Why We Invested in Gringo

Valor is pleased to announce its investment in Gringo, an all-in-one app designed for Brazilian drivers. Gringo's solution, which has already reached 10M drivers, offers seamless management for vehicle documentation, convenient payment in installments for taxes, fines, car insurance, and access to auto equity loans.

The Brazilian Automotive Industry

Owning a car in Brazil can be extremely complex - drivers face many regulatory and administrative hurdles, including heavy bureaucratic requirements, frequent insurance renewals, complex payment procedures for taxes and fines, and limited access to vehicle financing options, to name a few. This is because the market is currently plagued by a lack of transparency, fragmented, time-consuming processes, and elevated fees coupled with a limited number of flexible payment options.

Almost half of Brazil's population possess a driver's license, with 75M drivers having direct exposure to the complexities of this massive automotive market. Documentation issuance fees and traffic violation tickets alone amount to over $20B USD. In 2022, more traffic violation tickets were issued in the country than there were drivers, with the number of tickets reaching 76M. Needless to say, the call for a more efficient solution has never been more urgent, and Gringo's solution is key to addressing this broad-ranging concern in the driver's daily life.

Complexities and Challenges in the Brazilian Auto Industry

The multitude of challenges faced by Brazilian drivers is largely due to the involvement of multiple stakeholders at various stages.

• Interactions with a Multitude of Entities: Access to insurance and financing, as well as navigating fees and fines, requires drivers to interact with several public and private entities and often depends on agreements between these bodies. When it comes to car insurance, which is renewed on an annual basis, drivers must opt to resort to a broker or directly with insurance companies. On the other hand, managing the payment of fines requires interaction with multiple public entities, adding bureaucratic hurdles to the mix.

• Lack of Integration Across Systems and Public Entities: On the other hand, despite huge strides made by the Brazilian Government for the digitalization of its services and documentation, it still faces the challenging task of efficiently managing, integrating, and regulating the multiple stakeholders in this market. The lack of complete data integration among municipalities, states, and the federal government, each operating under separate public agencies and regulations, has resulted in asymmetric information and inefficient processes throughout the market. Therefore, the government's strategic efforts to digitalize the sector will only be optimized through increased collaboration with companies such as Gringo, who have the potential to change the game for the entire industry in terms of information, process efficiency, and coordination.
• Payment Inefficiencies for Vehicular Documentation: Adding to the struggles mentioned before, drivers also face the challenges of having to pay fees and fines through inefficient physical payment processes. Indeed, drivers are often required to make their way to their bank or local lottery agency, both of which are seldom open outside of typical working hours, to settle their fees. Additionally, except for IPVA or "Imposto sobre a Propriedade de Veículos Automotores" (annual tax charged over the property of any automobile ground vehicle), vehicular debits cannot be paid in installments, nor can it be paid using a credit card. As a consequence, the possibility of paying these vehicular debits is highly appreciated by drivers, considering the fact that Brazil is among the top 5 most expensive countries in the world to own a car. Finally, drivers also suffer from a lack of visibility regarding payment deadlines on their different fees and fines.
• Third-Party Inefficiencies: The system, as it currently stands, is so complex that it requires a nearly full-time dedication to these processes, leading to the emergence of the role of "despachante" or broker. This profession, unique to Brazil, handles various bureaucratic procedures in the sector, such as registration changes, license plate issuance, and fine regularization, among others. Despite their efforts to streamline these processes, reliance on traditional pen-and-paper methods still results in lengthy procedures and high service fees for what could otherwise be resolved quickly and efficiently through digital means.

For the above reasons and more, harnessing Gringo's technical capabilities within a more efficient payment and management ecosystem can pave the way for transformative improvements that benefit both the public and private sectors. Indeed, Gringo positions itself as an ideal partner from the public sector's perspective; its solution tremendously improves the public collection apparatus by reducing default rates through greater payment optionalities and decreasing public spending on costly internal processes. We see significant opportunity for growth for its frictionless solution for all inefficient processes in the sector.

More Than an Alternative - A Seamless Solution with Many Optionalities

There is a clear government incentive to support and assist companies that generate benefits for citizens through an integrated and seamless experience. In this context, Gringo recognized an opportunity and pioneered the development and exploration of disruption for the automotive industry alongside the Brazilian government. Through several key partnerships, Gringo has already established connections with various public entities via its own APIs.

The company operates in this space as a first mover and reaps the benefits of exponential organic growth, triggering the initial signs of a network effect through a growing and loyal user base (boasting a rate of 4.8 on ReclameAQUI).

Gringo emerges as the "driver's best friend" through a driver and vehicle status monitoring feature, which creates engagement. With the app, drivers can keep track of their driver's license and vehicle registration expiration dates, IPVA (vehicle tax), and licensing payment deadlines, as well as monitor their traffic violations.

In addition to documentation monitoring, the driver can seamlessly settle any outstanding vehicle-related debits such as fines or taxes. Along with the convenience of accessing all their information and an integrated payment option within one integrated app, Gringo provides financial flexibility through payment options in installments across various payment methods.

Added to Gringo's current primary focus on solutions encompassing documentation and financial obligations within the automotive market, several inefficiencies remain to be addressed. Recognizing these other avenues for improvement, Gringo now offers the option for users to purchase vehicle insurance or secure a collateralized loan on their vehicle, all through a fully embedded and frictionless journey. More than that, the driver has the advantage of accessing various credit lines from multiple financial institutions, offering even greater flexibility.

We recognize that this is just the beginning of disruption in the sector, considering the multitude of other driver needs such as parking, fuel, vehicle buy & sell, and auto equity financing. With all optionalities, Gringo is a pioneer player in a market worth more than $200B USD, with a mission going beyond the consolidation of essential solutions for drivers within a single app; it aims to be the driver's best friend, available everywhere and anywhere.

At the helm of Gringo are co-founders Rodrigo Colmonero (CEO), Caique Carvalho (CPO), and Juliano Dutra (CTO). Rodrigo leads the company with a strong focus on both short and long-term strategic vision, backed by over 15 years of experience in M&A and Private Equity. Drawing from his product-oriented background, Caique dedicates his energy to consistently mapping out the next optionalities that Gringo will pursue, all while continuously enhancing the existing product offerings to meet customer needs. Juliano drives Gringo's technological efforts, benefitting from his experience as a serial founder and serving on the boards of several companies.

As we look ahead, we see Gringo not only as an app but as a movement - one that's bringing tangible, positive change to millions of drivers. We are not merely investing in an enterprise; we are backing a vision of streamlined, hassle-free driving experiences.

Join the ride!