New Tech Unicorn Aims for Next-Day Delivery Anywhere in Brazil

kaszekeditor web-pick
7 June 2019

Source: https://www.bloomberg.com/news/articles/2019-06-05/new-unicorn-loggi-wants-to-offer-next-day-delivery-across-brazil

Latin America’s newest tech unicorn has an ambitious goal: next-day delivery to nearly anyone in Brazil. That’s no easy feat in the world’s fifth-biggest country — where infrastructure networks lag far behind those of most developed nations.

Loggi is now valued at $1 billion, after raising $100 million this month in a funding round led by SoftBank Group Corp.’s Vision Fund, the company said Wednesday. SoftBank’s Latin America Fund is considering joining the round with an additional $50 million investment, according to the company. The cash infusion comes on the heels of a $100 million investment the Vision Fund made in the company last year.

The startup, which launched in 2014 delivering documents on the chaotic streets of Sao Paulo, is using the investment to build a team of more than 1,000 engineers as it constructs a Brazil-wide logistics service. The company currently covers about 35% of the population, and makes about 100,000 deliveries a day for clients including French retailer Carrefour SA, e-commerce giant MercadoLibre Inc.and fast-food restaurants McDonald’s Corp. and Burger King. Chief Executive Officer Fabien Mendez said the company aims to increase its coverage to 95% of the country by the end of next year and boost its delivery frequency to about 5 million a day within five years.

“Our philosophy is that we deliver anything for anyone,” Mendez said in an interview. “By the end of 2020, we want to connect all Brazilian cities. The idea is to offer next-day delivery to all Brazilians.”

Loggi will have to overcome obstacles that have made Brazil a notoriously difficult country for shippers, including poor infrastructure, crime, thick bureaucracy and sheer size. Brazil is bigger than the continental U.S. but its transportation infrastructure ranks near that of Rwanda, according to the World Economic Forum.

“When you operate in logistics in Brazil, it’s a death by a thousand cuts,” Mendez said. “The only way to leapfrog the structural barriers is through the use of technology.”

The company is opening a network of distribution centers across the country, including small warehouses in neighborhoods. It says it relies heavily on robotics, artificial intelligence and algorithms to find the most efficient route to air ship packages to those centers. The system alerts a nearby freelance courier — around 25,000 of them deliver packages for Loggi — to make the final drop off. The goal is to have minimal labor involved in the process, with only one set of human hands touching the package during each step of the delivery process, Mendez said.

The company is betting the country of 209 million people will rapidly adopt e-commerce. Sales in the sector are expected to rise 15% this year to about $15.5 billion, after rising 12% last year, according to Ebit|Nielsen, a research firm.

That growth has attracted other startups, including the Goldman Sachs Group Inc.-backed CargoX. Last-mile delivery companies, including Colombia’s Rappi and homegrown iFood, are also expanding in the country.

But instead of competing with other existing players, Mendez said Loggi is working with them, providing delivery services for both Rappi and iFood, as well as retailers including Amazon.com Inc. “Loggi is emerging as a key enabler for Brazil’s burgeoning gig-economy and e-commerce sector,” said Akshay Naheta, a managing partner at SoftBank.

GGV CapitalMicrosoft Corp., Fifth Wall Ventures and Velt Partners joined the Vision Fund in the latest Loggi round. SoftBank’s Latin America Fund launched a $5 billion tech fund for the region this year. Already this year, SoftBank agreed to invest $1 billion in Rappi, and is said to be in talks with Brazilian lender Creditas.

Venture capital funding in Latin America has roughly doubled for each of the past two years and is on track to surpass the 2018 record of $2 billion. More than half of that funding last year went to Brazilian companies, according to the Association for Private Capital Investment in Latin America.

As Brazil’s growing population of smartphone users place more orders online, automating logistics for food and package deliveries will be essential for the economy’s growth, Hans Tung, managing partner at GGV, wrote in an email. “We are seeing this as a global trend from the U.S. and China to Latin America, Southeast Asia and India,” Tung wrote.

If it’s able to establish its service across Brazil, Loggi will look to expand into other Latin American markets, Mendez said.

The 33-year-old, who was raised in a small village in the south of France and moved to Brazil in 2010, said he plans to grow the company’s employee headcount to 1,500 people, from the current payroll of 600. The company charges sellers a delivery fee based on the weight and destination of the package, plus an insurance charge. As a private company, it doesn’t release sales figures, but Mendez said Loggi expects to turn a profit next year, and was profitable in 2017.

Mendez said the startup had no immediate plans to have an initial public offering or to be acquired. But “the plan is to get the company to be IPO-able,” he said. “We want to show exponential growth, but also the Ebitda to make ourselves attractive to the market.”

Source: https://www.bloomberg.com/news/articles/2019-06-05/new-unicorn-loggi-wants-to-offer-next-day-delivery-across-brazil