Yummy: Venezuela's first superapp
Venezuela's economy has been isolated for a while. Vicente Zavarce is serving the resulting digitally-virgin verticals.
This interview was transcribed and edited by Timothy Motte.
Biography
Vicente Zavarce is the founder of Yummy, a Venezuelan superapp offering everything from ride-hailing to medicine delivery. Yummy went through Y-Combinator in 2021. Since inception, Yummy has raised more than $60M.
Before Yummy, Vicente worked for American food-delivery startup Postmates (acquired by Uber) for over two years.
What does Yummy do?
We operate across three verticals.
The first is delivery. On Yummy, users can order food, groceries and medicine. In the process, we create gig worker jobs and help local stores sell more.
The second is transportation. We offer ride-hailing services, by car and motorcycle taxi. This is pertinent to Venezuela, where people have a harder time buying a car due to the economic crisis. When there is no physical mobility, there is no social mobility. Yummy assuages that. Today, 40,000 drivers drive with us. One of them told me that he used Yummy to pay for his pilot school; he now drives planes instead of cars.
The third is merchant enablement. We released an AI WhatsApp chatbot (Wink) that local merchants use to streamline their WhatsApp sales. Big chains such as KFC and Dominos are using it as well. The product also provides merchants with their very own e-commerce website.
These three verticals create human abundance in Venezuela through technology. They are useful regardless of the political situation.
Can you talk about Venezuela’s “dollarization” and how that plays in Yummy’s favor?
Around 2018, Venezuela suffered from horrendous hyperinflation. Strict capital controls were, in part, responsible for it. It was cumbersome to exchange the Venezuelan currency (the bolivar) for more stable foreign currencies. Even when one could, they could only do it at the government-set exchange rate, which valued the bolivar higher than the market did. This created a vicious circle. The country’s economy was forced to run on a spiraling currency.
A couple of years ago, the government loosened these capital controls. People seized the opportunity and started pricing goods in US dollars, to regain stability. Today, both hot dogs and cars are sold in US dollars.
This is a boon for Yummy. Our business model is high volume, low margin. Running this type of business in a hyperinflationary environment would be a nightmare. This tacit dual-currency situation enables us to operate in US dollars and simplifies our accounting.
Venezuela’s economic crisis implies an impoverished population. How do your unit economics make sense, if you’re selling to people with low buying power?
It’s important to remember that Venezuela’s economy used to be decent: it’s the country with the largest oil reserves in the world. Its purchasing power parity (PPP) was $16,000 in 2010 (around Indonesia's level). That number dropped sharply to $5,700 in 2020 but has since rebounded. It stands at around $8,000 today. GDP has more than doubled since 2020, the nadir of the crisis.
New fintech startups such as Cashea (a buy-now-pay-later app) are re-bestowing Venezuelans with access to consumer credit, increasing purchasing power. It’s also worth noting that there is limited competition in the verticals we operate in, due to a quasi-absence of foreign investment and interest in the country. We have enough clients to serve.
RO insights: Venezuela's credit card industry
Venezuela used to have a solid credit card industry. It crashed, as a result of hyperinflation and a cap on interest rates. That’s the gap in which Cashea, a Venezuelan BNPL startup, immersed itself in.
Here’s how Cashea’s founder, Pedro Vallenilla, explained the opportunity to the Realistic Optimist:
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Credit cards stopped making sense for banks because of negative real interest rates: interest rates were legally capped at around 28% while inflation was in the triple digits.
Imagine a Venezuelan bank issuing credit cards. The bank lends 2000 bolívares which, for the sake of argument, is worth $100. Over a couple of months, the bolívar’s value plunges. Its customer still owes 2000 bolívares, but that is now worth $30. Regulation places a cap on interest rates, so the bank can’t increase the repayment amount.
The customer pays back 2000 bolívares as planned, but it’s worth $30, not the $100 it originally lent out. The bank lost $70. Why would it continue issuing credit cards?
Recently, thanks to some reforms, the economic crash has cooled. We are even seeing small growth rates. But since the economic crisis, it has become illogical for Venezuelan banks to issue credit cards. This has created credit-starved Venezuelan consumers.
Hence Cashea’s pertinence.
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Excerpt from Cashea: BNPL in Venezuela, from the Realistic Optimist
What’s your hardest unit economics challenge today?