The first was skepticism: When Marcelo and his best friend, Alan Mota, got into the gray-market miles business and it grew very big, very fast, the airlines came after them. "They told us it was illegal, but we found a way to do it legally," says Marcelo. "It taught me that you don't have to do what people tell you, no matter how powerful they are. A lot of times, we live by the limits that are given to us, and it stunts our potential."
The second was service: Because his mile-buyers would often call only once, on impulse, Marcelo vowed to be available 24-7. It's a lesson he never forgot: Today, Brightstar is still known for "overwhelming the client with service," as BellSouth's Paulino Do Regos Barros Jr. puts it.
To handle their constant calls, the air-mile buccaneers went shopping for cell phones. Every store they visited around Boston had terrible service. The owner of one place complained to his two new customers about how much he hated the business. On the spot, Marcelo made him a deal: If the shop owner sold him the business for no money down, Marcelo would pay him in full in six months. He kept his promise: By the end of those six months, Marcelo and Alan had the largest cell phone franchise in Massachusetts, with stores in strip malls across the state.
They did it by applying the same impulse-friendly technique that had worked so well for air miles: Marcelo would have salespeople stationed in cars all across the state, just sitting in convenience stores with phones in their trunks. As soon as a potential customer called for information, Marcelo would dispatch his nearest rep. "You could buy a cell phone from us faster than you could get a pizza," he says. "My goal was to remove every possible barrier between an impulse and a purchase."
Two hours...
Never one to miss a meal, Marcelo slides back into the room shortly after the food arrives. Perhaps in deference to his guests, lunch is surprisingly all-American; instead of grilled Cuban sandwiches or rice and beans from Marcelo's favorite Latin diner, one of the tables is laid out with cold cuts, pickles, and side salads. While Marcelo loads his plate with a thick turkey sandwich and coleslaw, the VC guys are bringing up disaster scenarios.
"What about the ongoing risks in Latin America?" VC 2 asks. With Venezuela suddenly freezing its currency, and Colombia embroiled in drug wars and kidnapping epidemics, and Zapatistas still roaming free and angry in southern Mexico, how secure could any U.S. business be, especially one that depends on shipping lots of merchandise across desolate terrain?
"That's our strength," CFO Oscar Fumagali responds. "We get the best people on the ground, and we protect ourselves by knowing more than anyone else about how to secure and move our product." Brightstar has become highly skilled at scheming up ways to get paid in the midst of chaos; because no one can afford to have cell phone operations shut down, Brightstar has perfected methods for getting their collectibles transferred around currency freezes.
It's because the area is so tricky that Marcelo got into Latin America in the first place. When he and his three "crazy" buddies decided to get out of vendor sales and into global distribution, they had just enough money to make one serious stab. Dave Peterson, who is now vice president of sales at Brightstar's Chicago office, mortgaged his house for $250,000, and Marcelo borrowed his father's life savings.
They set up a small office in Miami because they'd decided that Latin America had three perfect components for budding entrepreneurs: confusion, demand, and disfunction.
The confusion came from dispersement: Latin America is made up of dozens of countries with a dizzying mix of currencies, government regulations, import tariffs, and trade restrictions. If Brightstar could make themselves into Latin American Talmudists and find ways to safely go where other companies wouldn't, that information would have concrete market value, because phone manufacturers would gladly pay to outsource that nightmare.
The demand aspect was obvious: The region's populations were growing rapidly, and typically the first major appliance any consumer buys, even before a car, is a phone.
Which leads to the disfunction: Because only 17% of the Latin American population had access to telephone landlines, the market was wide open for affordable satellite service.
90 minutes....
"Okay, so what's to stop your customers from just going to the manufacturers directly?" VC 2 asks. "Yes, let's talk about this for a moment," VC 1 presses. "What would happen if you got Telefonica Moviles all set up, got their logistics and forecasting all tidy, and they said, 'Thanks, guys, we'll take it from here,' and went to the manufacturers themselves?"
Once again, VC 2 seems to be on to something; earlier, in private, Marcelo had talked about the backstabbing he'd suffered during Brightstar's early days. "There are a lot of honorable people, but there are a lot of scumbags who would kill to save 25 cents." He shrugged. "We got cut out of a lot of deals, $10 million to $12 million deals, but we just moved on to the next."
But those days are long over. "We deal with this every day," Marcelo begins, and as he answers, the full impact of Brightstar's accomplishment is finally revealed.
During the 2000 telecom crisis, Brightstar didn't just content itself with seizing the business the bigger companies had abandoned. Marcelo knew that telecom chaos and Latin American instability wouldn't last for long, so he had to move fast to fortify his position before the competition came storming back in during the recovery.
And that was Marcelo's brainstorm. He worked up the supply chain in both directions, appropriating as much of the inventory process as he could from both manufacturers and network operators. Ordinarily, there's no reason for a distributor to penetrate beyond the loading dock door, but what gave Marcelo his opening was the fast turnover in technology. He could just drop new phones off at stores in, say, Honduras, but how would they get rid of the old ones to open up shelf space? No problem; Brightstar would buy them back (at a markdown, of course) and ship them to one of their other country-clients where last month's fashion was late to arrive.
