How Carrot raised a $2 million series B round

I first met Diego Solorzano and Jimena Pardo from Carrot at an Endeavor ISP in London. I was impressed as they passionately described their vision for building Carrot into the first car-sharing service in Mexico City. As a result of their passion and resourcefulness, Diego and Jimena were selected as Endeavor Entrepreneurs in June of 2012.

An electric car available from Carrot.mx
An electric car available from Carrot.mx

In the face of endless feedback that Mexico’s late-adopter culture would never accept car-sharing, Carrot built a strong business with 4,000 customers in Mexico City, Monterrey and Puebla. With the worldwide car-sharing market growing at 75% YoY, they decided to raise a series B round to continue an aggressive growth strategy.

During the fundraising process, Diego and Jimena had to address several concerns from investors. For example, investors asked whether Carrot might incur losses from theft, since auto theft is the second-most profitable criminal enterprise in Mexico. In response, Diego answered that Carrot has experienced zero incidents since launch, due to strong security and other policies.

Investors also questioned whether Carrot could generate sustainable profit margins, since US leader Zipcar has experienced losses since inception. In answer, Jimena responded that there were many profitable car-sharing companies in Europe, such as Germany’s DriveNow and Switzerland’s Mobility.

“I believe the key to fundraising is to appear as riskless as possible,” commented Diego. “By overcoming critical objections early in the fundraising process, we were able to give our investors confidence that Carrot would be able to build a meaningful business.”

After meeting with roughly ten investors over thirty days, they received a letter of intent from Mexico Ventures in October 2013. Next came three months of due diligence, with an extra month due to the Christmas holidays. Fortunately, Carrot had retained Deloitte LLP to audit its financial statements and contracts, which accelerated the diligence process. And in February of this year, Carrot closed a $2 million round from Mexico Ventures, with participation from previous investors Auria Capital and Venture Partners. In celebration, Diego and Jimena took the entire team out for dinner and drinks at Cafe de Tacuba in DF.

When asked how Carrot has succeeded in a highly complex industry, Diego credited his advisors, board members and Endeavor for sharing their expertise in internet marketing, finance and logistics:

“To be a successful entrepreneur in Mexico,” he says, “you need three things: 1) entrepreneurship is collaborative and no one can do it alone, so make sure you have access to advisors with more experience than you, 2) there will always be problems and this never ends, so your ability to solve problems is key, and 3) there will always be skepticism for any new project, but get it off the ground and start proving that you can get customers and grow your business. Prove it as fast and cheaply as you can, then scale from there.”

Thank you for sharing your story with us, Diego. We look forward to seeing you, Jimena and the Carrot team reach your goal of 10,000 customers by 2015!

 

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