Business

How Colombian startup Rappi has been leading the way in Latin America's new technology era

And why this is taking the region by storm

  • Sebastian Mejia, Simón Borrero and Felipe Villamarin launched Rappi in 2015, graduating from the Y Combinator startup accelerator
  • Rappi already operates in 50 cities across Latin America
  • The company raised US$185 million and then US$220 million from Delivery Hero, DST Global, Sequoia Capital, Andreessen Horowitz, Monashees and others

A South American on-demand delivery startup from Colombia, Rappi is a rising star within the region, having reached the unicorn status last year and recently attracting $1 billion investment from Japanese group Softbank – a rise that establishes a milestone in Latin America’s venture capital market. 

Such a tremendous and fast-paced success in a region still underrated for its business and technology potential has led us to ask the following question: How is Rappi managing – and succeeding – to lead this technological shift and behavior transformation in the region?

Fernando Chavarro, Product Lead at Rappi

The region has suffered from political instability, economic crises, strikes, inflation, social inequality, corruption… and the list goes on and on. When it comes to reputation, Latin America’s score wasn’t the best in the eyes of global players. 

However, things have been changing for some time now – or so it seems. Why are venture capital and big investment players, like Softbank, investing in these countries? How is it possible that the Colombian startup Rappi raised $1 billion capital from the above-mentioned Japanese group? How can we explain the booming number of startups whose solutions are elevating them to unicorn status within the region in such a short time?

Could it be that it’s because Brazil, Mexico, Argentina, Colombia, and others are heading to a stable and peaceful path in terms of politics and economy? 

Cartagena, Colombia skyline at sunset

Don’t get me wrong. We sure have problems of all sorts here. But these same problems, along with a behavioral shift, are the ones opening plenty of room for a brand new set of opportunities. This behavioral shift has to do with connection: 375 million internet users and 250 million smartphone owners, all the while the e-commerce sector reached $54 billion in 2018, up from $29.8 billion in 2015 across the region.

Latin America has never been more connected. Mobile technology adoption is booming, and people are seeking to get smarter, easier solutions to solve their day-to-day problems. In fact, Latin Americans are eager for solutions – innovative solutions that meet their needs, where traditional ones have been failing.  

In this particular moment, there’s no place in the world with as much potential as Latin America

It is this scenario – this particular match of elements – that made Latin America reach an unprecedented turning point. The keyword? Access.

Startups, technology, and innovation here are pushed to solving real problems and creating real solutions. That’s why these challenging problems also trigger great opportunities. But these are opportunities for the ones who dare to take it. Rappi is one of those.

Latin America’s business transformation

Some years ago it was very hard to open a startup and raise investment in the region. The real change that has generated a wave of growth and booming potential is the money these players can raise in investment: this shapes the speed in which a business can – or can’t – thrive.”

If the Latin American market was once overlooked by investors in the likes of Softbank, Sequoia Capital or Tencent Holdings, now things have changed. Profitable innovations are no longer exclusive to Silicon Valley. 

Softbank is there to prove it. After announcing a $5 billion innovation fund for startups early in March, the largest technology fund exclusively focused on the Latin American market; the Japanese giant conglomerate’s first move was to assign a great deal of this for the Colombian super app Rappi – $1 billion, to be precise.

“Rappi’s founders have a bold vision to create the premiere multi-service ‘super-app’ for Latin America, improving the lives of millions in the region. In less than four years, Rappi has become one of the fastest growing startups in Latin America. This rapid growth demonstrates the immense opportunity in the Latin American region”, said Marcelo Claure CEO of Softbank Latin America to Bloomberg, concerning the recent announcement. 

Other disruptive Latin American players such as Loggi, Gympass and 99 –  to name only a few – have also attracted investments from Softbank:

“There is so much innovation and disruption taking place in the region, and I believe the business opportunities have never been stronger. The SoftBank Innovation Fund will become a major investor in transformative Latin American companies that are poised to redefine their industries and create new economic opportunities for millions of people”, said Marcelo Claure to Techcrunch.

Global investors, such as China’s Tencent Holdings Ltd, Sequoia Capital, Tiger Global Management, Kaszek Ventures, Andreessen Horowitz, and Softbank are investing in Latin American startups along the lines of Rappi, Nubank, iFood and Ualá. Why? Because these are some of the companies changing the business landscape and making Latin America step it up a notch. 

Not surprisingly, Rappi aims to become the largest technology company in the region. They are pushing the Latin America startup ecosystem and e-commerce market to a whole new level – and they are very well-focused and goal-oriented so as to take bigger steps each time. 

Rappi’s bold journey in Latin America

Lima, Peru – Multiple Rappi bikes parked outside a restaurant

Rappi’s purpose was ambitious from the very beginning. The Colombian on-demand delivery startup was born in 2015 already with its sights set to becoming a super app. What began as a service focused on delivering beverages and meals, soon expanded into groceries, tech goods, and medicine.

And this isn’t everything: the super app also offers cash withdrawal, allowing users to pay with credit cards and receive cash from one of Rappi’s delivery agents. Although their app includes stores, pharmacies and beauty services, they also have a feature that literally allows you to buy anything from anywhere. Your wish is their command: access the app, fill in the location info, and give the item’s description, done. 

Gathering a variety of features and following users whole journey, from the moment they start the day, riding a scooter from the Mexican startup Grin, to the end of it, when they are ready to sit down and order a pizza; Rappi is solving logistics, mobility, access, and many other issues for the user. This is their power and craft. 

All this is made possible thanks to a deeply rooted culture innovation. “We always think about what we are doing to improve people’s lives, and if we have an idea, we launch a prototype in two weeks, which helps us understand what can be improved and whether or not we should follow through,”  said Rogério Pagliari, Rappi Pay leader at Brazil to Startse.

In Brazil, Rappi started operations in August 2017 and is now planning a strong expansion. Currently, the company operates in 20 Brazilian cities, besides Argentina, Mexico, Uruguay, Chile, and Peru – a sum of 50 cities across Latin America. 

Operating in 7 countries, Rappi is the first tech unicorn based in Colombia and is already considered one of the top 5 most innovative companies in Latin America. The $1 billion investment of Softbank Innovation Fund will support an ambitious expansion plan. It’s game on for Rappi.

Sebastian Mejía and Simón Borrero, Rappi founders

Challenges

Many have already thought of what happens when one tries to tear the status quo apart. Some have tried. Only a handful have become truly disruptive. But none have done so without facing big challenges.

When Rappi came up with brand new solutions to solve the same old problems, they started facing many challenges. Although the market momentum seemed perfect – given the mix of consumers eager to access these solutions and a fast-paced growth in technology – the company knew it would have to overcome some hurdles.

What happens to a society when disruptive changes crash into the scene? To Fernando Chavarro, “Startups and technology go at a faster pace than any other sector of the economy – while to change laws and regulations, the process is way longer and slow.”

In fact, these laws vs. innovation paradigm are ancient history – and any country has to deal with these types of matters. It is no different for Rappi: they met with resistance, but are currently building good relations with government and market players, according to Chavarro.

When you want to, business works: and Latin America has a culture of knowing how to make things happen

And things are truly happening: Besides the $1 billion from funds managed by Japan’s SoftBank, Rappi has already raised $200 million from its current investors DST Global, Delivery Hero, Sequoia Capital, Andreessen Horowitz, and Y Combinator

The future ahead

There are no people who understand Latin Americans better than themselves – and Rappi is a Latin American solution tailor-made for them.

If the keyword to thrive in Latin America is access, Rappi has it all figured out, since they are offering full support solutions – from delivery to mobility and financial services – for a user wanting to save time. 

More than becoming the largest tech company in Latin America, Chavarro says that Rappi wants to lead the journey taking the region to a whole different level and spread the word out loud to global players. One thing is for sure: they seem to be on the right path, supported by the right people. 

As the American management consultant and author Peter Drucker once said, “The best way to predict the future is to create it”. And this is for the ones who dare to dream – and more than that, who dare to do.