Nubank and Rappi are "unicorns" in the startup market and present themselves as a great alternative for investors in Latin America

The startups, business alternatives born from the possibilities the web offers, have managed to progressively create a new landscape in the way of understanding the markets and, above all, the way in which new companies are created.

Leer en español: Nubank y Rappi: Los unicornios latinoamericanos

Within these organizations, there are some that are already well-known in the Latin American market, such as Mercadolibre and Despegar, which have changed the way sales and travel were understood for years. However, lately there has been a "new wave" of startups that have a whole new business model and seek to revolutionize everyday life.

Within this new wave are located the two most important Latin American startups of the moment: Nubank and Rappi. These companies have recently reached the status of "unicorns", that is, companies that are valued at more than one billion dollars and, therefore, are located with a great projection for the future and the international market.

Currently, this status is only shared by these two companies in the region. Globally, there are 27 organizations that have reached this level, according to Bussiness Insider reports.

Why are these companies unicorns?

The term "unicorn" can be deceptive at first, because it suggests a great solvency and economic versatility of the startups that reach this denomination, even though many have a quite reduced scope, local or regional, that cannot be compared with the technological giants like Google or Amazon.

This assessment, then, is based on investments received by companies with projections of their market in the near future. The "unicorns" are predictions of investors who see a great future in startups around the world.

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Nubank, the specific case of Brazil, entered this category in March 2018, as reported by Bussiness Insider. Its CEO, the Colombian David Vélez, in an interview with Colombia Fintech, described the Brazilian market as one that has great opportunities for entrepreneurship and where new alternatives can arise that question traditional businesses.

Nubank is a company that seeks to change the paradigm of traditional banks by providing services that are only located from the digital. Vélez affirmed that he conceives his platform as an Amazon counterpart, given that everything it offers is digital and saves clients cumbersome procedures, at the same time that it targets a large Brazilian population that has not yet entered the traditional banks and can see this startup with different eyes.

Rappi, on the other hand, is the most recent Latin American case and comes from Colombia. It reached its "unicorn" status in August, through a million-dollar investment of 200 million dollars by DST Global, with the participation of Andreessen Horowitz and Sequoia, according to Axios and TechCrunch.

This company, which is based on the delivery of all kinds, has achieved a broad growth, both in the Colombian market and in Latin America. Its domicile style, where any possible product or exchange can fit, is profoundly innovative.

Is there a disadvantage?

Despite what may seem at first, to reach "unicorn" status is not only joy. It implies quite high market risks. As an article in the BBVA website indicates , there is a great responsibility for companies that are starting to be cataloged in this way, since they must fulfill the expectations of their investors in a highly competitive market.

In 2017, for example, several startups lost their category, as they were valued downwards. However, this is a risk that is not uncommon in an entrepreneurial context, since many of its business bets are based on risk and innovation in markets that cling to more conventional ideas.

LatinAmerican Post | Jorge Ovalle
Translated from “¿Por qué Nubank y Rappi son unicornios en el mercado latinoamericano?”