E-commerce is becoming a preferred way to shop for many, even when it comes to bigger-ticket items like cars as consumers grow more comfortable with shopping online.
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To that end, Vroom, an online used car retailer, has raised $254 million in a Series H round of funding to meet growing demand. Washington, D.C.-based Durable Capital Partners LP led the round. Funds and accounts advised by T. Rowe Price Associates Inc., L Catterton and other unnamed investors also participated.
The investment comes nearly one year after the company’s $146 million Series G raise (led by publicly-traded AutoNation). The latest round brings New York-based Vroom’s total raised to date to $721 million since its inception in 2013, according to Crunchbase data. The startup declined to disclose its valuation but the Wall Street Journal reported the company was now valued at $1.5 billion.
How it works
Vroom sells used, reconditioned cars directly to consumers via its website and app. The company picks up cars from sellers and delivers to buyers via what it describes as a “private-seller acquisition model” built on a mobile-enabled user interface. It also offers financing, warranty, and insurance products.
“Everything that a traditional offline dealership can do we can do online,” CEO Paul Hennessy (former CEO of Priceline.com) previously told Crunchbase News. “We live in an e-commerce world where people can get everything delivered to their homes. It makes sense that the next logical step is that larger, higher-ticket items like cars can also be delivered to their homes.”
Vroom, through a December 2015 acquisition of Texas Auto Direct, also operates a 500,000 square foot reconditioning facility and store in Stafford, Texas (just outside of Houston). But it is focused on growing the e-commerce side of its business, which Hennessy said generates the majority of the company’s revenue and is growing at triple digits year-over-year.
A growing market
The used car market is a $776 billion industry, according to calculations by Vroom based on the 2018 Cox Automotive Used Car Market Report & Outlook.
Personally, I found the idea of someone purchasing a car they’d never test-driven to be a little daunting. But Hennessy assured me that the company offers a 90-day warranty and a seven-day “test drive” on all its cars.
“We recognize we’re disrupting an industry, and in many instances, people are used to the traditional model of buying a car just like they were with clothes, shoes, and electronics,” Hennessy said.
While Vroom would not reveal its revenue figures or revenue growth, the company said last December it had sold more than 250,000 cars since inception in its “combined business.” It declined to reveal more recent figures but noted that it currently has about 700 employees compared to 600 a year ago.
Vroom plans to use the new funds to expand its newly established product and engineering hub in Detroit, which opened in August 2019. The company also plans to boost headcount, “fine-tune” its logistics so that cars are delivered more efficiently and build out “bigger and broader reconditioning locations.” It also plans to ramp up its national marketing efforts.
“Detroit provides us access to an amazing amount of talent,” Hennessy told me. “Plus, it’s ground zero for all things automotive. We love the idea of hiring technical talent with a bit of automotive in their DNA.”
Illustration: Li-Anne Dias
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