How the Rappi founders created a unicorn

Bernardo Montes de Oca

Delivery apps have grown in popularity in recent years, and Latin America is no exception. But, this territory belongs to one company: Rappi. This Colombian startup isn't only one of the most prominent startups to come out of the region in recent years. It's also the country's first Unicorn.

Rappi's rise to stardom has been fast and relentless. But the startup is far from perfect. On one side, it's earned praise from the business world. But, it faces harsh criticism and even legal issues. Plus, the discussion goes further. So, let’s see what makes Rappi’s story so interesting.  And, to think it all started with donuts. Here's what I mean.

How the Rappi Founders started the idea

It's 2015 in Colombia. Simón Borrero, Sebastián Mejía and Felipe Villamarín want to create an easier buying experience. So, they created Grability. The initial idea was to make food and grocery shopping easier.

But, then, an interesting phenomenon happened. Grability had a feedback section, and users began asking for favors, such as going to the ATM or delivering cat food.

The founders noticed that Grability was more than arepas and burgers. They have said that customers are in part responsible for creating Rappi. It was time, then, for a rebrand and change in course. That's how Rappi was born.

With ten employees and a basic app that helped with shopping, all Rappi needed was users. That's where donuts come in.

The founders set up two tents around Bogotá, Colombia, and offered a free donut to anyone who downloaded the app. (Simpson's reference). Well, people usually don't reject donuts. So, thousands signed up. Granted, you won't get massive numbers by giving away donuts. But it was a good strategy. That was all Rappi needed.

Rappi Founders wearing Rappi uniforms in front of the main offices

How Rappi became so popular

Delivery platforms exist long before Rappi. But this startup offered something different by having not only groceries but other services. So, from the start, Rappi set itself apart.

The perks didn't stop there. Besides ordering almost anything, Rappi promised that deliveries would arrive in thirty minutes and cost around a dollar. As for the startup, it makes money by charging around 17% of each retail transaction.

Then, there was the region. Rappi was unlike anything the Latin American countries had seen. So, for businesses, this was the chance to reach new customers.

As for users and customers, not leaving your house is almost always a guarantee for success. So, deliveries were a hit. Then, there was the delivery personnel. It was an opportunity for many people to get a job. But, hold on to this idea for later.

For the moment, let's say that Rappi had all the checkmarks for a promising startup. Just one year after its foundation, Rappi had already participated in the Y-combinator program. Plus, it had expanded beyond Colombia to other countries.

From 2015 onward, Rappi saw massive investment and rapid expansion. There was a lot of hype around it, as the founders claimed 30% growth, year-to-year.

So, investors were willing to drop big bucks. $200 million, to be precise, that's how much Rappi raised in 2018 alone. And this marked a critical moment in the company's history.

The Rappi founders take the company to the top

$200 million in investment is no small feat. But, with this investment round, Rappi was now the first Colombian startup to become a Unicorn.

And, there was no slowing down this startup. That same year, Rappi already operated in five countries. Plus, it was expanding to other services. The founders were ambitious and now aimed at fintech.

In 2019, the company partnered with Davivienda, one of Colombia's largest banks, and created the digital wallet RappiPay. It's a hit. By 2021, it already has 660 thousand users, with 20 million transactions per year.

Then they got into credit cards with cashback, preferred interest rates, and other benefits. Heck, Rappi even got into the business of selling air tickets. Rappi was so big that even beauty brands like Avon offered products exclusively through the platform.

In 2019, Colombian President Iván Duque gave Simón Borrero the "Entrepreneur of the year" award. In the President's own words: Rappi had transformed society. That's how big Rappi is.

By 2020, the company had expanded its operations to nine countries, including Perú and Costa Rica, and 250 cities. So, all this growth came before the pandemic.

Of course, the lockdown increased the demand exponentially. In 2021, Rappi had a Series F funding round, and the numbers are impressive. Rappi has raised over $500 million and has a $5.25 billion valuation. Those are big-league numbers.

It's even more so when we see that it's coming out of Latin America, a region at the beginning of a startup revolution. So, hats off to them. But Rappi isn't perfect.

Rappi’s bad side: salaries and reviews

No company this big is going to be perfect. Anything but. There are plenty of downsides to Rappi, and some entail a bigger discussion. But, let's not get ahead of ourselves.

Rappi is huge in Latin America, and, most likely, you've seen similar platforms in your countries. All these platforms are very comfortable for the user. The businesses also benefit, though they have to dish out a commission. But Rappi depends on an army of personnel delivering on the ground.

So many people deliver to make an extra buck that there's even a term: Rappitenderos, or Rappitenders.

Many Rappitenders are migrants. You see, the app isn't rigorous on requirements, so undocumented migrants turn to it, even if it means meager wages. That's where Rappi's reputation takes a hit.

Rappi has a flawed reputation

(FILES) In this file photo taken on October 25, 2018 Venezuelan nationals working as bicycle couriers, for Colombian online delivery company
(Photo by John VIZCAINO / AFP)

An investigative report by the BBC showed that, in some countries, Rappi claimed that Rappitenders earn about $1.5 per delivery. So with 2 or 3 deliveries per hour, that's $3 to $4 an hour. So from that perspective, the company is paying minimum wage.

Then there's the issue of calling delivery personal independent entrepreneurs. Rappi, like many other platforms, doesn't pay insurance or social costs.

Some countries have pressured giants like Uber to take action and pay some of these benefits. But Rappi operates in Latin America, and there's still much to improve in these topics.

So, Rappi claims they provide a minimum wage. But, Rappitenders say there's a lot that we don't see. For example, they have to buy the company bag. Not doing so could mean less work.

Also, in theory, Rappitenders can choose to reject deliveries. But many say that, in reality, they can't. Otherwise, the system gradually offers them fewer opportunities. But then, there's the cost of the bikes, fuel, and any work-related expense that Rappi doesn't cover.

Add all these factors together, and you have Rappitenders working countless hours to make a decent living.

The other dark side of Rappi

And don't think that there are any complaints on the other side. Rappi reviews are low in almost all countries. The main reason is poor customer service. When customers call to complain about an order, they've rarely gotten a satisfactory response.

It got so bad that Colombian authorities started an investigation on Rappi. The company had failed to comply with regulatory orders to improve customer service. And that's where the discussion gets interesting.

Should that be a surprise? Well, no. These massive companies rarely have excellent customer service. There's the debate around the gig economy. As customers, we're getting more used to these services.

So, are we willing to accept these conditions as employees? Many of us won't if we don't have to. But, on the other hand, these platforms are more and more common. This might be the work future for many.

Even Rappi isn't alone; competition is tough.

But one thing's clear: Rappi managed to be different from the start. From their approach to customer feedback to giving away donuts. They haven't stopped. Now comes the fight to stay on top.

Bernardo Montes de Oca
Content creator in love with writing in all its forms, from scripts to short stories to investigative journalism, and about almost every topic imaginable.
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