Why We Invested in Kangu

Anyone curious about the inner workings of e-commerce will rapidly get sucked into the world of logistics. Consider the sheer volume of packages shipped on a daily basis. The complexity is staggering and package volumes are growing rapidly. In 2019, e-commerce grew by 23% in Latin America and still only reached a 5% penetration rate. Compare that to the US where growth rates are 35% lower and penetration rates 3x higher and it becomes clear that Latin America will experience extraordinary growth in e-commerce logistics in the coming years.

That is why logistics is a core vertical at NXTP Ventures. It meets our every criterion: a huge market; an essential, non-discretionary spend for businesses; and strong market tailwinds. Add in pre-existing inefficiencies and consumer dissatisfaction, and you have the perfect climate for innovation. New market leaders are being born and we believe Kangu is among them.

The company is an integrated network of drop-off and pickup points for e-commerce logistics in Brazil. Kangu’s infrastructure connects small retailers, marketplaces, third party logistics providers (3PLs), and consumers in a single platform that delivers packages faster, cheaper, and more conveniently.

Before Kangu, the bulk of online sales in Brazil were served by pre-internet carriers. An order is placed online, the seller has to leave his warehouse, he queues for 30+ minutes — that’s the fast part — and only then does the legacy carrier begin slowly routing it to the customer. That meant high shipping prices, poor customer experience, and long delivery times for both vendors and consumers.

Kangu’s model fixes these inefficiencies. The company allows vendors to drop their packages at over 1,100 Kangu Points spread out across Greater São Paulo. Kangu Points transform neighborhood stores (pet, stationary, café, corner, etc.) into a distributed network of mini logistics hubs. Rather than waiting in long lines, as was customary, vendors today can visit their closest or favorite Point, drop off their packages, and let Kangu’s network take care of the rest. Third-party logistics providers service Points daily. They collect the packages and drop them off at cross-docking facilities before further dispatch.

Besides its drop-off and transportation services, the company uses its network for reverse logistics and pickup. Buyers can either return or retrieve parcels at Points. Offering multiple services atop the same integrated network highlights Kangu as an infrastructure solution, staying clear of the service heavy, competitive pricing of the last-and-first-mile space. This leads to massive operating leverage and equally impressive margins when operating at scale — as Kangu is today.

The Big Why

What excites us most about Kangu is how everyone wins, how every stakeholder is brought together. This creates a virtuous cycle where:

• Online retailers skip long queues and can offer faster shipping to their customers;
• E-commerce platforms offer a cheaper, quicker, and more reliable shipping solution to their vendors (which happens to increase sales);
• Logistics transporters and 3PLs receive recurring daily transport fees providing them with visibility over their businesses;
• Local store owners receive more revenue at 100% margin from commissions and an increase in foot traffic;
• And end consumers see shorter shipping times, better service levels, & more pickup options.

Integrating all these stakeholders is a tremendous amount of proprietary technology built by Kangu’s tech team. It works invisibly and makes simple complex systems for people whose business is not logistics.

That’s where the quality of the founding team comes in. Ricardo, Marcelo, and Celso each have world-class logistics track records, serving together as senior directors in building Rapidao Cometa into one of the leading transportation and 3PL companies in Brazil up to its sale to FedEx. The team brings 20+ years of experience along with an extensive network of strategic relationships with leading e-commerce players, transporters, carriers, and 3PLs.

Logistics is a heavily relationship-driven and operational sector, and the Kangu team is uniquely prepared to deliver on the company’s vision. Logistics remains the largest obstacle to broader e-commerce penetration in Latin America. We believe Kangu will help fix that. We are extremely excited to embark on this journey with them.

Originally published at https://nxtp.vc on March 10, 2020.