Mexico City-based used car marketplace Kavak, which is Latin America's biggest startup, raised $810M in debt financing, potentially rising to $1.2B in 2022
Context & Ripple Effects
Kavak's move from equity to debt marks a shift in how Latin America's biggest startup funds itself: barely a year after its $700M Series E led by General Catalyst doubled its valuation to $8.7B, it is borrowing $810M — potentially $1.2B by year-end — rather than selling more stock.
Debt layered onto venture rounds is already an established pattern among Mexico City startups: Kueski paired equity with a $100M debt facility months earlier, and Kapital and Klar have since followed with mixed equity-debt structures.
First-order effects
- Kavak gains up to $1.2B of working capital without further diluting shareholders at its $8.7B valuation, giving it runway to fund inventory and operations through a period when mega-rounds have become harder to price.
- Lenders take direct credit exposure to a used-car marketplace whose collateral — financed vehicle inventory — differs fundamentally from the consumer-loan books behind most Mexican fintech debt deals like Kueski's.
Second-order effects
- Rival used-car marketplaces across Latin America now face a competitor with a structurally cheaper and larger capital stack, pressuring them to secure their own inventory-financing lines rather than rely solely on equity.
- The success of a nine-figure debt round for a marketplace strengthens the case for regional banks and credit funds to underwrite Mexican startups generally, extending the template Kueski, Kapital, and Klar established.
Third-order effects
- If debt keeps scaling alongside equity for asset-heavy Latin American startups, the region's funding model matures from pure venture capital toward blended structures where lenders, not just VCs, set terms for late-stage companies.
- A deeper local credit market for startups would reduce dependence on US-led equity rounds — though whether lenders will keep pricing that risk through a downturn remains the open question this round tests.
The trend: Latin America's largest startups are shifting from equity-only fundraising to large debt facilities layered on top of venture rounds as they scale asset-heavy businesses.