The rapid spread of the coronavirus pandemic has put a freeze on many in-person sales and transactions for goods and services, so in what might be a sign of the times for funding in the startup world, today a company in the U.K. that's been building a portal to carry out car sales in the virtual world is announcing a large fundraise.
Cazoo, a startup modeled on the Vroom/Beepi-type model that buys in used cars and then sells them online and delivers to your door, today is announcing that it has raised £100 million ($116 million), funding that it plans to use to continue expanding its business. The company has now raised £180 million since first being founded 18 months ago.
"It’s clear that UK consumers are ready to buy cars online in a convenient, hassle-free way," said Alex Chesterman, Founder & CEO of Cazoo, in a statement. "Cars are an important form of transport for many in our society, whether conducting deliveries or getting to essential jobs and we want to ensure that those who need one can continue to get one. This new round of funding is a strong signal from investors of the scale of the opportunity. Our mission is to deliver the best experience for car buyers across the UK by delivering better selection, value, convenience and quality. That mission is now also focused on keeping consumers safe by not having to leave their homes to buy a car. We are also looking at how Cazoo can help other organisations move essential supplies around the country via our fleet of car transporters in these difficult times.”
This round is being led by DMG Ventures with General Catalyst, CNP (Groupe Frère), Mubadala Capital, Octopus Ventures, Eight Roads Ventures and Stride.VC also participating.
Cazoo has so far not revealed its valuation, except to tell us that it is a "significant uplift to our previous rounds." PitchBook notes that as of September 2019 its valuation was around $220 million, which on a basic straight curve would put its valuation now at around $336 million, but possibly more considering what the company said when I asked.
It may seem like a crazy time to be raising money for a startup -- much less one that is not only focused on vehicles to get people around at a time when governments the world over are urging people to stay at home; but one that is passing used vehicles from one owner to another at a time when people don't fully understand how the coronavirus infection spreads, and how long it might last on surfaces and in enclosed spaces (like cars).
There are a few reasons for why it did, it seems.
The first of these is the business of Cazoo itself: it notes that in the first three months of commercial operations, it has had £20 million in sales, which seems to point to a strong trajectory of growth (at least up to now).
That's before we consider some of the other challenges that startups in this space have seen because of the difficulties of balancing costly inventories and executing on sales and deliveries at strong enough margins without burning a lot of cash: at its heart it's an interesting business model and someone will eventually get it right.
In addition to that, there is the pedigree of the startup. Cazoo is founded by Alex Chesterman, a repeat entrepreneur who first founded film rental/streaming service LoveFilm (which was thought of as 'the Netflix of Europe') and then sold it to Amazon, where it became a cornerstone of its Prime Video operation, making the £200 million price it paid for it sound like a song.
Then he founded and eventually sold the property sales and rental portal Zoopla (for £3 billion, to Silver Lake).
No company can operate right now in a bubble separate from what is happening around the coronavirus pandemic, and the same very much goes for Cazoo.
The FAQ's on the company's site cut right to the chase in trying to reassure customers about how vehicles are sold and delivered at the moment. The company says that it "fully reconditions" all its vehicles before selling and delivering them, and the handover process is now being done "at a safe distance" to protect both customers and employees.
"As with other retail marketplaces, the current Coronavirus situation is accelerating the shift from offline to online transactions given its unique delivery proposition," it added.
It's also taking the very specific step of not carrying out any deliveries to people who are self-isolating, although as with many of the measures that are being put in place, a lot of the execution is down to personal willpower and judgement.
"If you are self-isolating due to being in contact with someone with the virus or you are unwell or in an at-risk group, we’re currently unable to make the delivery for your safety and the safety of our Delivery Specialists," it notes.
"We will put your order on hold until we can rearrange a suitable delivery time and you won’t be charged for rescheduling. If you have chosen to self-isolate, have no symptoms and are not in a group at risk then the delivery can still go ahead. Our handovers will take place from a safe distance and our Delivery Specialists will wear personal protective equipment to keep you both safe. They’ll also remain outside of your car whilst they talk you through the features."
It's hard to tell right now what the next three (or more...) months are going to look like in the UK, as well as the world, economy, so we may well be seeing a lot of rounds coming up specifically from VCs betting not just on businesses that have a chance of faring well in the current climate, but those that are strong enough that you don't want to see them disappear and so are throwing them lifelines of runway and support. Many will fall into both of those camps, hopefully.
"We are very excited to continue to support Alex and the team at Cazoo. The pace of what they’ve achieved and the level of adoption they’ve seen in the first few months since launch is remarkable," said Manuel Lopo de Carvalho of DMG Ventures in a statement. “With almost 8 million used car transactions a year in the UK, there is a clear opportunity to provide a more convenient way to buy a car and shift part of the market online.”