Colombia is focusing on its economy in the aftermath of a long civil war.
Colombian entrepreneurs Simón Borrero, Carlos Mejía and Felipe Villamarín have impressed global investors with their game-changing mobile start-up, Rappi (“fast” in Spanish), which aspires to become the “Everything Store of Latin America.”
The US-educated executives, whose LinkedIn profiles boast business degrees from the likes of Stanford University and ESADE, have convinced New York hedge funds, including DST and Sequoia Capital, that Rappi, founded in 2015, can be a regional unicorn in the grocery delivery line, beating competition from such well-funded rivals as Uber Eats, Glovo, and iFood. The financiers’ faith in the business case led them to invest more than $200 million in the company’s latest funding round last summer, valuing it at over $1 billion.
But pan-regional Rappi, whose couriers are becoming ubiquitous in Colombia, Mexico, and Argentina, faces multiple challenges in its plans for an initial public offering in 2021. “Their numbers are not very sexy, and when you ask about them, they say they still have many challenges and are consolidating growth,” says Carlos Rodriguez, head of equity research at Colombian brokerage Ultraserfinco. He believes uncertainty prospects for profits could derail Rappi’s planned Nasdaq debut.
Rappi also faces security and labor issues. The recent death of a Buenos Aires courier heightened the need to improve safety guidelines and issue formal contracts, efforts that could eventually pressure the bottom line.
“They don’t have labor contracts for their ‘rapitenderos,’ who recently organized to acquire them,” Rodriguez says. “This could pressure profits down the road.”
But with Rappi’s low price of $1 USD per delivery and expansion into new categories such as fashion and cash delivery, the leadership team projects the image of a juggernaut. Their recent marketing tie-up with South American foodstuffs chain Exito has been successful, Rodriguez says, while a new partnership with Visa, enabling credit card payments, is also going well. Rappi boasts a roster of more than 50,000 local partners. It is currently growing revenues by 20% annually and plans to hire 100,000 couriers in the next few years, up from just over 20,000 currently.