Bogotá — Colombian unicorn Rappi, which is backed by SoftBank Group Corp. aims to reach profitability amid the challenges faced by delivery platforms in the country with the closure of competitors such as iFood and Jokr, and has scotched rumors about its sale to DoorDash.
The delivery platform that operates in various Latin American countries has chosen to keep a low profile and has stayed out of the media spotlight while focusing on developing its strategy and new business lines, especially RappiPay, its fintech division, which at the end of last year obtained $500 million in financing.
After Merqueo’s plans to launch an IPO were revealed, the spotlight has been on what Rappi’s next move will be, but which has already ruled out following the same path, at least for now.
At the end of 2021, the company’s co-founder, Juan Pablo Ortega, said on the sidelines of the Web Summit conference in Lisbon that Rappi hoped to launch an IPO last year, but the unicorn, Colombia’s first, quickly responded that Ortega’s statements were “personal feelings.”
The company has recently been holding meetings with the Colombian government regarding a possible regulation of the working conditions of its workers, amid the rumors of its possible sale to US-based delivery platform DoorDash.
However, “at this moment, Rappi is not negotiating a transaction to sell the company,” the platform’s managing director in Colombia, Matías Laks, told Bloomberg Línea.
Despite the challenges faced by startups due to the lack of available venture capital and the return to post-pandemic ‘normality’ that has impacted e-commerce, Laks said that “2022 was a record year for Rappi in terms of operational maturity and growth”.
According to TTR Data, a total of 1,167 venture capital transactions with an aggregate amount of $8.06 billion took place in 2022, a drop of 60.80% compared to 2021.
In Colombia, venture capital investment in startups is estimated to have totaled $1.23 billion in 2022, a drop of 43.41% against 2021, according to TTR Data.
Even SoftBank Group Corp, which has invested millions of dollars in Rappi, recorded the lowest level in its history in startup investments last quarter.
The firm only participated in eight fundraising rounds with a total amount of $2.1 billion, when it used to invest up to $30 billion in more than 90 startups in a single quarterly period, according to Bloomberg.
Matías Laks emphasizes that Rappi is currently engaged in “a responsible and exciting exercise to become profitable”, and will not stop investing in innovation and product development.
“We are working to demonstrate that in Latin America it is possible to build great startups that add value to society and grow while being financially sustainable,” he said.
According to data provided to Bloomberg Línea, Rappi has close to 1.3 million users in Colombia who have placed at least one order a month.
“By 2023 we want to consolidate our expansion plan,” Laks said, adding that, in the last four months, the company has served more than 1.4 million additional customers.
Last year, the Colombian unicorn fell 386 places in the list of the 1,000 largest companies in the country prepared by the Superintendence of Companies of Colombia, based on individual and separate financial statements focusing on operating income for 2021.
Rappi moved from 385th place in the list of the country’s largest companies by operating income in 2020 to 771st place in 2021, and is one of the few nationally recognized technology sector companies to appear on the list that is dominated by companies in the hydrocarbons, telecommunications and commerce sectors.
Rappi had operating revenues of $254.5 million in 2021, but its losses totaled $243.46 million in the same period, while its assets amounted to $405.46 million in Colombia alone.
Objections to Rappi’s commissions
Amid the expansion of the delivery model in Colombia, some restaurants have been able to expand their presence, but at the same time some have begun to complain about the commissions charged by such applications, which, according to sources close to the matter, can be up to 15%.
This was the case of the food chain La Lonchera, which announced late last year that, after failing to reach an agreement on “a fair commission, and failing to receive attention to its request to review Rappi’s hidden costs in a vertical that they call compensations”, they were withdrawing from the app.
According to the restaurant, such ‘compensations’ “are the discounts they give to brands for product shortages”, which between 2021-2022 amounted to $200 million for the company.
Questioned about this, Laks said that “commissions are the result of a negotiation between the partner and Rappi, and are part of a business relationship in which the two parties agree on the conditions and sign a contract”.
“As in any contractual relationship, once the contract is finalized the conditions are reviewed and adjusted or maintained. Rappi does not have standard rate increases and everything is done as part of a commercial negotiation between the parties,” he said.
He pointed out that “all negotiations are framed by contracts in which the conditions are defined in detail. There is no hidden cost in Rappi’s negotiations. We build relationships based on trust and under the premise of transparency, which is why, in some cases, we even spend months negotiating conditions”.