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Used Car Startups And Backers Stuck As Market Stalls

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Selling used cars hasn’t historically been the most admired profession. But at least it had a reputation for being profitable.

Not these days. At the dawn of a new year, players in the pre-owned vehicle business are navigating the most challenging market conditions in years. Faced with the combination of declining prices, rising interest rates and growing inventory, several are scrambling to stay afloat.

Among the most high-profile casualties is Carvana, the used vehicle sales platform whose iconic towers of cars grace the skylines of over 30 American cities. Shares of the onetime venture-backed company are down nearly 99% from peaks hit in the summer of 2021, amid slowing sales and shrinking profit margins.

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A handful of venture-backed companies that hit public markets more recently are also seeing sharp declines. Out of a list of six funded companies that went public in 2020 and 2021, all are far off their peaks and a few are deep in penny stock territory. Worst performers include:

  • Cazoo, a London-based online used car marketplace, was recently trading around 17 cents a share. That’s a decline of roughly 98% from its debut price in 2021, when the company went public through a SPAC merger. Per Crunchbase, Cazoo raised $570 million as a private company and $800 million in post-IPO equity financing.
  • Shift, a San Francisco-based used car e-commerce platform, was already trading below $1 per share in August when it announced a planned merger with Carlotz, another player in the space. By the time the deal closed in December, shares of both companies were sharply lower. Before going public via SPAC in late 2020, Shift had raised over $220 million in venture funding.
  • Vroom, an online platform for buying and selling pre-owned vehicles, raised over $700 million in venture funding between 2013 and 2019 before launching its IPO in 2020. After peaking in August 2020, shares have shed over 98% of their value, recently trading below $1 per share.

Others have fared a bit better. Buffalo-based ACV Auctions, an online vehicle marketplace, and AUTO1 Group, a Berlin-based car-buying platform, have shed about half their values from a year ago.

VCs still investing

Meanwhile, venture capitalists are still investing in used car startups. However, very little is going to North America.

Using Crunchbase data, we counted at least 13 companies in the used car space that raised venture funding in 2022, collectively bringing in $670 million. The full list is below:


Carsome, a Malaysia-based platform for buying pre-owned cars, snagged nearly half the total, pulling in a $300 million Series E nearly a year ago. Athens-based Spotawheel, a used car dealership platform, pulled in the second-highest total, with $106 million in Series B funding in April.

Notably, none of the 10 largest funding recipients were U.S. companies, which makes sense given the macro situation. During the pandemic, used car prices surged, as auto manufacturers grappled with supply shortages and more vehicle buyers turned to the pre-owned market. Historically low interest rates kept payments reasonably affordable for many American consumers.

Today, rates are considerably higher, pushing up monthly payments. New car inventories have also recovered some. Demand for used cars, meanwhile, hasn’t evaporated. But changing market conditions means used car sellers can no longer count on the kinds of comfortable margins that make for a profitable business.

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