SoftBank-Backed Colombian Delivery Unicorn Rappi Hit With Trade Secrets Lawsuit

2020 is starting off on a negative note for Colombian on-demand delivery unicorn Rappi.

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Last week, we reported that the startup had laid off hundreds of employees, according to Axios.

Also last week, Colombian media outlet Dinero published a report that Rappi’s founders Simón Borrero, Felipe Villamarín and Sebastián Mejía took the idea behind the company from a trio of Colombian businessmen.

According to Dinero, the allegations by those businessmen – Mauricio Paba, José Mendoza and Jorge Uribe – have led to a probe by Colombia’s Superintendency of Industry and Commerce for “the possible illegal appropriation of the business model.”

And, according to legal documents obtained by Crunchbase News, the trio making the allegations (who all hail from Bogota, Colombia) have also filed a formal complaint with the United States District Court in the Northern district of California on November 9, 2019.

The complaint alleges “misappropriation of trade secrets under the Defend Trade Secrets Act (DTSA)” and “misappropriation of trade secrets under the California Uniform Trade Secrets Act (CUTSA).” It is filed against Rappi as a company, and Borrero individually.

In other words, the trio of businessmen believe that Rappi took their idea for an on-demand delivery company and represented it as their own.

Within The Filing

In the filing, Paba contends he came up with a mobile app that would connect users who needed to run an errand such as delivering a package or retrieving groceries with messengers willing to perform the errands. He went on to note that he teamed up with Mendoza and Uribe to develop the concept into “a detailed business plan.” The trio, according to the complaint, says they agreed to “share equally any revenue generated by their new business idea.”

They decided to call their app “Kuiky.” In January 2015, the group says it contacted Imaginamos, a Bogota-based software development company, and ultimately signed a contract with Rappi co-founder Borrero.

According to the filing, Imaginamos agreed to develop “wire frames” for the Kuiky application. Once the Kuiky creators had approved the final wire frames, the parties would enter a second agreement under which Imaginamos would develop the actual software code for the application to function, according to the court documents.

The work, the trio claim, ran into a number of delays but the frames were delivered in April 2015. At that point, the plaintiffs said Imaginamos proposed a second contract that would divide the app development work into several phases to take place between April and August 2015.

According to the filing:

“By this time, however, the Kuiky creators had grown increasingly concerned about the repeated delays by the Imaginamos team and the service they were receiving from Imaginamos. Because of these delays and concerns, the Kuiky creators decided to discontinue their relationship with Imaginamos and to try to develop the Kuiky app and business in a different way. The last email between the Imaginamos team and the Kuiky creators is from April 23, 2015, and Plaintiffs are informed and believe and on that basis allege that Rappi S.A.S. was incorporated only days later on April 27, 2015.”

I’ve reached out to Rappi for comment and will update this piece if/when I hear back.

A Unicorn Limps

Since its inception in 2015, Rappi raised a total of about $1.4 billion—including a $200 million Series D in August 2018 that took it to unicorn status, according to the startup’s Crunchbase profile. Yuri Milner’s DST Global led that round, which included participation from existing investors including Sequoia Capital and Andreessen Horowitz (a16z).

Last week, Rappi told Brazil Journal that it would be letting go of about 6 percent of its workforce, over 300 people. The job cuts are taking place just over eight months after Rappi confirmed an investment of “up to $1 billion” from Japanese investment conglomerate SoftBank. The raise, which we covered here, was done at a pre-money valuation of $2.5 billion, according to a Bloomberg report.

The news is the latest in a string of setbacks for SoftBank, which saw a number of its well-funded, high-profile portfolio companies – such as Uber, WeWork, Compass, Zume Pizza and Oyo Hotels – stumble (in a big way) over the last year.

Illustration: Li-Anne Dias