Caravela Capital recently co-led a USD86m equity and debt Series A for OCN (OneCarNow), a Mexico-based rental car startup for gig workers, alongside Collide Capital, Great North Ventures and i80 Group.

LAVCA: Caravela led the Series A round for OCN at a time when venture capital dealmaking in Latin America has slowed down. What made OCN stand out as a compelling investment opportunity?

Lucas Lima (Caravela Capital): This is the second round we’ve led for OCN after leading its seed. The company has come a long way in the last 12 months, growing more than 7x, and reaching important milestones, so we believed OCN was ready to raise their series A. OCN had already achieved product-market fit with a waiting list of approved drivers 5x larger than the number of cars on lease and excellent unit economics with very low default rates. We also gained additional conviction given the availability of structured debt that will enable the company to grow in the coming years with a low need for equity, as well as the addition of a new CFO and CTO as key senior members of the team with extensive market experience.

LAVCA: How has OCN adapted to the new challenges of today’s VC landscape, and what specific strategies are you employing to balance growth with capital efficiency?

Mairon Sandoval (OCN): OCN is a company launched in 2022 – post the era where capital was more accessible. Given market dynamics, profitability became the main KPI, and that allowed the company to not depend on additional investment for operational purposes, while reaching a considerable amount of self-sustained growth.

LAVCA: In your view, how is OCN positioned to address the evolving needs of the gig economy, particularly in emerging markets like Mexico and Brazil?

Lima: Each market has its own particularities, and it is clear that the dynamics in Spanish-speaking Latin America are different from those in Brazil or the US.

When we looked at Mexico, we saw a less developed financial system, with a significant volume of credit originating from SOFOLs and SOFIPOS, with a large part of the population having no access to credit lines from banks.

When we looked at the situation of app drivers, we saw that they were professionals with high incomes, but the banks didn’t offer them credit to buy a vehicle, which made it impossible for them to finance a car. OCN was therefore able to build a leasing product for these professionals that perfectly meets their needs.

When we look at other countries in Latin America, we realize that each has its own particularities, but there is a good opportunity for OCN to offer its service in other economies with a few minor adjustments.

LAVCA: What role does Caravela play in helping OCN navigate the challenges of expanding into the US and Brazil?

Lima: The US and Brazil are big markets, with 1.5m and 1m app drivers, respectively. Both markets are larger than the Mexican market, but they are more competitive, with banks and financial institutions offering credit lines to these professionals more easily than in Mexico. Despite this, OCN’s model will be able to compete since it has access to driver data that traditional financial institutions don’t have, and is able to have a higher collection rate because it is integrated with the driver’s receivables account which reduces default levels.

It’s also worth noting that OCN is increasingly reducing its cost of capital due to the excellent performance of its portfolio, as well as increasing discounts with car manufacturers for vehicle purchases, which makes the company increasingly competitive against the big banks.

LAVCA: With OCN expanding into South Florida and considering entry into Brazil, what are the unique challenges and opportunities you foresee in these markets? How do you plan to replicate your success in Mexico in these regions?

Sandoval: Our policy for expansion plans determines that the opportunity needs to be larger than USD5b to be considered attractive, and that existing infrastructure needed for the operational component of the business is sufficient to serve customers while maintaining the lean approach toward market expansion that enables profitability.

LAVCA: In your view, what should a VC-backed founder be looking for in his investors during this time in the market? Are there ways in which investors can be helpful that founders are not leveraging?

Sandoval: A big part of the VC industry is the company-fund fit, and equally important the investor-founding team fit. Founders should look for experts in industries that can join them in key decision-making at the board level, that can help navigate strategic decisions and that, on a personal level, enjoy the company’s industry and the founder’s vision. Successful long-term relationships are found in commonality and mutual interest between entities and people – as so, founders should look for investors who are experts in their industries and excited about what they are building. OCN is a clear example of that and we are lucky to be backed by investors that have deep expertise in our industry and that are always there to support the company.

LAVCA: Given that OCN has been profitable from the start, how does Caravela envision supporting its long-term growth strategy? What key milestones do you expect to see OCN achieve in the near future?

Lima: Unlike many start-ups, OCN won’t need to raise many rounds of funding, which will enable the company to operate smoothly regardless of funding scenarios. I believe the company is well positioned to reach $100m ARR next year, due to the excellent margins. All profits will be re-invested to expand the operation. We are confident that OCN is well-placed to dominate the Americas.