David and Goliath, how this YC startup is taking on Rappi

Contxto – “Don’t do it,” acquaintances told Justo founders, Rodrigo Segal and Nicolás López, when they said they wanted to launch a startup for food delivery in Chile. Some even laughed at the entrepreneurs’ idea.

Little did these haters advisors imagine that Justo would go on to grow 500 percent within a single year, prepare for launch into Mexico, and get accepted into Y Combinator, an accelerator program with a reported 1.5 percent acceptance rate.

Now, as the startup gets ready for YC’s Demo Day, as well as rolling out its restaurant management system in Mexico. It’s also embracing its biggest challenge yet: Facing food delivery giant, Rappi.

It’s the classic David and Goliath story startup dreams are made of. 

So to learn more about what Justo’s been up to and how it’ll take on the Colombian unicorn, I got in touch with Segal and López for what turned out to be the most enjoyable interview I’ve had to date.

During our conversation, the founders also revealed the startup’s plans to launch into another Latam country later this year.

What is Justo?

It’s a well-known fact that food delivery platforms charge restaurants a fee for being hosted on their system and completing deliveries for them.

If you’re a large-sized company, like McDonald’s or Starbucks, the fee might not be a big deal. But when it comes to smaller businesses, being charged a rate ranging from 20 to 30 percent over a sale, can pack a punch.

Moreover, restaurants don’t have access to the data on the customers who order through the food delivery app. This valuable information is gobbled up by, Rappi, Uber Eats, and other last-mile deliverers.

Segal and López found this situation was unjust and they wanted to give restaurants back control of their delivery operations and data.

Thus, they launched Justo in Chile last year.

[wd_hustle id=”InArticleOptin” type=”embedded”/] 

The startup doesn’t operate as a logistics service per se. Rather they provide restaurants with a website, an electronic payments system, marketing services, and even on-demand delivery.

Simply put, it gives restaurants an online presence but doesn’t charge them over every sale, nor does it hoard their customers’ data.

Justo in Latin America

In October of 2019, protests in Chile erupted and the startup was in full-swing to grow. Segal and López said it was hectic, but served practice for what was to come: the Covid-19 pandemic.

The startup grew from 220 businesses using its services to its current 5,000 in Chile. The entrepreneurs assured me that’s a 15 percent market share Justo holds in its native country within a year of its founding.

Now, it has set its eyes on Mexico. Segal and López said they were launching with restaurants this week. After which, in August, the startup hopes to deploy operations in Peru.

But in the meantime, it has Latam giant Rappi to contend with.

Propio versus Justo

Last week, Rappi announced it would launch “Propio,” a management system. Through it, the unicorn’s partnering restaurants can receive and handle their orders for free throughout 2020. Meanwhile, additional perks (like marketing and logistics services) come with a fee.

So basically, it’s the same offerings Justo provides restaurants.

But were the founders intimidated? Not quite. For them, there’s a big difference between the unicorn’s approach and Justo’s.

“[Rappi] doesn’t care about the restaurant. For them, the customer [the app user] is what matters. In our case, the restaurant is the customer. We do everything to keep the restaurant happy. It’s a very different mindset,” said López.

Rightly so, there’s only so much a profitable business model can handle if it tries to appeal to both. The phrase “no one can serve two masters,” comes to mind…

Rappi may have a longer track record, but Justo knows what it’s after.

“It’s a battle between David and Goliath. We’re newcomers. We’ve been in the market for a year. They’ve done so for five, they’re in nine countries, they have 3,000 employees, they have millions of dollars,” acknowledged Segal.

“But we internally and with our restaurants, are creating a sustainable business both for us as well as for our restaurants. And we believe that can make a deeper impact than a last-mile delivery app that’s tied to its customer can,” concluded the co-Founder.

It’s an impressive showdown—one might say of Biblical proportions—that I look forward to following and reporting on further.

Related articles: Tech and startups from Chile!

-ML