Success in venture capital is determined largely by finding and funding outliers well ahead of other investors. Funding a startup typically requires conviction on achieving and scaling product-market fit. Data and metrics are often crucial to developing such conviction. But what if there are no data, just a prospective founder and an idea? The prospect of being the first investor in such a scenario is terrifying to most—but exhilarating for a few of us. At Foundation we have an internal term that encapsulates having this kind of conviction for a founder: The Silver Bullet Investment. This means pulling the trigger on being the very first backers of a founder we’ve admired and worked with for a long time, no matter what project it is they’re working on. Our investment in Justo is a textbook example of using a Silver Bullet and it joins a small string of outsized outliers in our portfolio.
One of the most fun aspects of investing in Latin America is the chance to reconnect with long-time friends and colleagues who have big ideas about transforming the region by creating new companies. I’ve been friends with Ricardo (and many members of Justo’s executive team) since college. I’ve witnessed Ricardo’s career progression, including his rise to the CEO role at Cabify, which he grew to a $1.5b+ valuation after joining when the company had only a few cars and operations in one city. In early 2019, Ricardo told me he was thinking of “starting something new,” and my brain immediately pictured a big, shiny silver bullet. After a few conversations, I learned that Ricardo wanted to start a supermarket, which gave me a knot in my stomach because grocery is a fiercely competitive, logistically challenging, and capital-intensive industry. But silver bullets are for shredding through those kinds of knots. We led Justo’s pre-seed round and got to work.
Transforming the Mexican grocery industry requires bold conviction. It is massive: at $60b annual sales (about 5% of Mexico’s GDP), not counting traditional formats and Mom & Pop stores. Walmart Mexico’s subsidiary is a $50b market cap behemoth, with $32b+ in sales, commanding 30%+ market share across their different formats. Other supermarket players like Comercial Mexicana, Soriana, and Chedraui, collectively, represent similar sales and are each valued above $1b+. The opportunity is equally large and ripe with opportunity across every country in Latin America.
Despite heavy investments in infrastructure and logistics, the core supermarket experience has not changed in 50+ years. People still push a cart around isles of shelves, which are laid out to maximize the amount of walking consumers do (to increase their exposure to products). CPG companies pay retailers a premium to place their products on the shelf space at eye level and at the entrance of the store.
Starting a supermarket from the ground up, in 2019, means bringing the supermarket to the consumer. It means using the latest advances in machine learning and AI to create technology that helps deliver the highest quality and most convenience to the consumer at a fair price (the proof is in Justo’s spotless delivery of the hardest items: fresh produce). It’s also an opportunity to redefine the relationship that the supermarket has with farmers, suppliers, and the overall community. Justo is innovating on all of these fronts.
The past two years have been a great validation of the Justo Silver Bullet. Justo went from idea to launching in Mexico City in less than six months, thanks to the assembly of an outstanding team. The company has grown dramatically since the initial pilot and is already operating in more cities with an expanded product offering. Customer satisfaction is best in class.
Today, Justo is announcing a $65m Series A led by General Atlantic to accelerate their growth even further. This is both the largest Series A in Latin America to date, the earliest stage investment by GA, and our third investment into the company. This latest round reflects the massive size of the opportunity ahead and is also a vote of continued confidence in Ricardo and the rest of the team of Justicieros. We at Foundation Capital are extremely proud to be the first backers of Justo, and we’re excited to see them continue to turn grocery shopping into a delightful experience for more consumers across Latin America.