Kavak: Story of a US$4 Billion CompanyBy Alejandro Enríquez | Tue, 04/13/2021 - 13:00
Kavak is consolidating its leadership in Latin America while accelerating disruption in the used vehicle market in the region less than five years after its foundation. This week, the company almost quadrupled its previous valuation of US$1.15 billion to reach the US$4 billion mark after adding more than US$485 million through a Series D round. Mexico Business has kept track of the company's outstanding track record since our early interview with Carlos García last May. Take a closer look at the company's milestones.
Kavak was founded in 2016 by Carlos García Ottati, Looreanne García Ottati and Roger Laughlin. At the time, the start-up was backed up by Mexican Venture Capital firm Mountain Nazca, which invested US$3 million in the company. The company kept growing its online marketplace for used vehicles.
"When a customer buys a vehicle through Kavak, they should know our vehicles have passed an exhaustive 240-point inspection to guarantee the vehicle is in optimal condition. In addition, we recondition the vehicle in terms of aesthetics. Once polished, we take it to our potential customer’s home for a unique experience. Our customers have a three-month period to test for any malfunction," García shared during his interview with MBN.
As the company entered its fourth year of operations, the COVID-19 pandemic disrupted businesses while creating unforeseen opportunities. "given the current circumstances, we are the only alternative that allows people to sell or purchase a vehicle without leaving their home," said Garcia. Kavak's strong sense for innovation led the company to build a "contactless experience" during lockdowns that managed to deliver a daily growth between 5 and 10 percent, according to his founder.
In August 2020, amid the ongoing pandemic, Kavak started its international expansion to Argentina. The company announced the purchase of Checkars, the Argentinian equivalent of Kavak, with a US$10 million investment. "We are happy to communicate the merger between Checkars and Kavak, joining forces to consolidate our leadership in used-vehicle e-commerce in Latin America," wrote Juan Cruz, Co-Founder of Checkars, on a LinkedIn post.
The First Mexican Unicorn
The next breakthrough arrived in October when Kavak became the first Mexican company to surpass the US$1 billion valuation mark at US$1.15 billion. Japanese holding SoftBank Group, Hong Kong's DST Global and US Freenoaks Capital led that investment round. Later, SoftBank and General Atlantic bought Mountain Nazca's shares in Kavak in late April.
Kavak's has managed not only to bring outstanding talent to the company – like Federico Ranero, former General Manager of Uber México as its COO – but also to create strong partnerships with key companies in the sector. "At Uber, we are committed to achieving accessible mobility. Partnering with Kavak for instance, we can enable access for more people to find in Uber a place to generate additional income. This allows us to provide more affordable solutions for those aiming to acquire a used vehicle to then work with Uber," said Gretta González, now General Manager of Uber México.
Another important partnership is the one with BBVA, one of the major banks in Mexico. Ricardo Duhart, Director of Strategy and Solutions, Companies and Government, told MBN that collaborating with Kavak is part of the bank's digitalization strategy. "We are working on a first product that could be replicated on all platforms. The idea is for clients to be able to choose their car, apply for a loan on the same website and receive an approval or rejection immediately to complete the purchasing process."
Experts and industry leaders agree on the added value Kavak brings to the sector. Fernando Enciso Director México at Surman – one of the leading dealership conglomerates in the country – mentioned that the company adds value to the chain. “That change in mindset helped us to get more people to embrace this transformation," he said.
Oscar Silva, Partner Leader of Global Strategy Group at KPMG, agrees: "We are also seeing some innovations in digital sales strategies. Kavak is the clearest example of a successful business where they send a car over to your house for you to test it. Dealerships and brands should balance an immersive digital experience with a final physical interaction."
Kavak's Series D round now added more than US$485 million coming from D1, Ribbit, Bond and Founders Fund, which contribute to a total of US$900 million from private capital since the company was founded. The company has grown from 400 to 2,500 employees, according to BNAmericas. Now, it has 17 locations and four vehicle inspection facilities in Mexico and more in Argentina.
"Kavak will be the unquestionable leader in Mexico in its segment. In five years, we will be operating in a few more countries across the region, with a market share similar to what we enjoy in Mexico. All consumers involved in purchasing, selling or financing a vehicle will see Kavak as their first option given the benefits we will offer," said García when MBN asked for its five-year vision for the company, which last week hit the US$4 billion valuation mark.
"In five years, we may go public as well. We have great ambitions."