Kavak Doubles Its Value Thanks to Funds
The first Mexican unicorn Kavak, which leads the used car market, has become the second most valuable startup in Latin America after doubling its value to US$8.7 million.
Kavak’s Executive Director Carlos Garcia told Reuters that the company netted US$700 million during its Series E round, following only the Brazilian fintech company Nubank in startup value across Latin America. Founded five years ago, the rapidly growing company was able to achieve this task thanks to funders such as General Catalyst, SoftBank Group Corp and Peter Thiel’s Founders Fund, as well as due to its unique understanding of the market.
“If we add social distancing and the fact that people are also prioritizing savings given the harsh economic conditions, those are ideal conditions for a company such as Kavak to be successful,” Garcia told MBN in June of last year.
When MBN last spoke to Garcia, Kavak offered “more than 2,000 vehicles in optimal conditions and within any price range.” In the less than two years since, the previously owned vehicles offered by Kavak has grown to 15,000 with plans of reaching 40,000 in the coming year. To do so, Garcia hopes to employ over 2,000 engineers and developers by 2022 and continue to expand its market internationally after having successfully arrived in Argentina and Brazil.
An Initial Public Offering is not within the company’s plans, Garcia told Forbes. Instead, Kavak is analyzing global markets, promising an expansion to four or five more countries during the next year.
The COVID-19 pandemic certainly played out in Kavak’s favor, with customers prioritizing a contactless option when looking at purchasing pre-owned vehicles once cities began reopening and populations returned to roads. But an unexpected factor which has favored sales for the startup was the global shortage of semiconductors halting car production worldwide, including in Mexico.
“In the US, you are seeing a shortage of products in the new and used car industry. We are starting to see this early trend in Latin America, we think it’s going to be a huge driver for Kavak in the next few months,” Garcia predicts.
But not all news are positive for the startup. The recent controversial legalization of “chocolate” (illegally imported cars) by president Andrés Manuel López Obrador looking to aid Mexicans in need of a vehicle and without the means to afford one, is predicted to slump used-vehicle sales in the country by 20 percent. But as the company continues to place its focus on international expansion, the impact of the decree on the ever-growing company could be limited.