Earlier this year, when Rocket Internet announced a new injection of $500 million into its Germany-based startup incubator, co-founder Oliver Samwer told me that a large focus for it would be emerging markets like Latin America. Today comes some news about how that strategy is taking shape: Dafiti, a Rocket Internet-backed fashion commerce site based out of Brazil, is announcing a new investment of $70 million to continue building out its business. It comes from the Ontario Teachers’ Pension Plan (OTPP), a Canadian investment fund that has made other notable tech investments, including a $400 million round in Chinese e-commerce site 360Buy.com.
Rocket Internet confirmed to me that OTPP is the sole investor in this round. It takes total funding for Dafiti to $225 million, and puts OTPP among the company’s biggest shareholders, with others including JP Morgan and Quadrant Capital Advisors. It also comes on the back of a smaller (but strategic) investment of $10 million that Dafiti picked up earlier this year from the Leon Group consortium of shoe brands in Mexico.
Dafiti first opened for business in Brazil in 2011. Riding a swelling wave of middle class consumers in the region, the company has expanded quickly and now operates also in Argentina, Chile, Colombia, and Mexico. As with many other e-commerce startups (and those in the Rocket portfolio), Dafiti declines to disclose its actual revenue revenues or any other details on profitability. A spokesperson tells me that the Dafiti gets over 25 million monthly unique visitors, with 2,000 brands and 125,000 products across its five sites.
The bigger opportunity is to take Dafiti to more markets in Latin America, but this funding will be used primarily to build out what Dafiti has already established, not expand further internationally.
“We will use this money to strengthen our customer service and our product assortment,” Dafiti co-founder Philipp Povel noted in a statement. “All in all, this impressive funding helps us to bring Dafiti to the next level and fulfill on our strategic objective to change the way people in Latin America buy fashion, lifestyle and sports products.”
There is some logic to that, since Dafiti has already established itself in five of the biggest e-commerce markets in the region. In Brazil alone, sales from e-commerce sites, led by those specialising in fashion, are projected to grow 25% in 2013, having added 10 million consumers in 2012, according to e-bit. It also predicts that by 2015, 39% of internet users in Brazil (31.6m people) will be making at least one purchase online.
A spokesperson from Rocket Internet tells me that this is the first investment from OTPP in one of its ventures. But it may not be the last: the German incubator has a strong track record for repeat business from the likes of JP Morgan, Kinnevik, Summit, Access and more. On top of that, OTPP — which in December 2012 recorded $129.5 billion in assets under management — has been making a stronger effort to diversify its investments into new markets. Most recently, that has included (along with the 360Buy deal) a new office in Asia to expand its presence there.
“Supported by a growing middle class, huge consumption potential and significant growth in online and mobile access, Dafiti is well positioned to succeed in online retail in Brazil and Latin America,” Wayne Kozun, SVP, public equities, at OTPP, said in a statement. “We look forward to partnering with Dafiti’s successful management team.”
Rocket Internet, it should be noted, has some 75 startups in operation worldwide at the moment across six continents, expanding widely beyond its European origins. In Latin America, it’s active in eight countries, and has been making strong use of one basic building block of its e-commerce business model: building out on economies of scale by consolidating logistics for several of its operations (not unlike what Amazon does with its operations). Brazil, for example, is home to 15 different Rocket Internet startups, including Dafiti.