It’s official. Picap’s Colombian entity shuts down due to Government illegality allegations

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Contxto – The world’s current situation is asking for founders out there to put in their best efforts. Many of them, regardless, won’t make it. Some, on the contrary, are doing well despite the situation, and yet they are currently finding other kinds of obstacles.

On April 30, Picap—a moto-taxi and last-mile delivery app from Colombia—is officially winding down its Colombian entity. According to a press release, the Colombian government has pushed the company to shut down because its activity is regarded as illegal.

Allegedly, despite the company’s efforts to shift course from a motorcycle-taxi app—the source of the legal controversy—to a multiple logistics and mobility service, it still was not enough to change regulators’ minds.

This means that, as of this weekend, more than 250 people that worked at Cap Technologies—Picap’s legal name—are unemployed.

Government overreach?

I talked to Hector Neira—Picap’s co-Founder—to understand more about the situation. He said that, despite Picap’s efforts to pivot its business model and product, the superintendency “didn’t care and assumed responsibilities that didn’t concern them.”

According to Neira, Picap’s moto-taxi model was paused in Colombia a couple of months ago, because of the aforementioned controversy with the regulators. For that reason, they found other ways to fulfill users’ needs by leveraging their logistics and payment platforms. 

Picap offered a wide variety of products and services including barbers and manicure marketplaces, B2B (business to business) and B2C (business to customer) delivery, payment tools for e-commerce businesses, and even telemedicine services including nutritionists, psychologists, veterinarians, and physicians.

Despite this, the government didn’t reassess its concerns surrounding the company and decided to liquidate its assets.

“It took us by surprise. Picap had to completely reinvent itself to deal with the pandemic and among all of our products, there were six which didn’t concern the Transport Superintendency,” said the co-Founder.

We’re also reaching out to Colombia’s superintendency to hear their side of the story. We have yet to receive a reply.

What does this mean for Picap?

Picap’s operations are run from both Colombia and the US, meaning that those that fall within US jurisdiction will face no collateral damage. It seems it’s just the Colombian corporation that will face the consequences. 

The result will be having to lay off the entire workforce and liquidate assets. Apparently, this won’t mean the company will cease operations necessarily. The app will still be able to function if operated by the US holding.

The founder is considering legal action for protection, “but if the verdict comes out against us, we’ll turn to the international courts.”

Good for the letter of the law, bad for everyone else

Although there may be compelling legal justifications to support the government’s case, I will say that one can still question the ethical and practical consequences of these official sanctions.

It’s not the best time to have a company, employing many hundreds of staff and around 60,000 more third party workers dependent on the platform, close shop.

We’ve been harsh on Picap before. Their model does seem to involve a certain degree of physical risk to users. We even criticized the improper way in which of some of their Peruvian fleet members have conducted themselves in the past.

Nevertheless, it does raise concerns on whether this decision, though true to the letter of the law, turns out to be counterproductive in times when there is desperate need for employment and economic activity. 

Not only that, but if the business model changed in order to comply with the regulations, the decision to liquidate the company and fire people could seem a bit on the aggressive side. However, to reach a conclusion, we’ll await the regulator’s point of view.

We’ll update this story shortly.

Wanna hear more? We recommend you listen to the following podcast episode: Logística latina. You can find the time stamp available in the description.

Related articles: Tech and startups from Colombia!

-VC