Kangu bets on a decentralized model to create efficiency and scale almost overnight.
[Bloomberg] – Earlier this week Mercado Libre announced it was acquiring Kangu, the Brazilian e-commerce logistics startup with an insane growth rate, for an undisclosed amount. We heard from the executives at Mercado Libre, but at Bloomberg Línea we wanted to learn the story of Kangu, and more specifically, how it went from launch to exit in 2 years.
Here’s a birds eye view of the company’s growth: At the beginning of 2020 Kangu had about 30 employees – today it has about 350. It went from delivering 150k packages a month, to close to 8 million across three countries. According to Mercado Libre, in 2020, Kangu’s revenues grew by a factor of 100 year over year.
Bloomberg Línea talked to Ricardo Araujo, Kangu’s co-founder and co-CEO, and to the company’s only investor: NXTP Ventures, about the company’s rapid evolution (it was founded in April 2019).
“There were a lot of subtleties about the company, that when we saw it, we got really excited,” said Alexander Busse, partner at NXTP who evaluated the Kangu deal.
For starters, Kangu isn’t centralized, in fact, that’s how it maximizes its efficiency. Instead of having central warehouses – like many other e-commerce logistics companies – it’s taken your entire neighborhood and activated the small shops into drop off and pick up points.
“What Kangu is really doing is what we call distributed logistics with mini hubs,” Busse said. This approach speeds up delivery times and reduces cost – which Busse says is the main reason people abandon their shopping carts in e-commerce sales.
How Kangu Does it Differently
Let’s look at what’s known as “reverse logistics” — when you want to return a package. Traditionally, in Brazil, you had to go to your local post office, which is likely not within walking distance of your home, and then you had to deal with all the bureaucracy that comes along with it. With Kangu, you can take a look at the app, see what neighborhood store is a pick-up location (which one is closest to you, which one is open at a convenient time etc.) and decide where you’d like to drop off the package. All the store owner has to do is scan it.
The same goes for pickups, but in that case you always pick up from the same store.
Kangu is the brainchild of three Brazilian logistics veterans who met working at FedEx: Ricardo Araujo, Marcelo Guarnieri, and Celso Queiroz. Queiroz only participated in the company’s launch, but remains a co-founder.
The three left FedEx to launch a logistics consulting company, and during that time, Araujo said they were able to learn everything there was to know about logistics, and they had the time to really evaluate the market and see what solution was missing and would be a great fit.
They bootstrapped Kangu until January 2020 when the pandemic hit. By then, 9 months since launch, the company already had 600 delivery hubs, was already working with Mercado Libre, and had already expanded to Mexico; Mercado Libre asked them to.
“With an app, you can turn a regular person into a logistics entrepreneur. All he has to do is scan a package,” Araujo said. That’s what makes this startup so fascinating – it leverages the entire city and its human capital to scale its business – and quickly.
“What’s great about this model is that all the parties win,” said Busse. “Kangu is starting to localize logistics again making it a community enterprise,” he added.
It was these “subtleties” that made Kangu an attractive investment for NXTP, who was their only investor. For most companies to scale to that size would require hundreds of millions of dollars, but Kangu did it with just R$ 6 million.
“Because we were a startup we weren’t able to access money from the government [during the pandemic]. We were only a few months old. And we were growing, so we needed to burn cash to grow,” Araujo said. And NXTP was on board with that strategy.
“So we used our cash to keep things going – and so we created a lot of loyalty – because we kept them [the small stores] afloat. We also didn’t fire anyone or reduce anyone’s salary,” Araujo added.
For some small shops who lost their foot traffic during the pandemic, the logistics business that Kangu offered is what kept their doors open. And it was with those businesses that Kangu was able to scale quickly.
“The city creates this logistics system, so it’s very natural, and the more it grows, the better it becomes,” Araujo said.
Post acquisition, Kangu will continue to be run by the founders, but Araujo said that things will move even more quickly. “Now that we are one company, for starters, we don’t have to negotiate rates with Mercado Libre anymore,” he said.