Rappi, the on-demand delivery startup headquartered in Colombia and operating in Latin America, this week laid off hundreds of employees.
On-demand delivery of meals and other products is coming under increased financial pressure, as no one has managed to make the model profitable, Axios reported.
Rappi told a Brazilian media outlet that it’s laying off around 6% of its workforce, which would come out to over 300 people.
Rappi was founded in 2015 by Felipe Villamarin, Sebastián Mejía, and Simón Borrero, three Colombian entrepreneurs with an initial investment of US$2 million dollars.
Rappi’s customers including Colombia, México, Brazil, Argentina, Uruguay, Chile, Perú, Ecuador and Costa Rica, can order almost anything they want with a super app concept that will deliver it to them in less than an hour.
The mobile app lets users order groceries, food or drugstore medications, but also send money (cash) to someone, or have a courier withdraw money from their bank account from an ATM and get it delivered to them, also, the couriers can offer transport personal belongings (such as house keys, wallets, purses and more). Couriers even walk customers’ dogs.
The company generates revenue by taking a percentage from each transaction.
Rappi has raised nearly $1.5 billion in venture capital funding, most recently at a $3.5 billion post-money valuation in a SoftBank-led deal. Other investors include Andreessen Horowitz and Sequoia Capital. The startup is one of several SoftBank-backed companies to endure layoffs recently, including pizza-making robot company Zume.
What they’re saying:
“In 2020 we have decided to double down on our technology team and to focus on our user experience. In order to achieve this vision, we made the decision to reduce some areas and increase the size of others to achieve our goal for the present year and deliver an even better experience for our users. In total, the number of people who were impacted by the decision across [Latin America] was about 6% of the people in the company. This decision is not a reflection of our growth plans, and we are in fact actively hiring a large number of people in our areas of focus for 2020,” a Rappi spokesperson
On-demand delivery companies, including DoorDash, Postmates, and Uber Eats, have become notorious cash-burners, using venture capital to subsidize their losses.