A Mexican company of used cars surprised everyone in early October by claiming the title as the first Mexican unicorn. Kavak announced that it had achieved a valuation of more than $ 1.15 billion after a successful investment round.
This company began operations in 2016. Its business model was based on acquiring used cars from individuals and then reconditioning them and selling them to the public. The company started with three cars and has since raised more than $ 400 million in funding.
Among Kavak’s investors, the Japanese conglomerate Softbank, Kaszek Ventures and General Atlantic stand out, which have been key players in the creation of more Latin American unicorns.
An innovative or old model?
One of the most surprising things about this ad is Kavak’s business model. The company now valued at more than a billion dollars focuses on buying and selling used cars. His biggest innovation so far is the creation of an online store that the user can explore.
Kavak’s online store is responsive and the user can easily explore the options available on the page. But that’s what we expect from every digital store, isn’t it? What is it that makes Kavak a successful startup, besides being in an early stage?
The main difference between an SME and a startup is its scalability. Using technological tools, the company can offer service to 100 or a million users without having to significantly increase its operating expenses.
A website for selling used cars broadens potential buyers. However, Kavak also employs 700 workers to recondition the cars it is going to sell. If demand increases, so will your staff. So, is it a really scalable business?
Kavak: another WeWork?
Kavak would not be the first Softbank investment to come under fire for its business model. Previously, many commentators and investors criticized Softbank’s investment in WeWork, which in the eyes of many was just another real estate company.
In the end, Adam Neumann’s mismanagement proved the criticism well-founded. WeWork preferred to cancel its IPO and Softbank lost money for the first time in 15 years in 2019, causing many to wonder if Masayoshi Son had lost his touch.
So is Kavak really an innovative business model? Is it much more scalable than the plethora of Mexican fintech companies vying to become the first Mexican unicorn?
The highlights of Kavak
Regardless of whether Kavak deserves the title of “startup” or “unicorn”, it is worth highlighting the company’s achievements that have earned it the trust of large investors.
Softbank International CEO Marcelo Claure highlighted that Kavak has managed in a short time to transform the buying experience of the sale of used cars. The company solved above all a problem in the sector: the security in the purchase.
With the acquisition of the Argentine company Checkars, with a similar turn, Kavak has also managed to begin its internationalization with a view to Brazil.