Rappi's silent fall

The high ranks of the powerful Colombian platform Rappi, according to an internal source of the company, are no longer kept up all night by the publicized labor claims of thousands of food delivery drivers.

Today they have more weight on the agenda, he adds, other problems throughout the dozen business units that make up the portfolio of one of the great technology companies in Latin America.

The forecasts of various international organizations, such as ECLAC or the World Bank, are also worrying, warning of a possible recession or very slow economic growth in 2023.

In June it was learned that the company dropped 386 positions in the annual list made by the Superintendence of Companies of Colombia with the thousand largest companies in the country.

This novelty hardly surprises the financial analyst Camilo Zea, who recalls that many digital businesses in the world are going through a similar situation: “the drastic increase in interest rates, inflation and the characteristics of a business model that have not yet come together it is profitable, it does not throw black numbers, and it still depends on its ability to raise capital in rounds of financing”.

Until the time of publication, the company had not responded to this newspaper's questions on these and other points.

The Supersociedades ranking, which is based on the financial statements of 2021, indicates that the company with the white mustache logo went from position 385 in 2020, to 771 in 2021 -in 2019 it ranked 796-.

In 2020, Rappi billed 403,016 million pesos (about 100 million dollars) in Colombia alone, spurred by the sanitary confinements that forced millions of people to hibernate for months in their homes and resort to home orders to survive without going out. .

Now without confinements, the balances returned to pre-pandemic levels: in 2021 revenues fell to 254,489 million pesos (about 53 million dollars at the current exchange rate), which resulted in losses of 243,468 million pesos (about 50 million dollars).

The general context, and Rappi's figures in particular, generate uncertainty regarding the reaction of venture capital funds that have sponsored ventures such as the platform. Will they maintain the volume and appetite for early-stage investment?

Or, on the contrary, is patience running out with business models that take so many years to incubate and will favor those with present3 or short-term profitability?

Alex Szapiro, director of the Japanese conglomerate SoftBank in Brazil, dropped some clues during a recent interview with the Brazil Journal.

The executive acknowledged that the Asian consortium, which injected 1 billion dollars into Rappi in 2019, had been "wrong" by "requiring accelerated growth from 'startups'" instead of achieving profitability.

He said this in connection with the billion-dollar losses reported by SoftBank this year, which have led to a 30% cut in its global team, with effects in Latin America, with the poor performance in the technology investment line (VisionFund) as a backdrop. background.

Without going into apocalyptic forecasts, the administration and innovation expert Iván Hässig notes some tangible signs of a change in the cycle: “in the face of a possible consumer crisis, from Europe and the United States, investors can already perceive more modesty when investing in this type of digital business”.

The professor of economics at the Universidad de los Andes David Bardey agrees: "today it is not clear how interesting the return or profit is for investors in an environment of economic contraction."

Hässig adds that several countries have been updating their antitrust, labor, or information regulatory frameworks, which has led to the business model of many ventures losing the advantages they had enjoyed due to the lack of regulation.

For the chaos of Rappi, who has especially faced labor problems in several Latin American countries, there is already news.

Berlin-based delivery giant Delivery Hero, which once controlled 19.5% of Rappi's capital, sold 7% of its shares earlier this year in a transaction valued at $150 million.

According to internal financial reports obtained by EL PAÍS, sales of Rappi (Colombia) in 2021 fell by 32.8% compared to 2020. This, in a business that disburses millions of dollars a month in marketing, hiring, salaries and new projects , means that it continues 'burning cash', that is, spending capital to continue operating.

Spokespersons for Rappi, which was born in 2015 and today operates in 250 cities in 9 Latin American countries, have expressed in various press interviews their desire to quickly reach

(financial break-even point).

Likewise, during the second half of last year, the news circulated strongly, in such reputable media as

, that the company would make the leap to go public this year.

Neither of the two goals has materialized.

For now, it maintains its expansion plan to become a 'superapp', in the style of the Chinese Grab or WeChat.

RappiTravel (purchase of air tickets), RappiPay (banking), TurboFresh (food shipments in a hurry), or RappiCash (withdrawal of money at home) are now part of the services that have joined the foundational line of home delivery .

Among the analysts there are two currents to analyze the future of Rappi.

On the one hand, the financial adviser Andrés Moreno Jaramillo believes that what is expected is that “Rappi's private investors will at some point receive their compensation.

Rappi has very clear market data, its successes and errors, and they will have to continue adjusting the operation and specifying the niche to become a sustainable business over time”.

On the other hand, financial adviser Rafael Tovar is more skeptical.

He says there is a strong rumor in tech circles that Rappi could be sold.

He affirms that one of the candidates to buy it is the American Doordash, one of the giants of the market that -like Rappi and so many others accumulates- billions in losses.

"It would be ideal for both parties," writes Tovar on Linkedin, "because it would generate operational synergies, making use of information technologies with Bots based on machine learning and AI, which will make it possible to do without the staff plant (5,000 employees at a global level). regional) and operate from Silicon Valley at much lower costs.”

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