today it's kind of equal with japan so it may already be the third biggest so yeah the opportunity was just huge there were also not a lot of digital players in this beauty space actually mainly these two and one more which then got acquired by the biggest beauty brand in brazil so that in the end made it happen and the opportunity arised through network and i was reaching out at that time as many search funders do to all the mna boutiques that are active in sao paulo asking some there is something that what makes sense for me to look at and in that search these two companies which already were talking about the merger showed up right and that's also how i ended up acquiring both of them because they kind of came as a bundle already i see makes sense i think the macro trends in a lot of these emerging markets make the strategy even more exciting than it might be in other places and i think there is some statistic that says the first time

00:07:39 NICK LALL
sense i think the macro trends in a lot of these emerging markets make the strategy even more exciting than it might be in other places and i think there is some statistic that says the first time searcher in most countries has a much better return than subsequent searches. So given that they were sort of distressed and they were at a merger stage when you were acquiring them, what vision did you have for the two companies? And how did you come to the point where you realized that you could combine them into B4A and turn them into the ecosystem that you did?

00:08:11 JAN RIEHLE
So basically the vision for B4A today has developed much further than the vision that I had back then. back then for me just to explain you a bit like what these two companies were right like one of them was a beauty box company called clubbox it's a bit similar to in the us to ipsy or Glossybox or Birchbox, I think was the first player in the space. And basically, I think Birchbox was the first player and they kind of copied Birchbox in the Brazilian market. And they were already, when I acquired them, they were already leaders in the Brazilian market, right? There were a couple of other players, but they were already, I think, like four times bigger than the next one. So they were already leader. And they were not profitable, but they had a very interesting cross margin and I could see the way to profitability. relatively quickly right so i could kind of see okay like restructure them a bit more intense and in a couple of months you're gonna be breaky the other company man's market was an e -commerce play multi -brand e -commerce play and i initially had the b2c vision which kind of until today in in this b2c segment of the business is valid which was okay i'm gonna merge them into a shopping club for beauty products so if you have a subscription if you pay something every month you have a lot of perks and some of the perks are that you are able to also purchase beauty products at better prices at best prices in the country right so that kind of was the was the idea of combining them and in this b2c space right today before as i said is much more like today we have also a b2b area so we also attend beauty brands and we also have an area for influencers so we have products for digital influencers but in the b2c space this is kind of the vision that we realized right today you purchase one of our various subscription products which start at a virtual subscription where you pay a low monthly fee and it gives you access to all these perks and if you go up in the subscriptions you also get physical delivery every month to your home which is customized to your beauty beauty profile

00:10:25 NICK LALL
Yeah, I mean, those definitely make good businesses. I think those are some of the startups that have done really well in the e -commerce space are the subscription -based ones. So that makes sense. And I guess your first priority was to get to profitability and then maybe at that point you could start worrying about. I mean, a very interesting aspect of this is recurrent revenue,

00:10:41 JAN RIEHLE
mean, a very interesting aspect of this is recurrent revenue, right? Subscription gives you recurrent revenue so you don't have to conquer your clients. every month from zero and then if you work on some variables especially like if you add more value to the package you decrease churn over time and you start upselling other things and so you increase like your revenue per customer and the number of customers that was kind of the initial vision and that's exactly what we managed to do from back then to today sure totally i'm sure that that was a really exciting process and it probably

00:11:10 NICK LALL
totally i'm sure that that was a really exciting process and it probably

00:11:10 JAN RIEHLE
totally i'm

00:11:15 NICK LALL
It took a lot of learning and data and experimentation, but it looks like it's worked out really well. At what point did you feel that you understood the companies both well enough that you could enact that broader vision? I mean, I guess coming in, you hadn't worked in beauty exactly before you'd been in e -commerce, but then at some point you had that idea that this could be something much larger. Maybe you could talk a little about that. I'd love to hear where you got those insights.

00:11:39 JAN RIEHLE
I think, you know, Nick, the first six months, I mean, from the beginning on, it weren't really. two companies anymore because i just put them in one office and said okay guys now you're one okay so let's say there were there was one company from the beginning on however there was one company we've started kind of two cultures which took a couple of months really to get closer together right and to re -attribute responsibilities and kind of structure the whole thing so the first six months were kind of were kind of bad, right? Like to figure out like where are synergies, which functions we can eliminate. I mean, that's like an ugly word, but that's kind of what we did. Like we did like pretty strong restructuring on the payroll side initially.

00:12:21 JAN RIEHLE
And that's what I said in the beginning, right? I had like very good cross margins, but still not enough revenue to completely cover fixed costs. And that's where we started working on, like the fixed cost side. So the initial six months was bring these two companies together create kind of new culture on top of it and start looking who is kind of like adapting to that easily right and and playing along and starting to buy the new vision and who isn't and cut payroll and cut also a lot of other fixed costs cut or renegotiate other fixed costs and the first six months really were extremely intense on this getting costs downside not so much on like developing growth or anything like that like in fact i think we kind of lost some revenue not very much but we lost little revenue in the first six months but we managed to get fixed quotes like dramatically down so after four months on a monthly base we actually broke even right which was the idea and also since we had a lot of capital reserves like i acquired the company with my own capital and the capital of one investor and apart from acquiring it we also put some money on the balance sheet which we used to get some debt out of the business right like also one reason why it burned a lot of cash was the interest that we had to pay it was pretty leveraged already at the moment of acquisition so doing that taking the debt out and getting payroll mainly and other fixed costs down we got to break even after four months and after that after let's say six to eight months we started working more intense on setting all the levers then for future growth and yeah then one year later the game was a bit different yeah i wouldn't say less intense but it was a bit less emotionally difficult to to manage the whole thing right after this restructuring phase sure makes sense yeah just a different intensity focus on something else basically a lot of surf fund investors that i've spoken with they always tell me

00:14:12 NICK LALL
makes sense yeah just a different intensity focus on something else basically a lot of surf fund investors that i've spoken with they always tell me You should only search in the country you were born in because you'll understand the market and you'll have the connections and all of that there. I was wondering if there were any difficulties you faced. I mean, coming in and managing someone else's company is hard no matter what. Then if you're merging two together, I'm sure that's difficult. I don't know if you grew up speaking Portuguese, but you're not native language in a different country. I was wondering, were there any major cultural issues you dealt with or was that not such a big issue when you took over the company and decided to run it?

00:14:49 JAN RIEHLE
I mean, you know, for sure that was also a difficulty, I guess. But I tended to all my life be a very optimist person who is usually like if there are some difficulties being mentioned, always like, ah, it's not really a problem. In retrospect, I mean, yeah, it isn't really maybe help. But then on the other hand, you know, people with our inside background often don't have such a strong national identification, right? Personally, I don't have a very strong... national german identification although because i already worked in other countries before i had a lot of exposure to other cultures not only in seat but also outside of in seat so you know i didn't really see that back then as an issue right now if i reflect on it today i mean i do definitely have some discipline and like some attributes right that usually people probably would attribute to germans And I think they kind of are my strength in an economy like the Brazilian ones. Now, if you acquire a company, you need to be a bit careful about how to put these qualities inside the newly acquired company if you don't want everybody to run away. But on the other hand, if people kind of see that what you are doing is kind of making the whole thing get better, you will also earn some followership. So some people, you will actually get excited about that. And that's the people that we want to keep, the ones that kind of think, hey, wow, that's amazing what this guy is doing. I want to be part of that. And then you give them a bit of equity. And we did that also. So I handed out option grants to keep people. And we do that until today. So that's part of the incentive scheme at B4. And OK, there are others who really have difficulty with that. And yes, it is culturally different from what you find here in the marketplace. But I think today that this difference is kind of what made the whole thing work out. And there's more strength than a weakness,

00:16:40 NICK LALL
right? Totally. Yeah, I think that's great that you do that. I think that a lot of people talk about how to create a good company culture, but giving people the opportunity to earn equity, I think that translates across pretty much any country. And that is probably more valuable than anything else you give people. So I can definitely see that that would be a good influence on productivity. having the right people in the company was wondering if you had any mentors yourself that guided you along the way or were you just totally doing this based off your own ideas and vision or did you have any sort of board or other type of influences that guided you throughout this process yeah i mean when we acquired the business i had one investor right and this one investor like i had a history with him so we already did the deal together in the brazilian marketplace before that

00:17:18 JAN RIEHLE
i mean when we acquired the business i had one investor right and this one investor like i had a history with him so we already did the deal together in the brazilian marketplace before that that also helped a lot to raise the money and also like we are until today i would say friends right although a bit distant friends like he lives on a different continent not in brazil and in the beginning he was actively involved in a kind of board so we had a lot of discussions around what we do so that for me obviously was mentorship that was very valuable when kovit came in 2020 he wanted out right and that was also from his perspective a bit of a strategic decision to want to divest from brazil and i bought him out right back then partly with that and and from that moment on i was indeed a bit alone right so i didn't really have any mentorship anymore in this endeavor but at that time i was already pretty settled also right like the business continued profitable was already like way bigger. I mean, the COVID year was not easy, I must say, right? Like, because also, obviously, it made me a bit scared that you wanted out. Although, you know, maybe it wasn't COVID. It was really a strategic decision to restructure. But maybe you remember the year also back then, a lot of VCs in the US were like sending around memos to their portfolio companies, like cut all costs, like that's the end of the world and things like that. So I really got scared by that. It turned out that it was extremely helpful for digital. and businesses and e -commerce in general right like they all got a huge push by people staying at home and it was the same for us so basically we really lifted off in 2020 and in 2021 i started actually raising money in order to expand quicker and with that um i started not a board but an advisory board right so i kind of gained back some mentorship which is maybe not so much like technical mentorship but also network right as a german still In Brazil, this is one of my weak points, I would say, right? I'm not within the local business elite. So it's good for me to have like some support on that end. Yeah,

00:19:25 NICK LALL
definitely network seems to play a large role in success,

00:19:25 JAN RIEHLE
network seems

00:19:26 NICK LALL
to play a large role in success, especially as you get to the higher levels. If you wouldn't mind, I know that you grew quite a bit during COVID and since then as well, if you could share some of the numbers of where you are now, that could be helpful if you're open to it.

00:19:31 NICK LALL
you wouldn't

00:19:41 JAN RIEHLE
Today, we have around 700 ,000, what we call Glam Girls, which are people who are using the app, right? It's like the application that basically gives people the subscription and that actively do purchases in the Glam universe. And that's on the consumer front. We have more than 500 beauty brands, all of them in Brazil, which are our clients. So they basically purchase projects in various areas. So it could be like that we get the market intelligence. It could be that we sell influencers to them. It could be that they use our distribution, which we have through the products and through the e -commerce to send samples to customers. And on the influencer side, we have around a bit more than 7 ,000 micro -influencers who are using our application in order to participate in these brand campaigns and which use our social selling products to sell like in their own e -commerce shops, products and earn commissions.

00:20:45 NICK LALL
Was that part of the company when you joined or was that an idea that you brought on was to make it more focused on having that influencer aspect to it? I mean, you know, also coming back to your question on numbers,

00:20:56 JAN RIEHLE
back to your question on numbers, like usually we don't share our revenue numbers, but like one thing I can tell you about revenue is that since we acquired the two businesses, we can have 10xed it until today, right? So we really grew substantially. And that actually pretty much all the time staying profitable with an exception like in the COVID phase because like we kind of grew so strongly then and then we raised also some money that we didn't need to remain profitable. So we kind of accepted to have a negative EBITDA for like maybe one year, one and a half years. And now we are back being profitable 10 times bigger than the ET acquisition. And yes, I mean, initially a lot of focus was... on building the b2c vision which was the subscription and connection of subscription with e -commerce but then over time like we built a strong b2b business where basically we have they a team of account executives talking to beauty brands and selling beauty brands and products and we have also a very strong influencer business it actually may even become a spin -off like right now we're thinking about maybe spinning off some of the equity of the influencer business because it's kind of getting really, really big and it has its own brand. It's called B -Fluence, right? And it's basically like an agency for influencers, just it's focusing more on the micro -influencer part, right? You have a lot of agencies around big influencers, but for smaller influencers, usually the negotiation costs don't really make it feasible for a brand to, let's say, higher 50, right? So you can leverage technology to make this process a bit easier for the brand. And that's kind of what we do in this influencer space. And what connects everything is that it's all in the beauty space and it has one overall mission, which is to democratize beauty. And we live that in all these three spaces, right? Like we democratize beauty for the client by making it more accessible to people in Brazil. We do it for influencers basically by taking very small influencers and giving them support to become bigger influencers right and that also has a social aspect and works very well as a motivation intensivation for the team because they make people give them purely easier for the people that come from a poor background in brazil they help people who want to become digital influencers which is kind of the job of tomorrow these days right every you ask somebody who is 12 years what you want to become i want to become an influencer so we help these people do that and in the brand space we also help indie brands i mean we also have all the big brands in brazil's clients but we also enable smaller brands to get seen in the marketplace and often they don't really have many options right if they don't have a gigantic marketing budget an option like p4a for them is very valuable so we see ourselves as like a hub around the marketizing beauty for these three groups amazing yeah i think that

00:23:57 NICK LALL
think that a lot of the most successful businesses have that sort of a core principle or guiding why, then there are different what's that serve the why. And as long as you stay focused on that, you can sort of build a larger ecosystem serving in a lot of different ways. So it's great that you've been able to do that. It seems that following that core principle has definitely paid off. I mean, going to NX is pretty incredible. After taking the business over, I've heard multiple places that People have been calling you a great operator and that by being a great operator, that's why you've had the success. I was wondering if you could maybe talk a little bit more about what being a good operator means to you and why you think that that's a skill that you have.

00:24:38 JAN RIEHLE
You know, before A, I started having like two roles. I was the CEO, right? And I was the COO, which is more the operator position. Today, I'm differentiating these two positions in a way that for me, a CEO is more... on the side of strategy right i mean that's usually how the market sees that right it's more strategy vision communicating this vision right down and doing a lot of the relationship with the market outside investors etc so that is one role i had from the beginning on and i have until today and then the ceo it's more like really the

00:25:15 JAN RIEHLE
more like really the really busy work of all the time being on top of everything that is going on being extremely detailist right so yeah kind of you need to really get your hands dirty and i think i can do that very well i did that very well from the beginning on so i looked in every detail of every area Usually you don't accept if you don't understand something. You don't accept, I know, but this is like the guy from there who's doing and I don't need to understand it. No, you actually try to also go there and also understand it and understand it in detail and try to improve it. Kind of leave a bit this example also, right? Because, I mean, as you grow and you start having a larger hierarchy, I mean, you're not going to be able to do this everywhere, right? if you don't give the example nobody's gonna copy you you have a problem so you kind of need to do that but then you need to inspire others to do it constantly you need to rethink all the time efficiencies communication ways processes processes processes you can't just say okay that's the process all the time you need to relook it reconfigure it a company that grows Like B4A is kind of constantly restructuring everything, right? And that needs to be done very actively. Like you cannot just say, oh, no, this is good. This is good. It's never good. You always need to go dig into something again. And again, you cannot dig into anything. So you dig into where it's really relevant. And then the other parts to delegate. But to whom to delegate, they ideally follow the same. structure so like yeah all these things right like over time kind of reflecting like when i'm thinking about like so why did this actually work out i mean when i look at other ceos i often think that they don't go so much in detail about things as i do in many things so i think that kind of makes me being a good operator right being all over the place going a lot into details and rethinking processes all the time never being satisfied with anything It's frustrating, but I think it helps,

00:27:29 NICK LALL
think it helps, right? No, I mean, it seems like you've done both well. Not only have you definitely been very process driven, and I think you're right that especially if you're taking over a company, you really need to understand every process and every detail. You clearly have done that very well, but you also clearly have the vision and the higher level skills that a CEO typically does. I have been seeing that you've made some posts about AI recently, and you have an AI ward at B4A. I was wondering if you just talk a little bit more about... Why that's an area of focus now and what role is AI playing in B4A's business?

00:28:02 JAN RIEHLE
I mean, it's also a very personal interest. I have always been very interested in all future technologies and what's going on there and also investing personally in technology since I came to Brazil. I started in Brazil. I then also started investing in the US. And I mean, AI is kind of obviously changing everything, right? I think that's not so new anymore. um personally i i have i think if i compare like my vision a pretty aggressive vision on what's going on right so i think labor is getting completely disrupted and maybe in 20 years there won't be any demand for human labor anymore you know i mean maybe you know in some markets certainly quicker markets in which labor is more expensive in others like brazil where labor is not so expensive probably takes more time but i don't think it's gonna take you know like lifetimes i think It's going to go relatively quickly now. And I don't think that many people really realize that. And I think that the phase from now to when this happens still has a lot of opportunity for those individuals who learn pretty quickly to play together with all these today's tools, right? They're not yet that independent agents. I mean, they're going to be, but they are not yet. So today you're not going to lose your job. Because of AI, you lose your job because of somebody who uses AI, right? I mean, that you can kind of start seeing already. So that's kind of like all those thinking of my employees, why we are pushing this topic very hard. Like everybody, everywhere in every area needs to use AI. Who does not use it, it goes in an evaluation. And yeah, I mean, we see efficiency gains, right? In the end, that's also the truth. Not in every area always immediately. sometimes although you need to kind of push it a couple of months until people get used to using it in an efficient way because in the beginning they kind of need to have this wrap up phase right where they experiment a bit and figure out like what makes more sense what makes less sense and and mainly initial efficiency boost we got in all the creative functions kind of right something you can also see everywhere like where it's about text and image and all the things but then also it goes into the legal function like you can analyze contracts much quicker using that product development like we have today for proprietary direct -to -consumer brands right so we also develop proprietary products that's something i didn't say before but that's also pretty pretty interesting field and when it goes about analyzing formulas for products for example it's really amazing what ai is doing on that end or what you can do with ai on that end It really is amazing. And it goes on. There are so many areas where I'm talking more about generative AI now, where we kind of use it, not as an integrated part of our products, but just as an instrument that we have. So everybody in the team have a paid ChetGP account. We also have paid Gemini accounts, which then integrate already with the Google Drive that we also use. So far, I must say, most people here prefer ChetGP to Gemini, but they're getting better. And on the product side, right, when I talk about like B4A's products, we are now, for example, integrating with an API from Gemini. So customers who are talking to a customer service agent today sometimes talk actually to Gemini, right? So that's also an AI integration. And that we're going to make stronger. Like today, it's a bit more experimental in some cases, which are not so critical, right? But that... you can actually increase that uh the better you kind of manage to integrate it also with your internal apis so that then you know gemini triggers things that that gets a bit risky because you don't want to like trigger the wrong thing right you don't want the client to cancel something but maybe he didn't really want to or something like that so we are learning a lot but still it's a topic that i'm pushing pushing pushing because it just makes the whole company more efficient and also if you think of it long term i think the opportunity right now in the next 20 years is going to be amazing and when once it's over there may be no more opportunity for human labor right so you kind of ideally you use this opportunity now because tomorrow it will be gone yeah it's definitely the time to try to do what you can with it now i think it is really incredible i mean i would say even now i can do 70 to 80 percent of most white collar jobs and i'm sure you know 10 20 years now who knows where we'll go so

00:32:08 NICK LALL
it's definitely the time to try to do what you can with it now i think it is really incredible i mean i would say even now i can do 70 to 80 percent of most white collar jobs and i'm sure you know 10 20 years now who knows where we'll go so Definitely a good point. I also like the point that in emerging markets, at least labor is cheap enough that there may be more opportunity to employ people there for at least some amount of time. Interesting thoughts. I was curious if you have thoughts on how AI may affect those doing the surge fund strategy. Are there types of businesses you think people should be looking at more now or ways that they could improve existing businesses with AI?

00:32:46 JAN RIEHLE
I think there's huge opportunities also. Like if I wouldn't be here now doing B4AI, I think maybe I would go to the US and do a search fund there. I mean, you told me last time we talked, yeah, the US, it's already pretty crowded, right? There are a lot of companies. But honestly, doing a search fund, especially with focus on using AI to get a business more efficient, I think must be an amazing opportunity also in the US, right? Because you have a lot of... businesses being run in a very old -fashioned way and if you get fixed costs down by half or like you make the existing fixed costs let's say like this politically more correct like so much better that you can double revenues with the same fixed cost i think the leverage that you can get through that is really amazing and i mean in which industries i mean marketing agencies should be pretty interesting but also like law firm related things accounting firms But I honestly don't think there is anywhere like really something where you cannot do anything. Right. Like I think you can use it everywhere. It's just probably you have some industries in which you get more out of it right now. But everything changes over every year. Right. So I think like this leverage is just getting bigger now every year. And it's more about the mindset. Like you need to have a very strong mindset, focus the entire company on it from the beginning on. Only hire people who actually already have experience with it and are super open to it. Get rid of people who are Oh, no, I don't like that. That's not nice. No, no, no. But that's not human creativity, man. That's just like a bullshit computer. Like just ciao, goodbye. You don't need to work with me. I think if you do that, like you get like really efficient, really good organizations. And that is such a fun opportunity also, right?

00:34:22 NICK LALL
Yeah. I guess part of the thesis has always been that you're modernizing and professionalizing a more traditional business. ai kind of just adds steroids to that and allows you to do that at a much higher level than in the past have you had any most surprising insights or ways that ai was helpful in ways that you didn't expect it yet or not so much but it's also again you know i'm expecting a lot i mean i'm extremely optimist on this end so it didn't really surprise me i mean i had more some negative surprises to be honest right which is a bit like with what we said before you know in emerging markets sometimes i wanted to use for example in these support functions

00:34:39 JAN RIEHLE
so much but it's also again you know i'm expecting a lot i mean i'm extremely optimist on this end so it didn't really surprise me i mean i had more some negative surprises to be honest right which is a bit like with what we said before you know in emerging markets sometimes i wanted to use for example in these support functions uh llms and turns out like often the transactional cost with an lm is higher than actually like a human operator because human operators here are so cheap right i mean then also you know you need to realize there is a cost curve and it gets gets cheaper so if that is the case you know tomorrow this is not going to be the case anymore and in fact already now we're getting below it kind of depends on from whom you buy right you can buy directly from the source or you can buy from a layer an application layer on top and if you buy from the application layer yeah then probably it's it's cost prohibitive um in an emerging market in the us probably not even that so sure So even if sometimes you have these kind of figure these things out that here, it doesn't really make sense yet. So what, you know, next year it's going to be different for sure. Yeah. And I would also say that's an opportunity for us companies is that people may have been more hesitant to outsource certain tasks,

00:35:47 NICK LALL
I would also say that's an opportunity for us companies is that people may have been more hesitant to outsource certain tasks, but if the outsource person is using Chash EPT to give you an answer in native English, I mean, it also just enables people around the world also to do similar level work to the ones in the more expensive countries would be. So definitely a lot of interesting opportunities out there. Maybe you could just finish with talking about what your long -term goals are for B4A. Where do you see the company going? What would be the ideal outcome for you?

00:36:18 JAN RIEHLE
Sure. One thing also, if you want to do a search fund in an emerging market is that you need to kind of have a very long horizon. Because basically in an emerging market, often you don't have the same liquidity that you have in developed markets, right? Like today in B4A, we are at the size where the number of acquirers is... already not that big anymore potentially virus at least national ones i mean not saying there are none but it's already like a limited group right so um then ideally you have a long -term vision and i do have a long -term vision i think a lot of things that we do in this beauty ecosystem we can actually internationalize so one way for people going forward is to internationalize at one point and we even think about maybe going to the us Just because the market size and the degree, especially in this market, in this beauty market, the degree of innovation that we see from here is maybe not as far as we think it could be. So we think we could go there at one point. In terms of creating liquidity, maybe at one point somebody comes and acquires us. I mean, I'm not rolling that out, but it's not our... primary focus like I think we may do some kind of IPO some kind I mean don't know yet where the things like having some conversations right now more local but also we thought about the SPAC deal maybe even in the US that could also be an option at one point so yeah I have a very long -term vision I think that this idea of democratizing beauty has become very strong and it kind of really make it like concrete right by actually really showing it for consumers for brands for influencers and we think we can do a lot more in latin america and also outside of latin america and in the next whatever five years ten years or even more than that i think another thing is like you need to have extreme persistence also in an emerging i think it's probably in every market but maybe even more in the emerging market right because things sometimes don't work with the speed they work in the western world they take time building a business overall is not something that works like extremely quickly it's just you know the cases you hear in the press sometimes somebody builds a business sells it up to one year i mean it exists but it's not usual usually building a business really creating something that adds value to the world does take time and probably even more though in the emerging market and it also is difficult so if you are not like very resilient and willing to keep up with that uh maybe don't don't do a search in any market to be honest yeah entrepreneurship is never easy and in emerging markets there are a lot of other things you need to deal with as well so it takes a certain personality to actually succeed at it and i do think though that the benefit of sticking it out for the long term is the emerging markets are where humanity will be in the long term so if you have that sort of

00:39:01 NICK LALL
entrepreneurship is never easy and in emerging markets there are a lot of other things you need to deal with as well so it takes a certain personality to actually succeed at it and i do think though that the benefit of sticking it out for the long term is the emerging markets are where humanity will be in the long term so if you have that sort of buy and hold long -term strategy you're not trying to exit quickly absolutely no absolutely i don't want to discourage anybody i think you know when i look at search funds back then there was almost no search fund in brazil like back then in 2017 i think there was one team and i i kind of met them for a coffee and we exchanged ideas and stuff i'm not really following so actively but i think today there are actually like 10 or even more in brazil

00:39:23 JAN RIEHLE
no absolutely i don't want to discourage anybody i think you know when i look at search funds back then there was almost no search fund in brazil like back then in 2017 i think there was one team and i i kind of met them for a coffee and we exchanged ideas and stuff i'm not really following so actively but i think today there are actually like 10 or even more in brazil So it developed a lot and yeah, I think there are opportunities, right? There are opportunities because there are a lot of businesses and all the local businesses and brick and mortar businesses where people are looking for somebody to take over at one point. So yeah, I think I want to encourage everybody to go this route.

00:40:00 NICK LALL
Sure. Yeah. I mean, the opportunities are out there. You just got to have the right mindset to do it. Was there anything else you wanted to cover that we didn't cover so far?

00:40:10 JAN RIEHLE
I think I said most of the things, Nick.

00:40:17 JAN RIEHLE
If there are no more questions on your side, I mean, thank you. Thank you very much. I hope I could inspire some people also in the US who maybe think that there are a lot of opportunities to look at emerging markets and go a bit outside of the usual market considerations. I think overall, entrepreneurship is pretty amazing, pretty interesting. It doesn't really matter if you do a search fund or if you do a startup or if you do a mix of them, right? I'm feeling like I'm doing kind of a mix of them, right? Because I acquired instead of one business, I got two and then I got some capital into it. It was more like a startup. It doesn't really matter. I mean, entrepreneurship is you're taking a risk and you're doing something new and you innovate. And that's always an amazing experience.

00:41:00 NICK LALL
Sure. Yeah. I think it's one of the best things a person could do. So thanks so much for joining on. It was an absolute pleasure and wish you best of luck with your amazing company that you run. Thank you very much, Nick. Great talking to you.