- The startup behind local marketplace app Karrot has raised $62 million from investors including DST Global, joining a growing list of unicorns in South Korea that are eyeing global expansion as growth at home plateaus in the wake of a pandemic.
On a valuation of $2.7 billion, the Daggeun Market Inc. s Karrot scored new funds from investors including Yuri Milner's outfit and Aspex Management. Existing investors like Goodwater Capital and Altos Ventures also participated, according to co-founder Gary Kim. The firm is led by a venture arm of Masayoshi Son's SoftBank Corp. and the new round makes it one of the largest startup firms in Korea.
Asia's fourth largest economy has been making unicorns and self-made billionaires at a faster rate than ever this year, breaking away from family controlled conglomerates, or chaebols, that have traditionally lead its economy. Karrot is preparing to expand internationally in search of a bigger market.
'Not many of us imagined that BTS could become a world superstar, Kim said, invoking the Korean pop sensation during an interview at a new office in the upscale Seoul neighborhood of Gangnam. I want to show that Korean startups can become successful like Facebook and Google. Everything has matured in terms of quality of products, marketing and branding. Kim, 43, said the new funds will bankroll Karrot's talent acquisition and overseas expansion plans for the next 18 months to two years. The startup has already hired 200 people to hire 100 new employees this year. Kim said the company is keeping the focus on improving profitability and it could take as long as five years before any potential public listing happen. Karrot handled the hundreds of billions of sales last year, Kim said with without specifying the company's earnings. Its local-ad sales business is growing, but the company is not yet profitable.
Karrot has grown into an online community of 15 million first used users trading mostly with their neighbors directly face to face, within a radius of usually about 6 kilometers. The platform has expanded also to offer part-time jobs, real estate listings, pet care and laundry services. The company plans to launch a digital payment service in the latter half of this year.
The former Kakao Corp. worker believes Karrot will need at least five years of investment in the foreign market to turn that into a meaningful business. Naver Corp.'s parent company Line Corp. needed 10 years of data accumulating experience and experience in Japan before that app took off, he said.
Kim started Karrot in 2015 with a Kakao co-worker and a Naver engineer, using cash they got from selling Kakao stock options. Initial targeting South Korea's Silicon Valley - their old stomping grounds around Pangyo Techno Valley outside Seoul - the app has retained a highly localized approach even as it expanded throughout the country.
Today, Karrot also offers its service in several areas of Japan and testifies it in New Jersey and Manhattan in the U.S. some cities in Canada and Yokohama in New Jersey. Kim's team is still searching for a'success formula' for overseas expansion and the app is likely to face sterner competition abroad. Facebook Inc. is testing a similar feature it calls Neighborhoods, while rival Nextdoor Inc. is planning to go public when it continues to develop its own expansion push.
At home, Karrot's growth has somewhat stagnated after the app's usage tripled since the start of the pandemic - going from 4.8 million to 14.2 million users in the year to January 2021, but only added another one million users in the period to June. The company plans to broaden the services it offers to connect neighbors in more ways, such as local commerce and meet-up features. The company is planning to expand the app to the size of Kakao Talk, which has a population of 52 million and reached a 40-million human audience.
Karrot started testing a new service in May in the Songpa and Gwanak areas of Seoul, entering into a quick-delivery battleground for business. Coupang tests local-commerce delivery in some parts of the city, while Woowa brothers food-delivery leader Coupang also operates a quick-delivery service. Unlike the services of Coupang and Woowa that are using their storage facilities to source products, Karrot plans to connect local stores, customers and delivery people, all within a 4 km to 6 km range from each other, reducing cost in the process.
How'll I become a local super app then, Kim said? 'We want to build a neighborhood ecosystem that has all the activities that a person can do within their neighbourhood.