Team Analysis: Gaston Taratuta

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aston Taratuta, Aleph Group Inc.

Gaston Taratuta

Aleph Group Inc., Miami, FL

Developing a $2 billion valuation global giant with an investment of $5,000 – at VC speed

– with no VC.

Gaston Taratuta landed in Miami in 1996 with $300. He enrolled in Florida International

University (FIU) for his undergraduate degree in liberal arts. By transferring credits from

his college in Argentina, Taratuta was able to graduate in the class of 1998.

But Taratuta did not have enough money to pay his fees and was forced to borrow from

relatives. He also had to ask an employee at FIU to delay cashing the check he had given

them until the money arrived from his relatives. It was a balancing act, which has become

a Taratuta strength. He graduated with a Certificate in International Marketing in the MBA

class of 1999.

After getting his MBA, Taratuta was eager to start a full-time job in online advertising. His

strength was in sales, and he wanted to get on the ground floor of an emerging industry.

Through an application on Monster.com, Taratuta contacted UOL, the biggest Internet

provider in Brazil. He wanted to help digital companies advertise on UOL’s various

platforms to reach consumers. But as he told Alejandro Revich of UOL, “I do not know

anything about the digital ecosystem. But selling is my breakfast, lunch, and dinner. I will

learn digital advertising.” At first, Revich was reluctant to hire Taratuta, but when Taratuta

started talking about mutual Jewish friends in Buenos Aires, Revich continued talking and

offered him a job. In two years, Taratuta became a high potential employee and had risen

from sales rep to sales director.

In 2005, Taratuta moved back to Miami to form Internet Media Services (IMS). UOL had

decided to close the Miami office. Taratuta had a choice – to become an entrepreneur and

an independent agent for the company in Miami. Or get another job.

Before the Start

The early years. The Argentine dictatorship had a direct influence on Gaston Taratuta’s

life. Taratuta was born into a middle-class Jewish family in Buenos Aires. His father was

a successful entrepreneur in the shoe industry and was kidnapped in an extortion plot by

the military. In addition, his parents divorced. During these difficult times, Taratuta was

also threatened with expulsion from his secondary school because his family could not

afford to pay his fees and remembers going into the principal’s office terrified that he was

aston Taratuta, Aleph Group Inc.

going to be expelled. But the principal reassured him and found an anonymous donor who

paid for Taratuta’s schooling.

Early lesson. When Taratuta was 18, he learned his first sales lesson. His father directed

him to go sell a suit in Montevideo, in neighboring Uruguay. Taratuta could keep the

money from the sale. Taratuta took the boat and spent all day walking all over Montevideo

with no luck. That is when a guy standing next to him complimented him on his shoes,

asked about the size, and whether he would sell it for $20. Taratuta sold the shoes for $20,

bought some cheap shoes for $1, and returned home.

Creating opportunity with the Rolling Stones. Between 18 and 24, Taratuta was an

entrepreneur in Buenos Aires. He organized live music events in the region and succeeded

on some while failing on others. Taratuta’s friends were enjoying these events on “Gaston’s

back.” When he went to a movie, he was busy counting the number of filled seats versus

empty seats in order to understand which movies did well and which did not. Taratuta often

had no answer when his dad questioned him about the movie because he had been busy

counting seats and had missed a significant part of the movie. In 1994, the Rolling Stones

toured Argentina on their Voodoo Lounge tour, and Taratuta wanted to profit from this

tour. He negotiated with the promoters to allow him to sell tickets in neighboring Uruguay.

He committed to sell 1,000 tickets in return for the right to sell in Uruguay. He asked the

ferry company between Argentina and Uruguay to sell the tickets, but they did not sell too

many. So, Taratuta decided to do the job himself and promote it heavily among Stones fans

in Uruguay. The tickets sold out – especially after Uruguay fans saw the high demand in

Argentina, long lines at the Buenos Aires ticket counter, and a fan dying while trying to

cut into line.

Find the underserved segment. Each ticket cost 50 pesos (which would have been about

$50 at the time). Taratuta did not have the cash to buy the tickets for resale. So, when a

customer bought a ticket, he received a voucher from Taratuta who then used the funds to

buy the ticket and give it to the customer in two days in return for redeeming the voucher.

Due to the huge demand for the tickets in Argentina, Taratuta was able to sell the 1,000

tickets in Uruguay for 50-peso each (for which he received a 15% commission) along with

his own processing fee of 40 pesos. Taratuta did well.

Understand the customer’s perspective. In 1996, at age 24, Taratuta moved to Miami

with $300 in his pocket. He had a friend who was a consumer electronics retailer and

distributor with an exclusive for many labels for Latin America. There was no Internet at

the time, and Latin Americans, who could afford it, came to Miami to buy electronics.

aston Taratuta, Aleph Group Inc.

Taratuta started to work in the friend’s consumer electronics store for a salary of $180 per

week and started learning the electronic retailing business.

The business represented many assorted brands, including Yamaha. One day, a Yamaha

executive visited the store, and looked over Taratuta’s sales record. He noted that Taratuta

only sold amplifiers priced less than $1,000. Taratuta explained that he did not think that

buyers would pay for the expensive amplifiers. The executive asked Taratuta how much

he had in his pocket, which was $5. The executive then gave him $200 and told him to

always carry at least $200 in his pocket and touch the money whenever he saw a customer.

The lesson for Taratuta was that even if he did not have money, others did.

Differentiate yourself in an undifferentiated industry. The next hurdle for Taratuta was

to learn how to differentiate himself – and develop a customer acquisition strategy. Taratuta

believed that businesses could differentiate themselves either by product or by customer

service. He did not have much of an opportunity to differentiate in services, and therefore

he wanted to make his product offering unique. There were more than 500 stores on Flagler

Street selling consumer electronics to consumers flying in from Latin America to buy in

Miami. These were customers who would drive directly from the airport to Flagler, stroll

up and down the street checking prices before buying from the lowest-priced store.

Focus on the high end and get the right skills. In an effort to differentiate himself and

offer an attractive product that was unique, Taratuta decided to focus on high-end home

theaters where he had exclusives. He realized that focusing on the high-end with home

theaters would mean that he would appeal to about one out of 100 potential customers. His

strategy was to “low-ball” prices on all requests and wait for the customer to return. When

they did, he would use his sales skills to upsell the customer – 3 out of 10 customers bought

the expensive home theaters.

Pivot to the emerging industry. In 1999 Taratuta graduated with his MBA and decided

to find a new job. He saw an ad on Monster.com for e-commerce sales. Universo Online

(UOL), the largest Internet Service Provider (ISP) in Brazil, was looking for a salesperson

in the U.S. At the interview, Taratuta admitted that he did not know much about Internet

selling, but that he knew how to sell. The sales director for UOL was not impressed. As a

final effort, Taratuta, who had recognized the director’s last name as being East-European

Jewish, asked if he had any relatives at his old school in Buenos Aires. That broke the ice

as the director’s brother had attended the same school. Taratuta got the job.

Get unicorn skills in the emerging industry. Taratuta spent the next 3 months learning

from the director, at the end of which he knew as much as anyone else about digital

aston Taratuta, Aleph Group Inc.

advertising and selling. Taratuta notes that an industry is simple to understand in the early,

emerging stage because there are few players and fewer products. As the trend matures,

products advance and increase, and markets grow, the industry becomes more complex,

and the number of competitors expands. After markets mature, the rate of growth of

information slows down, but the industry complexity is higher.

Go to the center of the flame. When UOL decided to close its office in Miami. Taratuta

had to decide between working for the company as a commissioned rep or finding

something else. He believed in the industry’s potential, which was evolving at an

exponential rate. Taratuta had two choices – to switch to AOL in Miami or move to Brazil

to work for UOL with the same title and salary. Taratuta asked 3 people for their advice,

and the unanimous advice was not to move to Brazil. One said that Taratuta should refuse

to go even for a salary of $1 million. Taratuta did just the opposite and moved his family

to Brazil in 2003 for two years. By the end of the two-year period, Taratuta did well in

Brazil – he was promoted from salesperson to Head of Sales for UOL – at the age of 31.

Question 1: Analyze if there is an opportunity.

Question 2: What should Taratuta do?

Question 3: What would you do?