The process of buying a used car hasn’t changed much since the advent of the internet. The same questionable salespeople with practices that could be described as questionable at best. Vroom is looking to make the process and salespeople by introducing transparency, simplicity, and ease into the pre-owned car buying market. The company is already the largest online car retailer and is expected to close over $1B in revenue next year. While the company was in stealth, an impressive roster of investors took notice and poured $54M into the company recently, in a mixed seed and convertible note round.
Today, we sit down with Allon Bloch CEO of Vroom to discuss the funding, the pre owned car market, and the impressive growth of the company.
Who were your investors and how much did you raise? Was it seed, Series A, B, etc?
While in stealth mode, Vroom raised $19 million in seed funding and $35 million in convertible debt, for a total of $54 million. Investors include a number of noteworthy names and auto industry veterans, including former Denver Bronco and dealership owner John Elway, and AutoNation co-founder Steve Berrard.
Tell us about your product or service.
Vroom is a startup based in New York and the largest online car retailer in the United States. It is changing everything you’ve come to know about the car buying experience, by making the test drive obsolete and solving the hassle of visiting a car dealership. It allows customers to buy, sell and finance the highest quality pre-owned cars right from their couches, with free delivery to anywhere in the country and a 7-day money back guarantee.
What inspired you to start the company?
Americans love cars, but hate shopping for them. We wanted to make the test drive obsolete by providing the best possible customer experience with a focus on transparency, quality and affordability. Car salespeople are notorious for being untrustworthy, and the entire process is filled with unnecessary hassle — Vroom removes all of that from the equation. Also, while there is an enormous market for pre-owned cars, that market is extremely fragmented. The largest company in the sector controls less than 1.5% of the market, leaving a lot of room for disruption.
How is it different?
- Vroom is the only company that allows you to buy a pre-owned car online from anywhere in the U.S. with an exact, no-haggle price (including all local taxes and fees); free shipping nationwide; and a risk-free 7-day money back guarantee.
- Vroom’s methodology for sourcing inventory is so advanced, based on decades of auto industry experience, that it is able to offer the largest breadth of makes and models in the industry. Vroom currently offers unprecedented variety, with 38 different makes.
- Rather than offering a vague appraisal, Vroom uses its proprietary algorithms and pricing data to make an exact offer, which is higher than consumers would get from a dealership or competitor. Vroom even offers vouchers that consumers can take to a dealership.
- Vroom offers only extremely high quality, pre-owned vehicles that have never been in an accident, extensively inspected and refurbished by the auto experts at Vroom’s Dallas facility.
- Vroom offers financing from more than 30 different lenders, bringing competition into the process for the first time and maximizing affordability.
The market for pre-owned cars is enormous and generally comprises about half of the overall U.S. car market. Our target audience is naturally the internet savvy customer who already does most of their shopping online. We have happy customers from all ages, genders, all 50 states, and 17 countries.
Which are the most popular models of pre-owned cars that people in NY are purchasing right now?
There isn’t a specific model, but people in the NY area are purchasing a vehicle with a slightly higher price point than the typical vehicle. This includes higher end sports cars such as Chevrolet Corvette and Porsche 911, but we also deliver an incredible amount of Audi A4s and mid range luxury sedans.
What’s your business model?
Vroom acquires inventory through a wide variety of sources, including auctions and trade-ins. Vroom combines its in-house automotive experience with powerful technology to anticipate what the US car market will look like and mirror that in its offerings. All cars on Vroom are priced about 8% below market rate, and Vroom takes a small commission on each sale. We are a high-volume, low margin business.
What factors about your business led your investors to write the check?
The last true innovation in the used car industry was CarMax, and that was back in 1996. The business is ripe for disruption and our investors, including John Elway (NFL legend and auto entrepreneur) and Steve Berrard (former President of AutoNation and Blockbuster), understand how great the opportunity is to convert the car buying experience to the digital age. We sold 500 cars in the month of May alone, reaching $20 million in sales. We’re on track to reach $400 million in sales in 2015 and the company is projected to do $1 billion in revenue next year.
What are the milestones you plan to achieve in the next six months?
We’re working on streamlining our delivery, since free shipping is a strong differentiator for us and it is the only part of the transaction we can’t control completely. We hope to be able to offer 24-hour shipping nationwide within the year, but we still have some more hiring to do before that’s possible.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Stay dedicated to your mission and focus on growth and proving your model. That is what is going to ultimately make you successful. There are so many new markets being created each year that no one even dreamt would exist even a couple years ago. If you have a product that you know can solve a complex challenge or create a new market, you will find a way to create the success.
Where do you see the company going now over the near term?
We are currently focused on hiring and keeping pace with our rapid growth. We already have a team with more than 140 employees, and we’re still hiring in a handful of key positions.
Which is your favorite NY area beach to visit, when you feel like taking a drive?
I have three young children and reside in New Jersey, so my time is somewhat limited to making a trip to the beach. I will say, however, that Rockaway Beach is one of my favorites. The kids can splash around in the waves and enjoy the various playgrounds, so that is probably my favorite spot nearby.