Miami — By Marcella McCarthy
Kavak today announced that it has raised a $700 million Series E at an $8.7 billion valuation, making it the most valuable private company in LatAm after Nubank. The company more than doubled its valuation since April when it announced a $400 million Series D that valued the company at $4 billion. It hasn’t even been a year since the company achieved its unicorn status in October 2020.
Kavak, which was founded in 2016 in Mexico, is an online marketplace that aims to bring transparency, security and access to financing to the used car market. The company also offers its own financing through its fintech arm, Kavak Capital, and counts more than 5,000 employees - a year ago they had 300 employees - across Mexico, Brazil and Argentina.
Now we’re bigger in Brazil than we were in Mexico in year three.
Carlos García Ottati, Kavak’s CEO and co-founder.
Back in April they had just soft launched in Brazil, but, “Now we’re bigger in Brazil than we were in Mexico in year three,” said Carlos García Ottati, Kavak’s CEO and co-founder. “Most of our growth has come from the last 18 months,” he added. In Brazil alone the company has more than 700 employees.
Kavak has grown at lightspeed in part because the used car market in LatAm is informal and there’s a high fraud rate - 40% in fact - making it fertile ground for a company that buys used cars, refurbishes them, offers financing and therefore allows people to buy a better quality used car than if they were to buy a new car for the same price.
Ottati said the company is not yet profitable, and while he wouldn’t disclose specific revenue numbers, he did say that the revenues from the Brazil operations are growing by more than 40% month over month.
The company plans to use the money from the current raise to grow its operations into more cities in Mexico and Brazil, to expand further in LatAm and to expand outside the region.
“We want to cross the Atlantic,” said Ottati, who wouldn’t name specific countries. “What we are really trying to assess is whether we can or cannot add value in the market and what new muscle we will develop that we can bring back to our core businesses in Mexico and Brazil,” he added.
When assessing a new country to pursue, Ottati said they look at the following factors:
- The informality of the market; how exposed to fraud it is?
- What are the financial conditions of the market?
- Are we going to seriously solve a mobility problem there?
- Do they have high mobile phone penetration? (Kavak, which is app and web based, is moving all its operations to their app)
Bloomberg Línea asked Ottati why he raised two rounds back to back, and he said at the time of the last round, Brazil hadn’t fully launched yet, and there was no way for them to predict that it would grow so quickly. And while it seems like Ottati raised the Series E almost overnight, he explained that he takes a long approach to raising capital, and instead has been cultivating the relationships for months if not years.
“So by the time they become investors, it’s just a validation of the work they’ve seen. It’s like a marriage; we’ve been dating for such a long time and then [we] just add the documents,” he said. “I’m not in the business of looking for investors, I’m looking for partners,” he added, having previously told me that access to capital hasn’t been a challenge for them.
The round was led by General Catalyst, with participation from Tiger Global, Founders Fund, Softbank, Ribbit, Spruce House, D1, SEA and others.