Locaweb, a Brazilian web hosting and cloud computing company, has created a new subsidiary called Wake to serve a previously untapped segment of the market, namely medium-large companies.
The new subsidiary will integrate six recent acquisitions – Tray Corp, All In, Ideris, Samurai, Síntese, and Squid – and offer personalized services to companies with e-commerce GMV between R$ 1 million and R$ 500 million per year, and physical operations that invoice up to R$ 5 billion.
Wake’s target customer segment is larger than the medium-sized companies that Locaweb already serves but smaller than the giants served by companies like VTEX, Shopify, and Salesforce.
According to Locaweb CEO Fernando Cirne, there is a pent-up demand for this client segment in Brazil, and the company aims to provide a more personalized service to this group of customers. Wake’s project began with the arrival of Alessandro Gil, a former executive from VTEX who joined Locaweb a year ago as executive director of Enterprise Platforms – SaaS and Commerce.
Since then, Gil has worked to integrate and increase cross-selling among the group’s companies. Now, he has been promoted to vice president of enterprise solutions at Locaweb and will become the general manager of Wake.
Despite having a lower upfront margin compared to the SME business, Wake’s target customer segment has lower churn and higher revenue. As a result, over time, the margin increases. Integration and higher margins have been recurring demands from investors in recent months, and these demands have penalized the company’s stock, along with the entire gloomy picture for Brazil’s tech industry.
Locaweb’s market value has fallen by 50% in the last 12 months, and its share is trading today at R$5.17. However, BTG still maintains its buy recommendation for the company, seeing it as discounted in relation to its rivals abroad, such as VTEX and Shopify.
While Wake’s focus is on medium-large companies, Cirne emphasized that Locaweb will remain a growth company and will continue to focus on profitability while also growing revenue. Despite market demands for profitability, Locaweb aims to keep growing, and Cirne said, “We are not going to become a company that grows 6% a year. Our margin will grow more than revenue, but we will remain a growth company.”