Last-mile delivery, Zubut, closes round for investment in growth and AI

Contxto – You’d never think that the last-mile delivery company of the continent, Rappi, is in jeopardy when you listen to the venture capitalists (VCs) at Redwood Ventures speak. They’re just led an investment round in a shiny new last-mile delivery startup from their native Mexican city of Guadalajara, Zubut.

You’ll remember that Rappi had a rough start to the year. After months of continuous aggressive expansion, the Colombian unicorn was forced to brake and say goodbye to a good chunk of its labor force.

Therefore, one wouldn’t be crazy to think that, just maybe, this particular market was already saturated. So, what gives with this Redwood investment?

The key is in the differentiation.

What Zubut offers is different from Rappi. That is because their main focus is on their B2B (business to business) model. Their emphasis is not to pesky individuals, but rather on e-commerces, restaurants, and corporates generally, banking on that continuous operational cash flow.

The numbers don’t seem to lie either. My tocayo and Fund Manager at Redwood, Alejandro González, put it this way:

“The estimated value of the last-mile delivery market stands at US$2 billion. Additionally, e-commerce in Latam has been growing at a rate of 15 percent annually… We think Zubut presents a very scalable technological solution.”

AI, AI, AI!

Therefore, given this slant on the last-mile game, one of the added perks that Zubut provides its corporate customers is market intelligence they may be in desperate need of. Indeed, to outsource part of your market intel work to your currier is not a shabby deal at all.

This facet of the startup will be the one to most benefit from this latest investment round. The money will be poured into developing Zubut’s technological capacity. It will enable the company to better plan out routes and analyze the data output for their clients through the use of Artificial Intelligence (AI).

In correspondence with Contxto, Jorge Arambula—Co-founder and CEO of Zubut—had me note that they already had a couple of years working on tech behind them. Now, the plan specifically seems to be to hunker down on “demand prediction models” to lower prices for customers and make their corporate partners all the more competitive.

So, not to toot our own horn, but this is pretty much as we’d predicted last year. That soon, AI would become a must-have for any self-respecting company; not just a nice-to-have feature.

In fact, it seems that the biggest players are not only getting into the AI-game, but buying up all the stake in it as well. This is what we saw when Gympass bought Flaner last year, or when Loft announced it would be buying Spry just this week. All cases of big Latam unicorns going out into the wider world and buying up the best the market had to offer in this increasingly essential tech.

A web of local strongholds

Another type of differentiation worth noting is geographical distinction.

As Mexico’s second largest city, Guadalajara is rife with opportunities, and both Zubut and Redwood Ventures are keen to cash in on them.

Take Redwood. It is marrying itself to its local VC ecosystem. Zubut is its twelfth startup in a fund deliberately and explicitly aimed at—sure, scalable tech solutions—but also locally sourced ones. So it’s Tapatío power for the win in this portfolio.

The case is not too dissimilar with Zubut’s local slant. But the chick must one day fly the nest. And this is where the Redwood cash will come in handy. The plan is to rapidly expand to three additional cities soon, including neighboring Mazatlán and León, as well as the big kahoona itself: Mexico City.

This Guadalajaran last-mile delivery startup will need to be lean and mean by the time it takes that jump. Indeed, according to Arambula their investment in competitiveness “follows a strategy of attacking emerging Mexican cities where we are the first arrivals, in order to go for the (national) capital later on.”

Redwood and co. just gave him a big leg-up on this mission.

Related articles: Tech and startups in Mexico!

-AG