Rappi's complicated balancing act
Carried by an intense culture and seemingly unquenchable ambition, Colombia's first unicorn has to combine growth and profitability while facing scrutiny about its model.
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The logical continuation
Rappi was created in 2015 based on the following thesis: the e-commerce sector’s delivery capabilities were severely underdeveloped, even more so in LATAM where Rappi’s three musketeers (Simón Borrero, Sebastian Mejía, and Felipe Villamarín) hail from. Said thesis sprouted from the trio’s shared experience at Grability, a startup empowering super-market chains’ e-commerce capabilities, co-founded by Simón and Sebastian.
Likely bolstered by its founders’ diverse educational backgrounds, existing US ties, and already impressive entrepreneurial experiences, Rappi got into the revered Y-Combinator startup incubator in 2016 a rapid year after its birth. That, combined with the virginity of the market it was targeting, would prove to be a fruitful mix.
During Rappi’s childhood, the company’s initial market (LATAM’s e-commerce delivery), wasn’t just ripe for disruption. It needed to be built. The market also benefitted from an obscure, yet crucial metric: its AOV/delivery cost ratio.
The ratio between LATAM’s AOV, Average Order Value, combined with the region’s relatively low labor cost, added unit economic fuel to the market’s massive size.
“A source close to the company shared Rappi’s internal market sizing figures which indicate the company pegs the TAM at $1.1 trillion, composed of $88 billion in pharmacy goods, $243 billion in food services, $389 billion in grocery, and $331 billion in retail.” - The Generalist
One of Rappi’s first products went against conventional startup literature advocating for a careful, initial focus on a single vertical. The company’s founders went the other way: a free text field, whereby users could type in anything they wanted delivered to their doorstep. Legend has it that the Rappi team onboarded initial users by setting up a tent in Bogotá and trading app downloads for pastries.
Business model and funding galore
Rappi is playing the “become the leading super app in a digitally underserved market” game. To do so, Rappi has had to raise money, lots of it, while perpetually looking for new verticals to explore. That restless exploration has led to the creation of a powerhouse, a far cry from the cute, donut-wielding, delivery app Bogotanos used to use when they forgot to buy milk.