Gunning to become the top seller of used cars online, Vroom Inc. has raised $50 million in a Series E round of equity funding, bringing its total capital raised to $218 million to-date.
The market for used cars in the U.S. alone surpasses $400 billion annually. According to the Edmunds.com Used Vehicle Market Report retailers sold 38.3 million used cars in 2015 at an average price of $18,500.
Vroom founder Allon Bloch originally billed his startup as a stress-free way to buy or sell pre-owned vehicles online and via mobile.
Vroom’s current CEO Paul J. Hennessey, who joined the company in June this year and was previously the CEO of Priceline.com, drew parallels between online travel agencies and Vroom.
E-commerce platforms like Vroom could put some brick and mortar dealerships out of business, he acknowledged.
“At the highest level, we assemble great inventory for customers, give them a great shopping experience via mobile or desktop…and simplify the buying process so they can pull the trigger without haggling and paperwork. The car is delivered to your front door.”
Buyers get seven days to test drive a vehicle after it’s delivered by Vroom. Hennessy said he wants the process to be as easy as buying (or returning) a pair of shoes online.
On the seller-side, users can upload photos of their vehicle along with a VIN number via smartphone app to attain a quote from Vroom, and soon have their cars picked up.
The company uses proprietary algorithms and data about the value of different cars and trucks in different conditions, to set prices. Vroom also runs a huge refurbishing operation, Texas Auto Direct, which it acquired last year.
Vroom’s revenue today comes from sales of refurbished vehicles to both individual consumers and rental car companies. The company also sells scrap, i.e. after market parts from vehicles that can’t be fully repaired. And it generates revenue from selling warranties and arranging auto loans.
Self-driving vehicle tech is beginning to trickle into the market– including from startups like Comma.ai or Nauto, who want to retrofit computer-brains to cars that weren’t built to be autonomous.
As such, Vroom investors and executives expect to see a shift in consumer demand, and are looking into ways to, “Put consumers in the best car they can get for the price they want to pay,” Hennessy said.
Vroom’s competition abounds, ranging from large public companies like Carmax, TrueCar and Ebay Motors, to classifieds sties like Craigslist or Carfax, and other venture-backed startups including Beepi, Shift and Carlypso.
T. Rowe Price led Vroom’s latest round of funding joined by new investors Altimeter Capital and Foxhaven Asset Management, and earlier backers L. Catterton, General Catalyst Partners and Allen & Co.
Altimeter Group’s Brad Gerstner said he expects the company to use the funding to become a household name, and to expand its operations in a way that will ensure efficient delivery of vehicles to customers all around the country.
Gerstner said, “
Featured Image: Vroom
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