Courted by fintechs, Brazilian mobile operator Fluke seeks capital, creates new revenue streams

Growing at a fast pace, Brazilian digital mobile operator Fluke is moving to create new business fronts. Unabated by the slowdown in the venture capital markets, the startup is also looking for additional financial resources and becomes increasingly attractive for fintechs.

Fluke was founded in 2018, with a value proposition centered around no-strings-attached mobile plans that can be customized according to customer needs. Created by Marcos Oliveira, Augusto Pinheiro, Vinícius Akio and Yuki Watanabe, who at the time were students who sought to cater for other university students, the startup was widely accepted by the general public. The customer base, which has already surpassed the 11,000 mark, has grown more than seven-fold over the last year and monthly revenue is increasing similarly.

Additional milestones for the company in recent months were an equity crowdfunding round, orchestrated by Kria, which attracted 5 million Brazilian reais ($1 million) from 621 investors, and had former Nextel executive Roberto Rittes as a deal partner. In addition, the company sought additional capital in a bridge round; all these funding rounds, which raised 12 million Brazilian reais ($ 2.3 million), went towards boosting the company’s expansion in the 21 states where it operates. Also in 2021, the startup was selected for the Black Founders Fund, Google‘s initiative for companies with black people on the founding team, and joined Y Combinator’s acceleration program.

Based in São Carlos, a city approximately 200 miles away from São Paulo, Fluke has a busy year ahead, marked by important decisions. Following YC’s guidance, which urged its founders to expect the worst, the startup is set to pursue organic growth, testing new revenue lines and protecting cash, as well as pursuing short and medium-term profitability.

“It is wise that we adapt to the current context. Six months ago, I would probably have been talking about growing faster, but with much higher cashburn,” said Fluke CEO Marcos Oliveira, in an interview with Startups.

Approaching fintechs

Despite the more conservative scenario, the MVNO will need more capital, and has already started the fundraising process, and is in talks with both national and foreign funds. About the conversations with investors so far, Oliveira says that funds have a certain fear about regulatory changes in the telco segment in Brazil.

In addition to these local issues, there is an focus on unit economics. “One thing that has changed in the approach of all the funds, especially at this pre-Series A stage that we are at, is the fact that they are looking much more at revenue generating capacity,” he said.

Without revealing how much he is looking for this time, Oliveira said he had to adjust the approach in his pitch, precisely to respond to the current macroeconomic context and investor demands. “A lot of our cashburn would go towards customer acquisition. But if I’m going to maintain a more organic growth, around the community we already have, I’ll reduce the demand for capital for customer acquisition”, he said.

Even before the current market correction, one of the highlights of Fluke‘s pitch is the customer acquisition cost (CAC), which the startup says is about 50% lower than other major players in the sector, with more than a third of the base coming from recommendations. According to Oliveira, the startup has a turnover rate of 23%, while the rate at major operators is around 35% and 50%, depending on the quarter. The estimate of the average revenue generated over the customer’s lifetime value (LTV) is 30% higher than that of the country’s telecommunication giants – a great deal for players who seek to increase the recurrence in their base.

These players include the fintechs. According to Oliveira, the digital operator has been approached by financial services companies since 2020. “What catches the attention of this type of company is [Fluke being] a service with a very high recurrence of use, and which generates a lot of consumption data: you manages to understand very well the behavior of the customer, when he is online, what he consumes. This is interesting for companies that already have a customer base, but want to generate more information about them, or even create new revenue lines”, he said.

About 80% of Fluke‘s base is made up of young people between the ages of 25 and 39, who also consume other digital services. Another interesting point is the fact that a third of these customers’ cell phone bill payments take place via Nubank, the biggest digital-only bank of the country, with more than 53 million active users.