By Daina Beth Solomon
MEXICO CITY (Reuters) – Mexican used-car platform Kavak has reached a $4 billion valuation after raising $485 million in new funding, it told Reuters this week, making the fast-expanding company one of the most highly valued startups in Latin America.
Kavak, which was founded in 2016 and is backed by Japan’s SoftBank Group Corp, became Mexico’s first tech “unicorn” last October when it reported a valuation of more than $1 billion.
The new capital injection will help Kavak, an online platform for buying and selling secondhand cars operating in Mexico and Argentina, launch in Brazil in the next couple of months, Chief Executive Carlos Garcia said.
He said he expected Brazil, Latin America’s largest economy, eventually to overtake the two initial markets for Kavak, which aims to simplify buying used cars in emerging markets where potential buyers often struggle to dodge fraud and obtain loans.
“We definitely foresee Brazil as the biggest market for Kavak,” Garcia said in an interview on Monday.
The company is eyeing expansion elsewhere in Latin America over the next 12 months, and aims to take the business to emerging markets outside the region in about two years.
“Crossing the Atlantic is one of our ambitions,” Garcia said. “We see a lot of markets – in Europe, in Southeast Asia, the Middle East – where we could have significant value.”
Kavak’s latest funding round, which closed in January, lured U.S.-based investment firms D1 Capital Partners, Founders Fund, Ribbit Capital and Bond Capital.
Kavak last May launched financing arm Kavak Capital, and Garcia said 60% of customers now used that in-house option, which offers interest rates from 14% to 20%, compared with traditional options that he said offer rates as high as 60%.
Yet the speedy expansion has also brought its challenges, with some users complaining on social media of poor customer service. Garcia said he recognized the need for more employees to handle such issues, and recruited 1,500 people in Mexico in the past three months, bringing Kavak’s workforce to 2,500.
“We’re going through the growing phase,” Garcia said. “We’re a long way from having the product where we need to be.”
(Reporting by Daina Beth Solomon; Editing by Peter Cooney)