How a Philly college student's sneaker start-up is helping Latin American artisans climb out of poverty

Unlike most students who walked at the University of Pennsylvania graduation this month, Fernando Rojo won't officially earn his diploma until he completes a few additional classes over the summer.

That, it turns out, is the price of launching a business that's made thousands of sales in 15 countries — while supporting artisans in impoverished areas in Peru and Argentina — in between studying math and economics.

Rojo's start-up, called Patos (as in, "zapatos," Spanish for shoes), peddles sneakers and slip-ons that marry traditional South American textiles with current styles and a feel-good international development story.

While many customers are familiar with the model of TOMS, which gives away a pair of shoes for every one purchased, Rojo thinks what he's doing is even more beneficial — supporting local cobblers instead of undercutting their business.

"My belief is the way to drive an economy, not for a short period of time but in a sustainable way, is to give people employment," he said. "That's why our focus as a company is to empower the people that create our product, to bring employment to areas that might not have it and provide a better working environment and better pay."

Rojo, whose partners are also students — D.J. Corbett, a rising senior at Penn, and Josh Carn-Saferstein, a friend who graduated from University of Michigan this spring — has been learning through doing, making plenty of mistakes and almost going out of business once or twice along the way.

But he had guidance in the form of a Wharton School of Business entrepreneurship class that has helped jump-start other successful enterprises, including ChargeIt Spot, a leading provider of cellphone charging stations to restaurants and retailers; Deliveroo, a food-delivery start-up recently valued at more than $2 billion; and Harper Wilde, a fast-growing online bra retailer.

Patrick FitzGerald, who teaches the class, said he was excited enough about Rojo's product that he bought a pair of Patos for himself. He said he saw potential in the brand because of the stylish design, quality craftsmanship and potential for social good.

But he also saw in Rojo the same thing he's seen in his other most successful proteges: "The students who have been successful are the ones who aren't distracted by the day-to-day life of a college student. They'll run through walls to build their start-ups." ​

Rojo said he's always had that entrepreneurial drive.

He grew up spending summers in Argentina, where his family is from, and the rest of the year in Ann Arbor, Mich.

There, he and other neighborhood kids sold lemonade during football games. But he chafed under market regulators — namely, the parents who set a fixed price for everyone.

"I didn't like that," he said. "So I invited someone to park in my parents' front lawn, and they give me $20. I parked nine cars and went from making $5 a game to a little over $200 when I was 6. That was the moment I knew I wanted to be an entrepreneur."

His parents weren't pleased with that — or Rojo's next endeavor, at age 11, when he taught himself to code and built a website that hosted pirated TV shows. "I didn't know much about copyright law," he admits.

But when he got to Penn, he was ready for a new project. On winter break his freshman year, visiting family in Argentina, he stumbled on a market stall surrounded by a crowd of tourists. Looking over their shoulders, he saw an array of slip-on flats made with colorful woven fabrics. He got into a long conversation with the craftsman, and ended up bringing home a suitcase full of them.

"I didn't have much of a plan. I just wanted to see: Can I get people to pay money for this?"

It turned out, he could. He created a brand, picked up a few retailers, and built a website to sell online.

People liked the shoes and loved the story. But, soon, he realized his manufacturing and distribution channel — that is, Rojo flying back with a suitcase of shoes made by one guy in Argentina — was far from adequate.

"There was a time when I was out of money, we were almost out of shoes, and we were close to not existing as a company," he said.

That's when Rojo decided to take time off from school and scour South America for manufacturers, calling small-town economic development offices and learning about foreign trade policies in various countries. He drew up a list of 20 cities, and spent a year visiting them, meeting craftspeople and looking at their products.

Then, he connected with a family in Peru over WhatsApp, and was struck by both their skill and their pride in the quality of their work. Rojo sent them a sketch — a simple sneaker accented with a patch of one of the colorful woven fabrics that first caught his eye in Argentina — and they sent back photos of a finished shoe.

"I decided to just take that picture and put it on my website of preorder. A lot of people ordered them."

Still the one thing neither he nor the artisans had was money for quality materials, like rubber and leather, to make a durable shoe. So, he launched a Kickstarter, setting a goal of $45,000 in sales. He ended up with more than $60,000 — and they were back in business.

Today, Rojo still orders the slip-on flats from the craftsman in Argentina. The family in Peru makes the sneakers, which represent most of his sales. The shoes are priced from $95 for canvas sneakers and flats to $145 for leather sneakers.

Rojo said they're making three to five times more than Peru's minimum wage, which is about $280 per month in U.S. dollars. He said they've become like a second family to him.

Now, he said, his goal is not to take over their business but to help them grow it — including finding other outlets for their wares, such as at trade shows or tourist markets.

That's often a benefit of such enterprises, said Eric Verhoogen, a professor of economics at Columbia University who focuses on industrial development.

"Is it transformative? Maybe not," he said. "But this sort of model can be quite beneficial for the community in which production is happening, in part because many times people in the community don't really know what the end consumer in the U.S. or another rich country wants. The advantage that companies like this one bring is they know the consumer."

Other researchers have found that, when local producers are provided with export contracts, it can have lasting impacts on their business.

David Atkin, an MIT professor of economics, created such a randomized, controlled trial with rug producers in Egypt; he found that producers who received export contracts earned 20 percent to 30 percent more, while their productivity and the quality of their work also improved dramatically.

"These types of programs are very promising," he said, as a means of helping impoverished communities. In fact, he considers it far more beneficial than the type of skill-building workshop typically offered by aid organizations, often with minimal follow-up. "Whereas, in this relationship there's a buyer that says if you make high quality shoes we'll give you business, so your incentive is very strong."

And, he agrees, it's a better model than TOMS, pointing to a study of the impact of the shoe giveaways in El Salvador. "It finds that people don't really need shoes that much," he said. "They have shoes; then they get a slightly nicer pair of shoes. It doesn't change their lives."

Rojo's goal is to sell 10,000 shoes next year, as he works full time to scale up the business. He already has a warehouse in New York from which he's distributing directly to online purchasers and to a growing number of retailers that, so far, include a handful of J.Crew locations.

Verhoogen said the impact in Peru will depend on how much Patos is able to grow. "And that depends on how much us consumers are willing to pay to ensure that their shoes or other products are being produced under conditions that they approve of. The open question is, how much demand there is for products made with ethical sourcing?"