Kavak Raises $700M, Valuation Doubles to $8.7B

Kavak Secures $700 Million in Series E Funding

Kavak, a Latin American pre-owned car marketplace headquartered in Mexico City, has recently announced the successful completion of a $700 million Series E funding round. This substantial investment results in a valuation exceeding $8.7 billion for the company.

Significance of the Funding

The scale of this funding is particularly noteworthy, representing a significant amount for any startup, especially one operating within Latin America. This announcement follows closely on the heels of a $485 million Series D raise just five months prior, which valued the company at $4 billion.

Notably, Kavak has now doubled its valuation twice within the current year, having achieved unicorn status last October. The company now stands as the second most valuable startup in Latin America, trailing only Brazilian fintech firm Nubank, which was valued at $30 billion earlier in the year.

Investment Details

General Catalyst, based in Cambridge, Massachusetts, spearheaded Kavak’s Series E round, bringing the company’s total funding to over $1.5 billion since its founding in 2016. Tiger Global, Spruce House, D1, SEA, Founders Fund, Ribbit Capital, SoftBank, and other investors also participated in this latest financing.

Kavak’s Core Business Model

In essence, Kavak functions as an online marketplace designed to enhance transparency, security, and access to financing within the used car sector. The platform is dedicated to facilitating trustworthy transactions and mitigating the risks of fraud.

Furthermore, Kavak aims to elevate the standards of used vehicles through mechanical and safety improvements, leveraging artificial intelligence and data technology. The company also provides its own financing options via Kavak Capital, its fintech division launched approximately 18 months ago.

Vision of the Company

“I often explain Kavak as a fusion of Spotify, Amazon, Toyota, and Citibank,” stated Kavak co-founder and CEO Carlos García Ottati in a recent interview with TechCrunch.

The company’s business strategy is demonstrably effective, with Kavak experiencing revenue doubling every three to five months, according to García Ottati. This growth is reflected in the company’s expansion from 300 to over 5,000 employees across Latin America, responding to substantial demand.

Operational Growth

Currently, Kavak operates 40 logistical and reconditioning centers in Mexico, Brazil, and Argentina. This represents a significant increase from the 20 hubs and 2,500 employees in Mexico and Argentina at the time of its previous funding round in April.

Over the years, the company has served “hundreds of thousands” of customers.

Future Ambitions

“The primary benefit of this funding isn’t necessarily about immediate need, but rather a reflection of Kavak’s long-term ambitions,” García Ottati explained. “It will enable us to focus on building a lasting, generational company.”

Beyond facilitating car ownership, Kavak is committed to financial inclusion and improving the professional and personal lives of individuals, as highlighted by García Ottati. His inspiration for founding the company stemmed from personal challenges encountered while buying and selling cars in Colombia and Mexico.

Impact and Expansion Plans

“If we succeed, we anticipate a 30% growth in the middle class within emerging markets over the next two decades by providing financial products to those currently excluded, offering a tool to improve their lives,” he stated. “Our goal is to evolve into a super app, an ecosystem of services that promotes mobility and financial well-being, extending beyond simply buying and selling cars.”

Kavak intends to utilize the new capital to expand its presence throughout Latin America, with plans to enter several new markets within the next year. Long-term, the company is also considering expansion into other emerging global markets.

The company also plans to continue its hiring efforts, particularly focusing on engineers and product developers, and to further invest in product development.

Positive Impact on the Latin American Startup Ecosystem

García Ottati also expressed enthusiasm regarding the impact of Kavak’s funding on the broader Latin American startup landscape.

“It’s beneficial to introduce new investors who haven’t previously invested in the region, allowing them to assess the potential of LatAm,” he said. “They can recognize that we are addressing significant and complex issues.”

Investor Confidence

Adam Valkin, Managing Director at General Catalyst, believes Kavak has firmly established itself as “the clear leader” in the Latin American pre-owned car market.

“The company has developed a successful model for delivering a transformative customer experience with a compelling and efficient economic structure,” he stated. “We are excited to support Kavak’s expansion into other emerging markets, driving financial inclusion and empowering the middle class through access to car ownership.”