From the left to the right: Marcelo Maisonnave, Tito Gusmão, Rodrigo Grundig, Kelly Gusmão and André Gusmão, the founders of Warren. Photo: Warren/Courtesy

Amid the crisis, Brazilian investment startup Warren almost doubled its team size and received BRL 120 million

LABS talked to Tito Gusmão, CEO of the Brazilian startup which currently has BRL 2 billion in assets under management and intends to quintuple that amount by the end of 2021

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Amid the economic crisis caused by the coronavirus pandemic, Brazilian investment startup Warren is in full expansion mode. After hiring 100 new employees and opening another 100 job vacancies not yet filled in the last two months, the digital asset management firm announced that it will receive an infusion of approximately BRL 120 million (nearly $22.4 million) from a pool led by the venture capital fund QED Investors, which has already invested in unicorns like Nubank and Loft.

The round also includes the participation of the Argentine fund Kaszek Ventures, Chromo Invest and Ribbit, which were already investors in the company since a Series A round, and MELI Fund, WPA and Quartz, which invested together with QED, in Series B. The first round raised by Warren took place last year, with an investment of BRL 25 million ($4.6 million).

In an interview with LABS, CEO Tito Gusmão explains that fresh capital will be invested to continue expanding Warren’s operation in Brazil. “There is so much opportunity here in Brazil that expansion to other Latin American markets does not cross our minds. Maybe in the distant future, but now there is a trillion reais from Brazilians invested in savings, which is absurd,” he says.

From the left to the right: Marcelo Maisonnave, Tito Gusmão, Kelly Gusmão, Rodrigo Grundig and André Gusmão, founders of Warren. Image: Warren

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Founded in 2017, Warren doubled the assets under its management during the period of social distancing to prevent COVID-19, and remotely hired 30% of the current staff.

The company currently manages BRL 2 billion in assets and intends to quintuple the amount by the end of 2021, reaching the BRL 10 billion milestone. The broker offers, through its platform, 400 products, including seven funds of its own.

During the interview, Gusmão talked about Warren’s growth, the arrival of “superapps” and the renewal of the investment market in the country, which recently witnessed a public spat between broker XP and Itaú, the largest private bank in Brazil.

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LABS – How will the raised investment be applied by Warren?

We will use it on three fronts. To increase staff, as today the team is reaching 300 people. In the last two months we have hired almost 100 people and there are still 100 vacancies open, so we will invest a lot in the team to continue delivering the best investment experience and process efficiency. With benchmark interest rates nearly at 2% in Brazil, you either deliver technology or you are dead. We were born with the DNA of a tech company and we intend to invest even more to continue delivering when investing.

But another part is antagonistic to remote technology. Today we have 7 physical locations to receive customers and we should expand this until the end of the year. We believe that investment is a relationship of digital experience, but also a relationship of trust, especially if you are going to invest more money.

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LABS – Where are Warren’s offices today?

Today we have seven physical offices: in Porto Alegre, São Paulo, Florianópolis, Curitiba, Jaraguá do Sul, Itajaí, and Blumenau and we must expand to five other locations to arrive at the end of the year with 12 physical spaces to receive our customers. Finally, we will invest in our partners, professionals to align investments. We have a model that is different from one of autonomous agents, that XP and BTG Pactual use, and which gave rise to all this controversy regarding conflict of interest (the two companies compete for autonomous agents, even stealing these professionals from each other).

We have more than 200 partners connected with clients on the platform and we will invest a lot to increase this base and create this job of an investment professional who delivers investments in an aligned manner.

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LABS – Can you better explain how Warren’s 3.0 remuneration model works?

There are two models of remuneration in the industry. There is what is called commission-based, in which the commission is embedded in the products, and it is in this model that banks and brokers run. How does it work? I’m an investment broker, and I sell you a product. Since the remuneration is on the product that I indicate, eventually I will sell you the products whose commissions are higher. That’s how Itaú and XP work, no matter how much they argued.

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Another model that exists is the feebased, in which there is a single and transparent fee in the management of investments, and all the products in which you invest the commission come back to you. The professional on the other side will charge, for example, half a percent per year to manage the investments, and all commission received for the products return 100% to the customer.

LABS – Why do commission and fee matter?

Since I will not receive a commission on the product I recommend, I will always recommend the best products for you. So it’s a model aligned with the customer, zero conflict of interest.

The curious thing is that the fee-based is how the super-rich invest, via family offices, exclusive funds. I include in these super-rich the owners of brokerage firms and banks, that is, they invest in a model aligned to them but sell models that are out of alignment and then fight on television

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Our B2C works in the aligned model. Today in our structure we are an asset management firm and a brokerage. So we distribute all of our firm’s products and also the others offered in the market. We charge 0.5% per year for managing the client’s wealth. Other products (the U.S. and Brazilian equities, private credit) are zero-rate. On third-party products, we return the commissions we receive to the customer. For our partners, B2B, we are a platform that delivers technology, access to the stock exchange, and the alignment model. So they charge their clients an annual, transparent fee, and use our platform to offer investments.

LABS – And did you see an increase in investment demand during the pandemic? There are surveys saying that Latin Americans are saving more because of the crisis.

We have seen the demand, we have been breaking records in the last few months, but not only for saving, because we are going through a pandemic moment and people are seeing the importance of having an emergency reserve and etc., but mainly because the benchmark interest rate in Brazil is 2.25% per year. If we had this conversation 4 or 5 years ago, the interest rate was 14% per year, and then it was possible to be “lazy” when investing. It was possible to leave the money in a not so good product at the bank and still earn 1% a month. Now it’s no longer possible. Now the Brazilian looks at the bank statement and sees that he is no longer making money. The natural flow is either google how to invest better, or to read investment articles in a newspaper, or to ask friends, since savings yields no longer exists.

So we are seeing a large inflow of Brazilians – and that was the point that bothered Itaú – leaving banks and seeking investment platforms. The same thing happened in the United States many years ago.

In Brazil, 93% of the money is deposited in five banks and 7% of Brazilians’ money is in investment platforms. In the United States, 90% of Americans’ money is on investment platforms and 10% on banks, so it’s the opposite. We are seeing the beginning of this race of Brazilians leaving banks because they need to invest better

LABS – What was Warren’s growth compared to last year?

We more than doubled compared to last year and this year we also doubled, even if we are still in the seventh month of the year. We are growing fast and so is the market. The Stock Exchange registered 1 million Brazilians until a year ago, now it has 2.5 million investors, so it is the Brazilian’s race for better performance, and many of them are discovering the world of variable income now.

LABS – How many customers do you have?


LABS – And are the operations only in Brazil?

Yes, we have a fund in which it is possible to invest from here in Brazil in U.S. companies, but the operation is 100% in Brazil. There is so much opportunity here in Brazil that expansion to Latin America does not cross our minds. Who knows in the distant future, but now there are a trillion reais from Brazilians who are investing in savings, which is absurd. We want to save these people who are investing in bad products in Brazil. Then, who knows, you may have another place to look.

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LABS – Do you disclose revenues?

No, we don’t.

LABS – We have seen some companies looking to create their investment platforms, wanting to offer SuperApps. Now PagSeguro has announced that it may have “its own XP”. How do you see this market in Brazil?

I think it’s fantastic, hopefully PagSeguro will come and other platforms will come. There is a race between PagSeguro, MercadoPago, Banco Inter, which is to be not a new XP, but a new WeChat, which is the platform in China where people do everything. You pay the bills, receive a salary and make an investment. Banco Inter has this engagement thesis. As they are more engaged than Magazine Luiza – for example, people access Banco Inter once a day and Magazine Luiza would only be accessed when buying a television, for instance. So naturally you have more engagement at Banco Inter and in theory he will be able to sell a television more efficiently than Magazine Luiza. Which is what happens in China.

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But I don’t really believe in that model here. Especially when we are talking about investments in higher values. Because if you work, you’ll want to invest money well so when you get to an age of retirement you have good assets. Investment is serious, it is different from buying a T-shirt or a television. You need to make good decisions and you need to be well advised to do so. I do not believe that people will invest large amounts in the same place where they can buy a TV or a hamburger. A small amount will be invested, which is what happens in China, in WeChat. There is an average of BRL 500, bringing it to the Brazilian currency.

LABS – Is PagSeguro a competitor for you?

I think it is cool that PagSeguro (a Brazillian acquirer and neobank) offers better investment products, as today they offer a basic one. This popularizes investments and I think this is important. It is popularized in the Brazilian mind that savings is a good investment, and it is not. Savings returns 70% of the Selic (Brazilian benchmark interest rate) and still has that absurdity of the fixed date, that is, you invest on the first day of the month, you have to wait until the first day of the next month to liquidate the performance, which is already something bad.

It is nice for other platforms to popularize a world of investments besides savings. But, to invest more money you need to have someone on the other side focused 100% on investments. So I don’t believe that PagSeguro is, for example, a competitor for Warren, because our mission is to focus on investments and to have professionals helping to build wealth management in the most efficient way possible.