Kavak Becomes First Mexican Unicorn

Habemus Mexican Unicorn!

Kavak became the first Mexican unicorn after reaching a valuation of US$1.15 billion in its latest funding round last month. The SoftBank-backed used-car buying and selling platform  has raised more than US$400 million in total funds since its founding in 2016. "We know our story is just beginning and we have a lot to build and many customers to satisfy yet. We will not stop until we transform the world's auto industry," CEO Carlos García Ottati said in a statement on Thursday.

The startup implemented a digital model based on purchasing cars from individuals, then refurbishing them and offering them for sale to the public. It has two reconditioning centers, one in Lerma, State of Mexico and another in Guadalajara, Jalisco. In August, Ottati announced the platform would invest US$10 million in Argentina, its first venture outside Mexico, over the next 18 months.

“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. Our headline will be: Kavak Building Latin America’s Best Team. In five years, we may go public as well. We have great ambitions,” told Ottati to Mexico Business News in an interview back in June.

With SoftBank's investment, Kavak is the newest firm in Latin America to become a unicorn, after the Loggi delivery application and the Gympass gym membership application, both from Brazil, and Rappi. In 2019, SoftBank promised to invest US$5 billion in Latin America, something Mexican investors praised as a potential game-changer for young companies struggling to raise funds locally. 

“It is unbelievable the pace at which the Mexican entrepreneurial ecosystem has grown; less than 10 years from the first institutional seed rounds to the first unicorn!,” wrote Fernando Lelo de Larrea, Partner of the venture capital ALLVP, on his Twitter account just after the announcement. Lelo emphasized that Mexico has a young, digitized population of 126 million, as well as a GDP five times larger than India's and 20 percent larger than Brazil's. “It was a matter of time for its first unicorn and it is a matter of time before it gives the best-realized returns in the world for those investing VC today,” he added.

🇲🇽Mexico has a population of 126 million, young & digitalized,& a GDP per capital 5x larger than 🇮🇳 & 20% larger than 🇧🇷.

It was a matter of time for its first unicorn 🦄

It is a matter of time before it gives best realized returns in the world for those investing VC today.

— Fernando Lelo de Larrea (@ferlelo) October 1, 2020

More news below:

• Mexico is a privileged and promising country. Its strategic geographical position, labor force and long-standing relationship with companies have made it the number one destination for startups in Latin America. According to research carried out by ALLVP, a venture capital fund, Mexico is the main destination for the expansion of startups, as is the case with Colombian companies such as Rappi and 16 other startups.

• Having a collaborative digital ecosystem is the first step to bridging the gap between companies at the peak of the digital pyramid and those at the bottom. “The pandemic forced us to see allies everywhere. At the beginning of the pandemic in the country, Jüsto, a Mexican online supermarket, allied with Urbvan to be able to ship its products. That kind of news means that we are on the right track to understanding that we can generate more value when we work together,” said Andrés Díaz, Co-Founder and Managing Partner of Atomic88, in an interview with MBN this week.

• Intel’s CEO in Mexico Santiago Cardona believes we are living a historic moment that requires the best of us. “Our ability to innovate, collaborate and create and companies’ agility in the face of change, will remain relevant and competitive,” he wrote for MBN this week. In this piece, Cardona addresses the importance of people’s creativity for a company, regardless of its line of business.

• The digital transformation went from being at the bottom of the list of priorities for companies to the top in just a few weeks. The lack of budget, however, is something that these players have had to deal with. According to an IDC survey, 18 percent of SMEs in the region are looking to strengthen their digital education, as 80 percent of them stated that digitalization is the only way to overcome the current situation.

• On Tuesday, the Argentinean neobank Ualá started operations in Mexico. So far, the startup has raised just over US$190 million in investments and has more than 500 employees. “After 18 months of work, we are very happy to offer all Mexicans a safe, innovative and truly free product,” its founder Pierpaolo Barbieri said in a statement. “We are proud to be part of the technological transformation of money and to lead a revolution that will change the way people see and understand their personal finances.”

• The Government of Jalisco and DiDi signed a collaboration agreement to implement smart transportation technology in the state with the aim of reducing road traffic. The Chinese mobility company reported that the tool analyses and optimises congestion at traffic-light crossings in real-time which, together with the traffic lights of the State's Intelligent Mobility Management System (SIGA), can improve mobility.