Kovi Raises $104M Series B to Expand Car Ownership in Latin America

The Expanding Accessibility of Vehicle Access in Latin America

The widespread availability of opportunities like becoming a rideshare driver is often assumed. However, this overlooks the significant number of individuals who desire such income streams but are hindered by a lack of vehicle ownership – a particularly prevalent issue in nations beyond the United States.

Kovi's Mission and Recent Funding

Founded in 2018 and based in São Paulo, Kovi was established to address this challenge by providing access to these opportunities for those previously excluded.

Kovi recently announced a $104 million Series B funding round, co-led by Valor Capital Group and Prosus Ventures. Additional investors included Quona, Broadhaven Ventures, GFC, Monashees, UVC Investimentos, PIPO, Norte, Maya Capital, Globo Ventures, Tinder co-founder Justin Mateen, and PayPal co-founder Peter Thiel, through his family office. This brings Kovi’s total equity raised to approximately $145 million, supplemented by a recent $20 million debt facility. While not yet a unicorn, the company’s valuation remains undisclosed.

Company Origins and Expansion

The company was started by Adhemar Milani Neto and João Costa, both former executives from 99 (Brazil’s first tech unicorn, also known as Didi). Initially, Kovi focused on renting vehicles to on-demand drivers working for platforms like Uber, Didi, and Lyft.

The service has since expanded to include food delivery personnel.

Addressing Vehicle Ownership Barriers

Kovi’s “all inclusive” car subscription model is predicated on the belief that greater participation in the gig economy is possible if more Latin Americans could afford a vehicle. Approximately 75% of Latin Americans are unable to own a car due to the high costs of purchase and upkeep.

Vehicles are significantly more expensive in countries like Brazil compared to the U.S., and this disparity is amplified by lower average incomes. Obtaining financing is also often difficult and costly, with credit access limited in many Latin American nations. Kovi co-founder and CEO Adhemar Milani Neto reports that 60% of loan applications are rejected by traditional banks, and even approved applicants face interest rates as high as 30% annually.

Kovi’s Asset-Light Approach

Kovi provides drivers with “quick access to quality cars” at a “fair price,” without requiring them to own a vehicle. The company employs an asset-light model, partnering with OEMs like Toyota and Volkswagen through rental agreements to offer vehicles, complete with insurance and maintenance.

“Our mission is to promote a revolution in this market, making car ownership affordable, less complicated and accessible to an underserved population,” stated Neto. “We aim to provide a range of options, creating a platform for urban mobility and expanding possibilities for our customers.”

Growth and Key Metrics

In 2020, Kovi experienced over 70% customer growth, now serving more than 11,000 users across Brazil and Mexico. The company’s fleet currently comprises 12,000 cars, with plans to add another 20,000 by the end of 2021.

Kovi’s annual recurring revenue (ARR) is approximately $45 million, with month-over-month growth exceeding 15%. According to Neto, the company is “very close” to achieving profitability and anticipates doing so this year.

Competitive Advantages and Innovation

“Our mission is to make car ownership more inclusive, human and efficient using technology and financial innovation,” Neto explained.

Kovi differentiates itself through connected vehicles, leveraging data science and analytics to enhance user experience and offer competitive pricing, according to co-founder João Costa.

The company has also transitioned from relying on third-party insurance to providing its own insurance services.

“We basically built an insurance company from scratch,” Neto said.

Adapting to the Pandemic

Initially impacted by the pandemic in 2020, Kovi swiftly adapted by introducing a pay-per-mile model, effectively functioning as a “Root Insurance for car owners,” as described by Neto.

This model proved beneficial for drivers, and Kovi enhanced its B2C offering to provide access to a car with comprehensive coverage, including insurance, 24-hour roadside assistance, and preventative maintenance.

“Once things got more back to normal, the on-demand economy scaled really fast,” Neto said.

Expanding Service Offerings

Over the past year, Kovi broadened its scope to include long-term car subscription options, which have proven successful, now accounting for 35% of the company’s revenue since launching in October of the previous year.

This expansion also benefits Kovi’s OEM partners, providing a more profitable model than traditional sales to rental companies or end consumers, with recurring revenue for 12-24 months and subsequent resale opportunities through dealerships.

“We’re now taking Kovi to the broader OEM market. We see this as a global business model that extends not only in Brazil and Mexico but across LatAm and to other developing countries,” Neto added.

Future Plans and Capital Allocation

Kovi will utilize the new capital to expand its services to new cities in Latin America and strengthen its existing operations in Brazil and Mexico. Funds will also be allocated to technology development, particularly data management and pay-per-mile capabilities.

The company plans to grow its 700-person team by hiring developers, software engineers, and data scientists. Additionally, Kovi intends to launch new financial services and products, including its recently launched auto insurance offering, Kovi Seguro, and a “rent to own” option for drivers aspiring to vehicle ownership.

Investor Perspectives

Prosus’ Banafsheh Fathieh highlights Kovi as a financial services company that enables consumers lacking traditional credit access to incrementally work towards car ownership through a subscription plan.

“Because Kovi owns and manages their fleet during the rental period — and therefore can control the fleet remotely — it is able to cater to a severely financially underserved population that’s typically considered higher risk by creditors,” Fathieh explained.

Valor co-founder and managing partner Scott Sobel believes Kovi is strategically positioned to capitalize on three significant trends reshaping the Latin American car ownership market.

Key Market Trends

The first trend is the growth of the ride-hailing industry, with approximately 1.5 million on-demand drivers in Latin America, projected to triple in the coming decade. Cities like São Paulo, Mexico City, and Rio de Janeiro are key markets for companies like Uber.

The second trend is the increasing adoption of car subscription services, currently at less than 0.5% in Brazil but expected to reach 10-20% within five years due to changing consumer preferences.

“Being one of the first movers in LatAm gives Kovi an edge,” Sobel stated.

The third trend is the disruption of the auto insurance market by more flexible, customer-centric, and tech-driven models. Currently, less than 30% of Latin American drivers have active car insurance policies.

“These global trends will provide greater access to millions of drivers in the region,” Sobel said. Valor was impressed by Kovi’s traction and the “strong competitive moats” it has established, including verticalized maintenance centers, a driver’s wallet, and IoT systems integrating the entire fleet.

“Kovi is a very smart company, obsessed with metrics, tech and product innovation,” Sobel concluded.