Mexican used car startup Kavak raised a record amount of financing to fund a major expansion into Brazil and is now valued at $4 billion.
The Mexico City-based startup plans to begin operations in Brazil after the Series D funding round which raised $485 million and was led by D1 Capital Partners, Ribbit Capital, BOND and Founders Fund Management LLC.
The company, which currently operates in Mexico and Argentina, may enter additional countries in the coming 24 months, said co-founder and chief executive officer Carlos Garcia.
“The market is enormous, it’s broken and it’s really informal,” Garcia said in an interview, adding that the used-car market is worth $60 billion annually in Mexico alone, with 80% of those transactions made between individuals. “The pandemic accelerated consumers’ trust in digital platforms, and car demand will continue growing globally due to social distancing needs.”
Kavak buys used cars through its app, refurbishes them and then sells them to consumers, with the option of giving them medium term financing. Company transactions surged during the pandemic as stay-at-home measures encouraged buyers to move safely in their own cars, and look for cheaper second-hand options. The company grew to 2,500 employees in the past six months, up from 500 before.
The company is planning to use the financing to grow its car inventory to 30,000 cars in the next 18 months — up from 12,000 vehicles currently — and to boost its financing credit lines, invest in technology and in infrastructure including warehouses and refurbishing centers.
Kavak’s upfront investment in Brazil means that it will have more infrastructure there than in Mexico, its home market which is currently its largest.
Kavak was founded in 2016 after Garcia faced multiple setbacks when trying to sell his car to move from Colombia to Mexico, from mechanic issues to receiving incorrect information on the car. That drove him to add transparency to a market prone to fraud, and with potential to grow across emerging markets beyond Latin America, Garcia said.
In prior rounds, Kavak has been also backed by SoftBank Group Corp., Greenoaks Capital, DST Global and Kaszek Ventures, among others. Garcia declined to give an estimate for when the company might look to do an initial public offering.
