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Mexican used car buying and selling startup Kavak that was once valued at $8.7 billion in 2021 is now worth 75% less, after closing a $127 million round in March led by SoftBank Group Corp and General Atlantic, according to Bloomberg.
The down round has valued Kavak at $2.2 billion, the same valuation as cryptocurrency unicorn Bitso.
With this, it leaves the title of Latin America’s most valuable unicorn now held by Colombian fast delivery and travel platform, Rappi, with a valuation of $5.2 billion.
Kavak also disclosed that it secured two lines of credit from Goldman Sachs and HSBC, the company’s founder, Carlos Garcia Ottati, told Bloomberg News.
Garcia Ottati said the capital will help it continue to grow and strengthen its automotive lending business, which is now financing about 60% of purchases on the platform through Kuna Capital, its financing arm.
Kavak’s route
In times of venture capital boom Kavak was among the most benefited startups. In 2021 it more than doubled its then $4 billion valuation after closing a Series E of more than $700 million.
Founded in 2016, Kavak was among the fastest growing unicorn startups within Mexico and by 2022 began expanding into Latin America and the Middle East.
According to Bloomberg’s report, Kavak spent $86 million in cash in the first quarter of 2022 alone, according to a letter to investors dated May of that year. Among the items in those expenditures were million-dollar advertising contracts with soccer teams and individual players, as well as Mexican race car driver Sergio “Checo” Perez.
After the rapid expansion in 2022, Kavak began to restructure with a series of layoffs, including country managers in some countries, which showed that the strategy was not on track.
Its aggressive expansion led it to shrink until it closed its Colombian and Peruvian operations in 2023.
Garcia Ottati had said in 2022, also in an interview with Bloomberg, that Kavak was going to reach profitability in 2023, which did not happen.
In the recent interview with Bloomberg, Kavak’s CEO said, “We haven’t reached annual profitability yet, but we are on track to achieve it in all markets by 2025 and hopefully by the end of the year overall.”
For the time being, Kavak is focused on improving its operations in Mexico, which account for about 60% of its business. The company is looking to be prepared for a possible IPO in three to five years, its CEO said in that interview.
Unicorns and valuations
After the venture capital boom, which ended in 2022, Latin American unicorns had not received more capital until last year when Clip, Ualá and Clara began raising large rounds of capital in excess of $50 million.
In these cases the founders have not openly shared the new valuations, but have assured that these rounds have not been downward. CB Insights, which keeps track of all the unicorns in the world (and updated through January 2025), still has on record the past valuations of these startups that have received new capital, which confirms their testimony.
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