Scaling Engineering Teams in LatAm: Chris Cali, Newfound Equity
Chris Cali is a serial entrepreneur with two successful exits and the co-founder of Newfound Equity, a flexible capital partner for lower-middle-market IT and business services companies.
In our latest interview, we sit down with Chris Cali, a serial entrepreneur with two successful exits and co-founder of Newfound Equity, a flexible capital partner for lower-middle-market IT and business services companies. Chris previously co-founded Spark Digital, a media-focused technology consulting firm serving clients like NBCUniversal, WWE, and Verizon before its 2021 acquisition by intive. He shares insights on scaling a 400-person nearshore operation, navigating M&A from both sides of the table, and how AI is reshaping tech services.
Q&A
Tell us about your journey with Spark Digital and how you built the business.
I started my career in software engineering, working at Sony Music and then Maven Networks, which Yahoo acquired. After that experience, I started my first business, Panvidea, an early Amazon-based SaaS company doing video transcoding and distribution for large media companies. We sold that in four years - not a huge success, but a ton of learning.
Importantly, that was the first time I had built an engineering team in Argentina. I’m a dual citizen - my mom was born and raised there - so it was the first place I looked, and it turned out to be a really great source of talent.
After we integrated Panvidea into the acquirer, the 10 developers in Argentina and I started looking for consulting work and very quickly landed a gig with Verizon, who was launching their first media services division. We became their core development team, and we thought, “We have something here, why don’t we try to find the next client?”
So we started Spark Digital and really leaned into the vertical expertise, doing custom product development for media companies. Over 10 years we built that to about 400 people - 350 of them were in Latin America and about 320 were in Argentina. We had customers like NBCUniversal, Major League Baseball, Dow Jones, and WWE.
What were the critical elements to scaling from 10 to 350 people, and what were the biggest challenges?
People businesses are hard, no matter where they’re located. Externally, client-facing, you need to understand the client’s business, deliver high-quality services with people the clients want to work with, and do the right thing whenever mistakes are made - because they’re going to be made. The bar was shockingly low in all these areas in the market.
Internally, there are some specifics to Latin America. There’s inflation, and engineers are getting offers in dollars on a daily basis from companies that aren’t exactly playing by the rules all the time. You have to do the right thing when it comes to money - cost of living increases might be quarterly or monthly.
But outside of that, you have to build and foster an environment where high quality is rewarded. As a former developer, I know how developers want to be treated - you have to listen, let them bring ideas forth, provide a clear career path and growth plans. Treating them like they’re worthwhile is half the battle. So many companies look at their nearshore location as “less than” versus a core part of their business.
How was your team distributed between the US and Argentina operations?
We were both involved in all sides of the business as founders, especially in the earlier days. But to keep it easy, I tended to be a little bit more client-facing with the sales and marketing team here in the States. We did have project management and some key architects here as well. But my partner Francisco was from Argentina, lived in Argentina, and focused a lot on the operation side of things. It was a very good setup for keeping an eye on both sides of the business.
How did you attract and retain talent as the market became more competitive?
I think the quality of client matters a lot. Smart developers want to work on great projects. We really focused on product development for our clients - we didn’t want to be the outsourced team working on periphery, non-mission-critical stuff. We said no to a lot of that type of work, and that served the purpose of attracting developers who wanted to be a crucial part of the business.
We also tended to skew pretty senior level, even when we sold the business. We weren’t that perfect pyramid where you have a few seniors at the top and lots of juniors at the bottom. We never hired anyone we would have considered junior right out of school. It was great for clients, and the people in town that other people wanted to work with were working with us.
Having the thought that anything you do as a leader is going to get down to people who are trying to join your company matters. By treating your developers well, doing the right thing with cost of living increases, and providing clear career paths, word gets out that you’re not “the other guy.”
What would you do differently now, having gone through the transaction process?
We never thought about the business as something we were building to transact. We wanted to build a profitable business that we didn’t have to raise money for, because raising VC money for our previous company was not a great experience.
We had a maniacal focus on profitability, but also the balance of profitability to reinvesting in your company. Because we were building with the idea that we’re going to do this forever, it made the investing easier. We were long-term thinkers about it.
When you have to sacrifice utilization for new training or do a cost of living increase before the exchange rate catches up, you do the right thing knowing that in the future it’s going to be okay. Turns out, you actually build a really healthy business by doing that. When it came to transaction time, we were in a good spot.
The transaction itself was a huge learning experience. Working with a bank and learning how to talk about your business in ways you’ve never thought about before was super interesting. It’s a lot of the same conversation over and over with different buyers, so it can get tedious, but if you’re proud of what you built and have a great business, you’ll find the right buyer.
We were very much convinced that we were willing to not take the highest price for our people to have a really good place to land. In fact, we didn’t take the highest offer because of that reason. As a founder-owned business, you kind of have that luxury.
Now that you’re on the investment side with Newfound Equity, what do you look for in companies?
If you’re a founder looking to run a process and go out for sale, you really have to start thinking about that a year or two in advance. That’s from a preparation perspective, making sure you have the right team in place to tell the right story for the ongoing success of the business.
We’re really looking for founders that want to continue on, that want to build a big business. Our case is unique in that we are independent sponsors - we don’t have a committed pool of capital, we’re raising money deal-by-deal. We’re much more open to situations where the founder wants to continue and doesn’t want to move fast with a traditional private equity firm that’s going to put a lot of debt on the business and do aggressive M&A that might break culture.
They might have 10 more years to give and want to continue sharing in profit dividends. We have the ability to find the right investors for the right situation, and we’re very open to that.
Are there any technology trends that have caught your eye, particularly around AI?
Every conversation we’re having has some AI component these days. How it impacts development services firms depends on their level of specialization, their business model, and their ability to use it.
If you’re specialized with intimate knowledge of a certain vertical or the nuances of a particular solution, you’re going to have defensible pricing and can use AI tools to your advantage. But it’s going to be harder to be just a staff aug, price-forward arbitrage company going forward.
To capture the efficiency benefits, it might make more sense to fixed-price a project. You’re going to have to quote projects with value pricing because you’re going to finish much faster or with less manpower. If you just charge hourly rates for bodies in seats, you’re going to have a challenge justifying that.
On the investor side, they’re going to have to be willing to accept and value recurring revenue, but if things are more fixed price and value based, you’re going to have to look at whether they did this project for this large company, then the next one, and they’ve been a client for five years - that’s just as good as a recurring revenue model.
You have to make the decision to invest in AI, and that’s harder than it sounds. You’re going to have to maybe reduce some utilization for trial and error and training time. Those who make that investment are going to benefit in the long term.
What other trends are you seeing around partnerships and alliances?
Something I learned from one of the investment firms that looked at Spark heavily is around alliances and partnerships. That’s an area we never looked at - we always wanted to be the objective third party. We thought that if we were getting some sort of referral fee from a partner, it was unethical, but it’s just not true. I’ve completely turned the corner on that.
I’m seeing so many companies balancing partnerships well these days, especially around data and AI. Microsoft, Databricks - these companies are really leaning into their ecosystem and investing in AI themselves. You want to benefit from their investment versus thinking you can develop it on your own.
If you have a strong partnership with one of these companies, you get early access to their new AI tools and have the necessary time to work that into your process. There are tons of benefits from partnering.
How are you sourcing deals at Newfound Equity?
We took a thematic approach from day one. We laid out three themes of areas we wanted to source businesses in. First is e-commerce services firms, specifically around the Shopify ecosystem - that’s a wave going up and to the right. Second is managed service providers and cybersecurity firms, which becomes even bigger with AI coming. Third is what I call “AI readiness” - companies that used to be called big data. Big enterprises know they have to use AI but still don’t know where their data is. These are your Databricks partners, your Snowflake partners.
We’re generally looking in the 2 to 10 million EBITDA zone. My partners Mike and James are experienced private equity investors with a lot of banker relationships. I think we stand out because I built a real business, and a lot of independent sponsors don’t have that track record.
Mike jokes that there was a business we really wanted to meet in New York - the hottest thing in AI services - and when I reached out cold with a little blurb about my story, I was having drinks with the guy the next day. If he as a PE guy had reached out, there’s no chance the founder would have returned his call.
We’re leaning into the fact that I can relate to founders better. I’m honestly happy to help them even if we’re not the right buyer - let’s just stay in touch, I’ll make connections, and think long-term about the situation. It’s clear when we talk to founders that we really want to roll up our sleeves. I’m not just an operating partner brought in for one deal - I’m an owner in the firm.
I can lean into areas I was successful at prior, like establishing nearshore operations, helping them build a verticalized go-to-market strategy, investing in thought leadership marketing, and protecting culture at all costs. We’re more flexible on hold times, don’t want to kill the business with debt, and don’t want to do M&A that doesn’t make sense.
Are you open to mentorship and helping other founders?
I’m always very willing to meet new people, and I learn from them as much as I hope they can potentially learn from me. I’m always happy to be helpful to anybody in this space, and who knows, maybe there’s something we can do together in the future.
You can reach me at ccali@newfoundequity.com or on LinkedIn.
Any book recommendations that helped you in your career?
100% - “Managing the Professional Services Firm” by David Meister. It’s like the Bible in this space. I read it very early on in starting Spark and referenced it almost like a dictionary. I’d remember, “Oh, now we’re at this point where we should be investing in middle management - how do we do that?” I found myself continuously going back to that book.
Connect33 is a full-service consulting firm specializing in market entry, expansion, and software engineering team building in Latin America. With extensive experience in the region, we help companies scale efficiently by providing experience-based insights and services with on-the-ground experts.
Our list of companies we’ve scaled with includes mid-to-large enterprises such as Apexon, Atrium, Bain, Braze, C3 AI, EPAM, phdata, Terminal, and more.