We look at the downloads and it's zero, right? There were six downloads from my aunt and my mom. We pitched something like 57 funds and 57 funds told us no. Once we were 20 days from running out of cash, and in 20 days 900 people were going to be out of a job. Rappi's mission is to show the world that we Latin Americans can build world-class companies.
Well, Simon, thank you so much for being here. We have a very special guest today, and I want to thank you in advance because you and I didn't know each other — I just saw you at the pool one day and we hit it off. Thanks for giving us your time. So, let's start from the beginning: what have you done throughout your entrepreneurial career so people have context, and then we'll get into the different topics.
Well, the career is long. I started entrepreneurship in university. I started at 19 doing startups with friends, starting with $200 in savings. The first four or five startups failed, they didn't work. I was lucky to start them all in university, and for all of them I needed something like software, right? A website, a CRM, an application. So I was studying economics and business, and I decided to learn to program at night. This was 20 years ago, and back then the good universities didn't have such good programs in practical coding — you had to go through a very long degree. So I started studying programming at night and launched a software studio with, yes, $300 in savings. I was obviously the one designing, building the websites, selling, and then I hired my professor from that institute to be one of the first developers at that software studio, and then another, and then another, and it grew to more than 250 developers. And I was very lucky because at that company we started recruiting a lot of people who were there not for the money but for all the hype around the internet at that time. So we built thousands and thousands of websites and projects for clients, but we also started building our own internal projects, and from there Grability came out, and from there Rappi came along.
So, to clarify several things — I'm very interested because there's a lot to unpack here. The first six startups that didn't work, do you think those failures were necessary to learn the lessons to...
Yes, totally, totally, totally. The most important advice by far is to start as young as possible to get rid of your ignorance as soon as possible. Yes. And you learn an infinite amount in each startup. Because when you're young, depending on the career you choose, the math can be a bit difficult, etc., but the challenge is very limited. Moving into entrepreneurship and feeling that fear, that failure, that challenge — that makes you a very different person. So starting young is the most important thing. Plus, you also have much less to lose.
Sure. And that was absolutely key. Totally. So, several failures. You build a software shop, starting with the internet, right? This was, yes, in the era when it was just beginning. The first startups were pre-Facebook, meaning we acquired clients through High Five, which was something that came out before Facebook. And at that moment it was also a nice opportunity to start companies without so much capital — and he knows exactly what's happening now. Now anyone can start an AI company with no capital at all, so there's no excuse.
Totally. We're in the Golden Age for entrepreneurs. I don't think today you can build a business in two weeks without a significant capital injection with AI. Anyone can do that, right? Totally, 100%.
And then, how do you go from having these thousands of projects you were working on, more like a services business, to Rappi? I mean, who comes up with the idea? How does it start?
Before Rappi comes Grability, which is a company where I invented a new way of doing grocery shopping, where you would throw the little products into the cart, and we patented that interface. And we started there — that's where it was. That's where Sebas joins, Felipe joins, and Andrés Bilbao also joins Grability. And from there we started selling this software to big retailers around the world — to El Corte Inglés in Spain, Reliance Industries in India. And that was like one — I think Tony Robbins talks a lot about building confidence, right? That's what Elon has done in his life. Elon now believes he can go to Mars and die on Mars. I don't believe I can go to Mars, right? But that's because he's already gone through believing it, passing through very important milestones. For us, or for me as a Colombian entrepreneur, I had a good software studio with good Latin clients, etc., but starting to sell to companies in India — supposedly the best at making software — companies in London, companies in Spain, everywhere, that gave us the credibility that, well, we can build world-class software, right? We Latin Americans. That was an important step, and there we were working with many of these big supermarkets, building software for them. The users were super happy with the software. Grability had spectacular margins, but I started feeling the friction of my clients' users, right? The interface was great, they could do everything super easily, but then it took 24 hours for the groceries to arrive, right? It's like — so from there the idea came out. I told all my partners and investors at Grability, we're going to do this crazy thing, we're going to build Rappi. And everyone told me, 'Absolutely not. What are you talking about? I have a divine business with 90% margins in software, and you're going to get into logistics?' Absolutely not. And there, well, one is a bit stubborn, and we kept going and kept going. And something funny happened. We started Rappi and started pulling engineers out of Grability, moving them over — I mean, very, very messy — but after we gained traction, obviously the investors were happy we started.
Simon, what was the first business model you pitched to your partners when they told you you were crazy?
About Rappi? Rappi, literally. I mean, it was the same. It's just that usually the people who care about you will tell you — I mean, they don't want you to take so many risks, they want to protect you, right? They also wanted to protect, obviously, their profits, but they want to protect you. So it sounded a bit too crazy. I mean, this was pre-everything. This didn't exist in the world when we started. So it was a bit too weird for them.
Why Rappi? Why is it called Rappi?
Rappi is called that because in Colombia there are these rapi stores, which are like little neighborhood shops where you can get everything you want. And so the app was going to be called Rapitienda — thank God we didn't name it that. Felipe, I think, had something to do with it, and we named it Rappi. And the double P is because of the word 'app' in rap — I mean, the normal word is rap, R-A-P, and the P for the app.
Exactly. Exactly. And we talked about raising capital. I think Rappi is a business that required and requires a lot of capital, right, to stay afloat. How did you do it? You had this very crazy idea. The people who cared about you told you, 'It didn't exist on the internet.' I mean, so people have the context that it was even crazier, you know what I mean? I mean, there were no references. How did you manage to raise capital? From whom? How was that process?
That process was long. First, the first money for Rappi — we put it in ourselves from Grability, and some investors who perhaps believed more in me than in the idea. I mean, it was more like, well, I trust Simon and the team. They didn't quite understand the magnitude of what that could do. Some did see it very early on. And I remember when I told them — we raised very little money at the start, I don't know, very little money in quotes, like I don't know — and I remember telling them, if this works, in a month we need more money. If this doesn't work, this money will last us. This money lasted us a year, and thanks to that it worked and started growing a lot. But well, it didn't grow from one moment to the next, right? The story is also good about when we spent 8 months, 10 months building the first version of Rappi. We launched it — we came from B2B and we thought that putting it on the App Store would bring all the clients, right? And those first days were painful because the team had worked Saturdays, Sundays, nights, and we reached that moment where we launched on the App Store and we thought we were going to have a world of downloads. And I remember coming to the office early on Monday, and we look at the downloads and, well, zero, right? There were six downloads from my aunt and my mom. So, well, no, come on, no, I think there might be a bug, fix these things, right? Just to keep the team busy. Next day nothing. Next day nothing. And we'd arrive at the office and, well, the heavy deploy, and everyone looking at each other like, this guy is crazy, he made us work for 8 months. And I remember that by Thursday or Friday I came to the office and told everyone, 'Well, come on, close your computers, we're going out to the street.' Everyone thought we were going to a cool offsite or something. No, no, no. We're going out to the street to convince customers to download — the engineers and everyone went out talking to customers. And in Bogotá, when you approach a stranger, they think you're going to steal their phone, right? They'd say things like — and in those very uncomfortable conversations, which is another piece of advice we can talk about now, if you want to start a business, you have to go to the field. You have to go to the field, but above all you have to prepare yourself for rejection. I mean, at 17 you should already be approaching a group of friends and talking to them and having them reject you, saying, 'Why is this guy talking to me?' I mean, that rejection is important, but through that rejection we managed to see in users' eyes why yes, why no, what they liked, what they didn't. And Rappi started like a turbo, honestly. The first screen of Rappi was a couple cooking pasta and they had run out of parmesan cheese, and they said, 'Before the pasta is ready, the rapi will arrive.' No, honestly at that time it didn't arrive that fast, but that was all it was. It was just like the turbo, which is like the supermarket thing. And thanks to those conversations, we'd say, 'Well, what about that restaurant that doesn't have delivery — what if we bring it to you too?' And people were like, 'Ah, well, that yes.' And that's how we kept adding things and things and things.
And what was the reason customers at first didn't want to buy? I mean, what did you realize? What's your hypothesis, like before talking to customers versus after?
Yes, many things, but the first thing was the grocery delivery thing. At that moment it was a bit too advanced for the time. The first real need was, bring me a restaurant that didn't have delivery. Because at that time delivery was only Domino's, pizzas, and a very few others, but the cool pasta restaurant didn't have delivery, right? Or the burger joint, the cool Smash Burgers of the era, didn't have delivery. So when we started offering those kinds of things very much out of desperation, like, well, what if I do this for you? Let's see if you download it — that's when we started to see a different response.
Simon, and how do you enter a new city? I mean, how was entering Mexico after Colombia? Do you arrive knocking on restaurants' doors like, hey, can I deliver your food? And what was the line? I mean, I want to understand. You start out knocking on doors, all bootstrap, and then how did you expand and grow to different cities?
There it was too accelerated. We suddenly felt that once we started seeing traction, other companies started appearing around the world doing this in other geographies. For us it was already very clear that this was going to happen, right? So we said, 'Well, we have to go to Mexico now.' And we went — I mean, we launched in August 2015 in Bogotá, we launched in December 2015 in Mexico City, I mean, with three little months of learning that were absolutely insufficient. And we put together a team. At that moment the level of execution was crazy. I mean, we had meetings that we called parking lot meetings because we no longer fit in the office. So we'd go out to a parking lot on the street and gather people there and talk about everything we had to execute week by week, and the level of execution week by week was crazy, crazy.
How did you achieve that team culture or the people? I mean, what is it like? Because there are super bureaucratic companies, right? And throughout your growth you had execution like — I mean, like, how is that achieved? To add to that, in some interview researching your story, we saw you said people would stay until Friday 11 at night, 12, 1 in the morning, 2 in the morning and kept working like a total cult, like a total cult. I mean, you want to build a great company — according to Jim Collins, great companies look more like a cult than a corporate enterprise. And how do you achieve that?
First, we were lucky. How do you achieve it in general? You achieve it with a cause. People don't work — everyone says, 'The advice is hire people smarter than you.' No, the reality is, why on earth would someone smarter than you work for you? The answer is, no, they're not going to work for you — they're going to work for a cause with you, right? So that cause — one starts hearing this and says, well, Rappi's cause, what is it, delivering hamburgers? Well, no, it's not the most inspirational cause. Rappi's cause has never been that. Rappi's cause is to show the world that we Latin Americans can build world-class companies and to push the growth of the region. We are poor in Latin America because we don't grow. It's not a matter of politics, it's a matter of entrepreneurship and economic growth. Samsung came to represent 20% of South Korea's GDP — one company. So it is possible to change this region through companies, and that madness of proving that we can do such big things is what really infected people from the start. There weren't many startups at that time. So this was different, and the feedback loop of that crazy growth — at the same time, all the friends of the people working at Rappi were using Rappi and talking about Rappi, and that gave the team a very special energy, right? Jim Collins also talks — Jim Collins is the one from the books Good to Great and all those — he talks a lot about 'who luck,' and that's a big part of what makes a great company. We were very lucky with the crazy people we brought in, right? They were a pack of crazy people, and we were very intentional. A nice story is how we hired people. I remember someone came to be a sales leader, a commercial lead, and they were interviewing him and giving him a math test that we used for engineers, and I said, like, what are you doing? Come here. You're commercial. Yes, yes, I'm super good at commercial. Well, come on, let's go out to the street. But he didn't understand. We went out to the street. Look, these are 100 coupons. I have 100 coupons. You have 100 coupons. Sell more. You have some coupon codes, I have other coupon codes. If you convince more users, tomorrow I'll see how many users registered with your coupon and how many with mine. If you convince more, you're hired. If not, you're not. And he was there like, 'Ah, well, and he was going to ask me a question and I said, and we're already down there.' And I said, 'Well, now I'll see you.' And I crossed the street and started talking to people. I remember Bernardo's face saying like, 'Ah, well, I mean, this is serious, right?' And he went out and turned out to be a rockstar, and obviously convinced way more people than I did, and we hired him, and he was one of the most incredible leaders Rappi has had, with charisma, with energy — but these were people who were really in a different league, right? They came like on a mission, they came to explode the personal growth they had, right? So how is it achieved? It's achieved with a cause, it's absolutely achieved with example. I mean, I remember there were times I stayed — we were finishing a financial presentation or finishing something in the code where I had helped at the beginning with a bit of the product architecture, but I wasn't doing the code anymore. If the engineers were going to be there until 3 in the morning, I was there until 3 in the morning sitting next to them. But the example of the leaders obviously inspires, and obviously people work according to the energy you're implementing in the company. So mission, traction — that same growth gives people a positive reinforcement that this is working, this is pulling. And a lot of example.
We're back with our guest. In a minute — has it happened to you that despite sleeping well, eating well, and exercising, you're still tired and still not performing like before? It's not just about drinking more water. Water alone doesn't replenish the sodium, potassium, and magnesium your body needs. LMNT is that — electrolytes without sugar, without dyes, and without fillers. Nico and I use LMNT every morning for that reason. And we have a very special offer for you. The first 30 people in this episode who buy a box of LMNT will get a free packet with three different flavors with their purchase. Go to drinkelement.mx/tugist. The link will be down here, and if for any reason LMNT doesn't meet your expectations, they'll refund your money. I'd like to get into the acquisition you mentioned, the coupons. You came from the B2B world, which I assume had totally different acquisition, right? A lot of word of mouth, I don't know — tell us how you cracked Rappi's acquisition, and yes, I mean, how the whole process was. And from what I understand, we'll get into raising money later, but a lot of the money you raised was for that, right? For that accelerated growth.
Yes. So the acquisition at Rappi — we had a good principle that we said: normal companies discuss an idea and it gets discussed for three weeks, idea A or idea B, and in the middle, right? Idea A is said by this VP, idea B by others, and bureaucracy and egos and politics. At Rappi it was very simple, and it was: there's idea A, there's idea B, let's go out and do both now, and whichever gets better results — we forget whose idea it was and we go with that. And that had the good part for junior people, that they could propose things and we couldn't tell them no, it was like, ah, well, you can try it. But also the good part for us leaders, which was like, look, I don't have to — I mean, ah, go ahead, right? So I remember there was a marketing leader we had brought in, digital marketing, very sophisticated, very this and that, and the idea was — one of the ideas was a digital strategy, and my idea was, well, why don't we go hand out donuts, donuts for downloads, period? And I remember the face, and later leaving the office I remember he told another person like, I can't believe I left my job to come hand out donuts. But the beautiful thing about that culture was that we put the ego aside, we put Rappi first, and later that same leader was hiring 150 delivery people at once across the city and was delighted because the CAC was, well, no. Yes. So that trying things very fast worked well, listening to the customer worked magnificently. I mean, we have very cool products like RappiCash, which is an ATM on delivery — that was invented by a user, we didn't invent it. Any other company in the world would receive that idea and discard it. We had a mockup built in 24 hours of an on-demand ATM, right? So, listening to the user, experimenting a lot, and lastly, obviously understanding how a good marketing principle is the message you're giving. It has to be a message powerful enough for you to pick up the phone, call a friend, interrupt their day, and give it to them. No, most marketing messages aren't like that. If I read you half of Rappi's messages today, with that being in our DNA and everything — no, they don't pass. You wouldn't talk to me again. If I called you and read you what the ad copy of Rappi says, you'd say, 'Damn, don't call me again, please.' No, I wouldn't have a single friend versus some who are like, thanks, this is useful, it adds value, right? So it's more about the stories. For example, before we used to deliver avocados in turbo in 10 minutes, but it took you 24 hours to be able to eat the avocado because it was green, right? Now we have the avocado for today, the avocado for tomorrow, for the day after. So you order the avocado, not only does it arrive in 10 minutes, but you can open it and eat it in 10 minutes, eat it instantly, right? Those kinds of use cases are what people tell their friends about, right? Those are the kinds of things you should use for acquisition.
Simon, before getting smoothly into the topic of raising capital — you mentioned that at Rappi you have an international team, you've brought in people from all over to work. What was the importance? And was it a requirement they asked you for when you raised capital for the first time, or why did you decide to bring in talent from abroad?
Yes, good question. Thank God, zero requirement. The investors have always been very respectful. But there were, especially in some very technical positions, other companies that were doing great work in other parts of the world, right? So DoorDash is a great example where we brought in incredible people from DoorDash, who taught us a lot from Amazon. We've brought in people from Stripe, from all the best companies in the world. But also a bit like we're good at Rappi, and I think we Latinos are good at that, right? Like at first this knowledge arrives like it's another language, right? Like, what is this people talking about? And very quickly we learn it and we can replicate it here, right? So we have a very international team, but a lot of Rappi's future will be a team that's 90% or 95% Latin because it's part of our pride.
Yes, yes, totally. Simon. And how was it sitting with Marc Andreessen? Like, getting to pitch to those people at Sequoia, a16z — the truth is their heads move much faster than they can speak. And it was the first company in Latin America that a16z wanted to invest in. It was the first company outside of Silicon Valley. They hadn't invested in a company in Chicago, they invested in a company in Latin America.
And I remember the conversation there was interesting because they openly told us — it's like if I'm pitching you a startup idea and you like it and you know the team and you like the vision and the technology, but then I say, well, and where will the first launch be? My answer is in Zimbabwe. You'd tell me like, don't you have something a bit closer, like I don't know, Mérida or something instead of Zimbabwe? That's how it was for them. For them, Mexico and Colombia were like some trees, right? I mean, what are you talking about? It's crazy, right? Brilliant people, but well, Americans are very much like that, right? For Americans, it's the United States. So I think that first step was very important for Latin America. And I think that was also the beautiful thing about starting young and the beautiful thing about having traction — is that when it comes to raising money, if there's one piece of advice, you have to believe it at a very deep level. I mean, and for us it was coming out of our pores that this was going to be big. I mean, it was impossible for you not to give us money, right? Vision, right? That was a cult. Yes, you saw Rappi tattooed on the heart. Totally, totally. I remember there are many fan stories, but I remember with Sebas — I mean, we raised with — well, they'll edit later if there are many stories, but there's a great story with Ben Horowitz, and it's that we were at YC. Just context before we get into it — what is YC? YC is the most important tech incubator in the world. Airbnb, Dropbox came out of there, many came out of there. It's like a mentorship for startups, right? It's like — yes, they invest in you and it's a 3-month program where they bring you to all of Silicon Valley and have mentors on different topics, right? So like you're every day like, wow, overwhelmed, overwhelmed, and there are other startups in the batch, right? So there are like 70 startups at once. It's harder to get into YC than into medical school at Harvard, right? The rejection rate is crazy. They send you an invite and they send you plane tickets to fly to San Francisco for a 10-minute interview after they've already seen your data and your pitch — 10 minutes — and you fly. We flew from Bogotá, whatever, almost 9 hours for a 10-minute interview. And after that interview they tell you, 'We'll send you an email, which means no, but you can try again later. If we call you, it means we're going to invest in you.' And it's — and how do you get in? I mean, before getting into the story — what recommendations do you have for all the people who aspire to get into YC?
To get into YC, look at two things. Look at three things. Look at the TAM — no doubt, how big can this get? Look at the — how big — if you have traction, no doubt the traction. And how rare is the team? And lastly, look at the fire in the founders' eyes. I mean, they say the 10 minutes we're going to see is to see who we have in front of us and whether these crazy people are going to do something incredible, right? And that's what they look at. And a great recommendation also that was given to me early in that YC era — we had already gotten in, but before the first round, a fund told us, look, the pitch with investors is an analogy. It's not like going to be asked things and trying to answer well because maybe they ask you something you don't know. No, no, no. The analogy is, you arrive with a bat and with your main arguments about why this is going to be enormous, and if the pitch lasts 30 minutes, then for the 30 minutes, if it lasts an hour, for the hour you take that bat and you hit them and you hit them and you hit them, and that's what the pitch is, right? And the truth is that's what the pitch is. I mean, when the pitch works, it's like I don't even let go of you. I mean, it's like, this is this, and you tell me and you ask me a question and no, no, it wasn't like that, no, no, you're not seeing it right, this is over here, and that's how it works. So that helped us. But well, we were very early for Andreessen. Andreessen, no, I mean, he did things like — but he did more Series A. But there were dynamics in YC that gave you investors who supposedly weren't investing in this round, they gave you a mini mentorship of like 30 minutes, so they'd do office hours, and among the various office hours, one day we were going to meet with Ben Horowitz. So we had 30 minutes. I remember I prepared those 30 minutes like 6 hours, and the next day we had 30 minutes with Ben Horowitz. We opened the door, greeted him with my very, very Latin English. Right away he asks me, 'Where are you from? Colombians?' And he says, 'Ah, Colombians. That's great, right? I love Narcos.' I said, 'Ah, well, great, right?' So I talked a bit about Narcos, and I thought we were going to talk a minute and a half about Narcos. Ben started talking about Narcos and Narcos and Narcos, and of the — I think it was 20 minutes, not even 30 — of the 20 minutes, 15 had already passed and he was still talking about the Narcos series. Like, hey, don't you want to know about Rappi? Exactly. And he himself — well, he saw our faces and said, 'Well, no, no, sorry, time is running out, tell me a bit about Rappi. 5 minutes of the Rappi pitch.' Well, there, more or less, and someone knocked, meaning the next group was coming, so bye. And after 5 minutes he was like, 'Ah, well, nice to meet you, bye.' And we left. Like, what just happened? I was there with Felipe. And as we left, a bit like that, I remember turning to look at Felipe and I said, 'There's no way that was our time with Ben Horowitz. I mean, this didn't end here.' No, it can't be. Felipe told me, 'Well, what are you going to do?' Yes. So we went and saw that the schedule was stacked, and he had 15 minutes for lunch and then the other startups followed. So we waited like 3 or 4 hours until he had the little gap. And well, the man had been pitch after pitch after pitch. I arrive and I remember opening the door, interrupting his lunch break. He was with a sandwich in his mouth, I open the door and he looks at me like, what are you doing? No, that I'm going to have 15 minutes of peace. What are you doing? And I tell him, 'Come, I have two stories about Pablo Escobar that only Colombians know, and your friends are going to love them.' The guy's eyes open up like that, he says, 'Come here, sit down.' I tell him two Pablo Escobar stories, the kind you know for being Colombian, and the guy does this and that and tells me, 'You know what? I'm going to put you in touch with Jeff Jordan. Jeff runs Instacart. There might be a conflict. If there's no conflict by regions, I'd like you to sit down with him.' We shake hands and that, and I leave, and thanks to that, 15 days later he connects us with Jeff Jordan, and that's why the investment advanced. So, I mean, what they say about opportunities — you have to look for them and grab them and not let go, and take agency, right? Because I think this story is a story of total agency. I mean, 99% of people would have said, 'No, it's not going to work. What a bummer that we talked about Narcos in our pitch instead of saying like, he likes Narcos.' Totally. I know things he's going to like, I'm going to look at the directory and I'm going to go in and tell him this.
Simon, and how hard do they hit you in the pitches with them when you arrive already with your — you bring the projections, you say...
Well, this is Rappi's business model. How hard do these funds hit you?
No, very hard, very hard. And it also depends on the moment, right? I mean, not everything is rosy. At Rappi we've had, well, after these beautiful stories and that Andreessen Horowitz invested in us,
ten months later we went back to Silicon Valley to do fundraising. We were growing super well, but we were burning a lot of money, and I remember we pitched something like 57 funds, and 57 funds told us no.
So they don't hit you hard — I mean, what's hard is the rejection, because you go with your whole life, right? You go with, I mean, the responsibility of — I mean, at that moment we already had, I don't know, 400, 500 people hired who had left their jobs to come work at Rappi for half the salary, because that's what we asked for. I mean, you come to Rappi, you come for your equity and your stock options, you don't come for salary. So it was a minimum 35% pay cut, usually 50%. There were people who had left their job for a job that paid 50%.
They had believed in you, and if you didn't raise money, the company was over, right? And I remember we had a really tough night where we came out of these pitches in San Francisco, we connected to six-hour calls with the team to change the deck, to improve it, to do iteration number 42 of the deck, to see if it would work.
And after one of those meetings we went out to eat — in San Francisco everything closes at 1 a.m., there's nothing. There was, I think, a Wendy's or something like that, and we went in and it was full of homeless people, and us eating a Wendy's with Sebas, everyone telling us we didn't look good, and we were like, 'What happened to our lives?' Like, we're in the — but with everything, and there was something that, like, deep down we knew was going to happen. And that conviction that I sometimes call cellular-level conviction — like, it's not that you believe it, but there's no doubt.
That ultimately makes you put in the extra effort, and if you don't stop — the beautiful thing about fundraising, which Sarob Gupta of DC told me, he told me when the rounds got tough, he said, 'The beautiful thing about fundraising is that you only need to convince one.'
Yes. They may have told you 57 no's, that you're a fool, that this is the worst thing in the world, but with one that says yes, afterwards the whole round lines up.
Like you say about rejection, right? I mean, that's why the skill is so important, because it's like asking your wife out. If 100 girls tell you no, or 1,000, but in that one you get your wife — who cares about the 500 that told you no? In the end you won or you didn't, you raised the money or you didn't. Exactly. And we come back to what we always say on this podcast, and what's behind our podcast is that, it's called 'Volume Negates Luck,' as JM says all the time. You can swing 1,000 times, but that one you hit 100% — and that one for us in that round in that dark moment ended up being Sequoia, and it was Sequoia Capital's first investment in Latin America too.
And how did that name, Sequoia, come about? I mean, that one afterwards opens all the other doors.
Well, more or less we thought that name, Andreessen, was going to open all the other doors, but what opens the doors — or not — is the attraction, but it's also the moment. I mean, Silicon Valley changes every year, they're on a different wave, right? So there are moments when everyone wants you and moments when nobody wants to know about you, because the industry is already thinking about something else, and then afterwards that other thing didn't work out for them, so they come back. So, so nothing like, I mean, all the stamps we've had — great stamps, right? We had Andreessen, Sequoia, we have Tiger, we have DST, SoftBank, but none of those really serves to guarantee that, 'Oh well, now the others are going to give you money,' right? What guarantees that they give you money is your execution, period. So every round, every round was very hard for us. We've been five or six times on the verge of going completely bankrupt. One time we had 20 days of cash — I mean, we had 20 days of cash and it was December, and in 20 days 900 people were going to be out of a job, and there we were. And at that moment [laughter] I was extremely stressed, I'm not going to tell you I wasn't, I was extremely stressed, a very tough moment, but at that moment I knew we were going to make it. It's the entrepreneur's rush, right?
Yes, it is. But also, someone asked me how to handle difficult moments, because there have been infinite difficult moments, and there's a lot of — well, that's a longer topic, it's the whole mental-strength thing and how you manage your mind, etc., etc. But there's a deeper issue and it's taking responsibility and having to answer to a team that has trusted in you.
I didn't allow myself to get down, I didn't allow it, there was no other way — I mean, there was no other way, and I simply had to keep going, period, because I wasn't going to let these people down.
That helps a lot. It helps a lot. That's something that's hard to understand, right? Of the startups that are many years with negative cash flow and you need to raise, raise, raise, raise, but there comes a point where you reach the light and it's like compound interest, right?
I want to understand exactly that part — how is it possible that a company loses money the way Rappi did, and yet the investors who came in — I mean, what's the vision, the dream, the unit economics, how does that mechanism work?
I think the best way to explain unit economics is a very Silicon Valley concept, because the old way of doing business was — let's talk about a, I don't know, a coffee shop, right? So you set up a coffee shop, you grew it, you made it profitable, and with the profits from that coffee shop you set up the second one, you made the second one profitable, and with the profits from the first and the second you set up maybe the third, and the third and the fourth, and so on little by little, and that's why it took 25, 30 years to build these big companies.
A bit of the Silicon Valley concept is, well, if you already set up one and made it profitable, set up the next one, make it profitable, but it also has a 30-minute waiting line because it's the best coffee in the world, and set up the third one and it also has a line and it's also profitable — well, instead of taking so long with the few profits from these three little shops to set up the fifth and then the seventh — because, what happens if I give you money to build 50 shops at once? And it's that simple. What we did was we made one micro-zone profitable, but then you had to do 50 other shops. So obviously the investment in the 50 shops is much greater than the profits from the first three shops. The company is losing money, but the unit economics give you the peace of mind that as these batches of shops mature, you're going to make much more money in the future.
Let's say, putting it on paper — it takes you 12 months to make a zone profitable because you have to reach, I suppose, a transaction volume, you have to acquire the customers, right? And afterwards the customers leave you money. So instead of waiting years to recover the spending you made to acquire the customer and the money, you come and say, 'You know what? I'm going to enter this zone, I acquire on both sides, right? I acquire the courier and I acquire the customer because — and the restaurants, I mean, it's acquiring those three. And I know that in — how long did they have of payback period — it was 12 months.' Yes. 12. I know that in 12 months I'm going to recover all of this. Instead of waiting for an opening totally.
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Simon, and how has the business model changed? Because Rappi today has many verticals. And how do you differentiate yourself from, for example, Uber, which I imagine is your biggest competitor?
So the business model hasn't changed that much. Much of Rappi's value is in the frequency of use. So how do we differentiate ourselves from the Ubers of the world? First, by moving faster. So we're still on the same plan. You listen to the consumer and you react faster.
For a long time we did delivery of — buying in stores, etc., etc., right? And that works very well for certain specialized stores, for example City Market. Obviously City Market, the City Market experience is super unique, it's premium, it's spectacular, that model is worth it for City Market, but for replenishment things, an experience like Turbo where we ourselves have — how Turbo works — Turbo, to give you numbers, Turbo is a billion-dollar sales business. In Turbo we've delivered more than 30 million orders in under 7 minutes, which feels weird when it arrives in under 7 minutes, it's like I just ordered and why is the doorbell ringing, right? But to achieve that you have to build a world of things. So you have to build the physical part, which are these micro-warehouses scattered across all the cities with distribution centers, etc., etc. And there you have the ideal stock for that zone and you do picking and a lot of technology, right? When you place a Turbo order, the picking is done with quality in 50 seconds. It's really super fast. You haven't finished placing the order and we already know the probability of success of that order. So we already know how many couriers we need to have in the queue and we start sending the courier to the Turbo queue. So all this technology makes the reliability 10x, and not just reliability — delivery times, but also stockouts. In Turbo there are no stockouts. You enter and everything you see is in stock in real time and so it arrives perfect.
Where is Turbo heading a little bit?
What's already happening in other places — in Buenos Aires, for example, people are doing their monthly grocery shopping on Turbo. One might say, well, Turbo is for small, quick orders, right? It's already the same price as the grocery store. They deliver in 10 minutes, same quality of fruits and vegetables, super-skilled products, super premium. Before there were 15 SKUs, now there are stores with 9,000 SKUs in the same space.
And the beauty is that they're doing their monthly grocery shopping split into 14 orders. So people in Buenos Aires, for example, are already changing the way they do their grocery shopping. Instead of making the list and getting ready because they had to go out, etc., they simply order one day the salmon, the next day they order the beef, and the next day the vegetables, and they make 14 orders a month and that's how they do the complete grocery shopping.
That value proposition — compared to what the other platforms normally do.
We took that same thing and put it into restaurants. That same Turbo technology we have connected with restaurants where you can order Starbucks and it arrives in 10 minutes. And the nice thing too is that in an order — not to speak badly of Uber, which is a great competitor — a normal order on Uber or Rappi, you order your food and it tells you it will arrive in 20 minutes or 30, and it usually arrives in 20 or 30, but when it doesn't arrive well — I mean, when it doesn't arrive fast, it can take 60, and you're hungry. That lack of reliability is very painful for the industry. A Sunday, for example, a Sunday or it's raining, whatever. The nice thing in Lima, for example, how it works. In Bogotá it's starting to work that way, in Polanco it's starting to work that way, still not the rest of Mexico.
You see how the user behaves and they almost don't enter Rappi anymore — they enter Rappi to go down to the Turbo Restaurants carousel and they only order what's inside Turbo Restaurants. Not only because of the speed, because yes it arrives very fast, but it's because — talking with users afterwards, the truth is it's the reliability. They know it will arrive at the time they want.
Exactly. That if a Turbo Restaurants order goes wrong, it doesn't arrive in 12 minutes, but it arrives in 16. So the spread is very small, the reliability is very important. That's the kind of thing we have to do to differentiate ourselves from platforms that do the same thing — I mean, if you look at this, we say it with a lot of pride, you look at the story or the evolution of a DoorDash, of an Uber, of many competitors worldwide, and the evolution has been exactly as Rappi has been guiding it. Uber didn't do groceries, it did groceries because of us, it didn't do pharmacies, it did pharmacies because of us, it didn't do quick things, right now it's trying to roll out quick — I mean, it's like their innovation is let's see what Rappi is doing and let's try to follow. So that gives us a lot of pride as Latin Americans, and the same for most of the —
Simon. There's another vertical I'm very interested in touching on, which is RappiCard. How did you get into that world? It's a totally different business from what you had.
Yes, that business is a beautiful business. A little bit of the principle was — there are many banks that are either denying you cards or giving you cards with a limit much lower than what you should have. You already have a history with Rappi. With that data we can help you have a credit limit much larger and much more in line with your level of consumption, and that's what made it work well. I mean, applying the credit bureau is outdated, right? More or less we saw the same example in another episode — OneCard gives credits to the couriers.
Sure. But that business I'd like to break down a little bit. I'm very interested, especially where you got the cash to start giving credits. And two, why did you decide to migrate there? What was the need? Was it a client who asked for it or why did you start rolling that out?
So first, the cash — we didn't have the cash, and that's partly why we did it with partners in different markets. Here we did it with Banorte. So Banorte put up the money for the credits. That business — we already sold it to Banorte, so we don't operate it anymore. But the why was very much about frequency of use. If you look at which are the two types of apps with the highest frequency of use, it's your digital bank and your delivery company. Those are the two apps people open the most outside of, obviously, social media apps and WhatsApp. So for us it was very important to also have that frequency of use of people coming in to make their payments, to pay their credit card, see their statements, etc., etc. That was basically the main reason — a frequency issue, an issue of — for us the priority is that Rappi is on your iPhone home screen. That's the priority.
Yes, because honestly when I've ordered Uber Eats, the only reason I've ordered — because I'm not much of an orderer — the only reason I've ordered is because I already use regular Uber a lot, of course, and the ease of — I mean, it didn't take me any effort. Let me explain — in Mexico the best is Rappi, and especially the number of restaurants it has, I mean, it has many more options, many more options, and it's a marvel.
The stock market — for people who want to invest, it seems they're going to do their IPO soon. How are you thinking about this problem?
So first is us being ready, because we have to be ready in a world of compliance issues, etc., etc. I think by the end of next year we're going to be ready. Then comes the other issue, which is when the market is ready, right? And right now IPOs are opening up, but they're very AI-focused. So we have to see — Rappi is going to be a very interesting company at that moment because it's already very positive, it has a very attractive growth rate for its size, and now it's also doing very interesting AI things that if we have time later I'll tell you about, but that are also going to accelerate growth quite a bit.
We'll get to that at the end, right? The AI.
Yes, but so we don't lose —
And why did you make the decision — I mean, compliance. Being a public company is a disaster, right? I mean, it has many moving parts. What's the added value you see in being public?
Several things. First, being public, you have a valuable currency to also make acquisitions of smaller companies. So that's valuable. Second, the vast majority of incredible companies in the world are public companies — that rigor of being on the stock market raises your standard. Okay. 95% of MercadoLibre's value came after it went public, right? And so with all the big ones. So a lot of life is also about how you don't get comfortable and how you keep pushing yourself, and it helps. I mean, it's something very rare and something we talk about at Rappi — people, I mean, the great athletes of the world and the great, well, personalities of the world, they all have coaches and they pay a coach to push them, right? Sometimes people in the company don't like that the boss is demanding, that he pushes them. It's crazy. The boss is free, right? These athletes are hiring a coach to push them, so one should be looking for people who push you.
