Favo, a startup focused on the community group buying concept (an e-commerce model based on micro-locations, in which entrepreneurial partners make purchases through social networks) is closing its operations in Brazil just over two years after its arrival in the country.
Marina Proença, co-founder and CPO of Favo, said on LinkedIn that after 846 days of hard work, the company has decided to pause its operations due to rising costs and has no set date to return. She will be responsible for the last activities of the startup in the country until June 30th.
Founded in 2019 in Peru by Alejandro Ponce and Proença, Favo landed in Brazil in February 2020.
“I never thought it would be easy, nor am I here to glamorize the temporary closure of this operation that cost me nights of very little sleep, anxiety disorders, and a lot of absence from the rest of my life, but to declare that we are doing it in a dignified way, the same way we started: taking care of people,” said Proença.
The startup had over 160,000 buyers in both markets and was already serving more than 7,000 entrepreneurs. According to Proença, Favo is trying to assist these businesses in the best way possible, even “closing partnerships with competitors.” “We pause Brazil with the same respect with which we started.”
The startup focuses on the community group buying concept, an e-commerce model based on micro-locations, in which entrepreneurial partners make purchases through social networks. Through its platform, Favo connects community-leading entrepreneurs to end consumers. By registering as a seller on Favo’s platform, partners have access to a personalized online store that offers the entire Favo’s product catalog, which today consists of more than 2,500 retail items. All this operation will now be available only in Peru.
In October last year, Favo secured $26.5 million Series A round led by venture capital Tiger Global and followed by Global Founders Capital, MSA Capital, Elevar Equity, Positive Ventures, FJ Labs, H2O, and David Vélez, Nubank’s CEO and founder. The fundign would be invested in logistics and expansion to other cities other than Sao Paulo, in addition to prepare Favo’s launch in Mexico. All these plans were paused.
LABS has reached out to the company’s PR team for comments and will update this story if it hears back.
Favo’s ‘pause’ comes on the heels of a series of bad news for the tech ecosystem and startups in Latin America and the world. In recent weeks, Brazilian ecommerce platform VTEX and the 2TM group, which owns the crypto exchange Mercado Bitcoin, have made significant cuts in personnel, 193 and 90 employees, respectively. Before that, QuintoAndar, Facily, and others had also laid off, even shortly after receiving large investment rounds.
The general picture, highlighted by several of the investors of these companies, is that it is necessary to be cautious, reduce the çash-burn’ rate, and cut side projects (and personnel involved) to focus efforts on the organization’s core business—all as a way to “prepare for the worst,” quoting the words of Y Combinator.