Vroom, already the largest online retailer for cars that has already completed $1B in transactions just raised another $50M in funding to make the pre-owned car buying process more seamless. Gone are the days of sketchy salesmen trying to sell you a lemon. The platform introduces transparency into the process, protecting both buyers and sellers with just few clicks at your computer rather than an unpleasant visit to a dealer or lot.
AlleyWatch spoke with CEO Paul Hennessy about the company’s latest round of funding as well as the increasing success of the platform.
Who were your investors and how much did you raise?
We’re announcing the completion of a $50 million Series E funding round with new investors Altimeter Capital and Foxhaven Asset Management, joining previous investors L Catterton, General Catalyst Partners, Allen & Company, and funds and accounts advised by T. Rowe Price Associates, Inc. The financing brings Vroom’s total funding to $218 million since inception.
Tell us about your product or service.
Vroom redefines how cars are bought and sold, by bringing the entire process online and on mobile. Car sellers need only to scan the VIN, submit pictures of their car and answer a few questions for an instant cash voucher. Car buyers can sit comfortably at home, avoiding the high pressure situation of used car salesmen, and search through one of the largest selections of pre-owned cars. Both buyers and sellers get free car pickup and delivery, respectively. Car buyers benefit from a 7-day money back guarantee, which essentially replaces the traditional test drive.
What inspired you to start the company?
After my tenure as CEO of Priceline.com, I came on as chief executive of Vroom back in June. I’ve long admired Vroom’s distinctive approach to pre-owned car retail online, which incorporates innovative technology, superior product and strong customer relationships.
Vroom was created to bring transparency, affordability and trustworthiness to the car buying experience, to make shopping for a car a delightful experience rather than a loathed one. Too many Americans view shopping for a car as an overwhelming and costly chore, rather than a pleasant experience.
How is it different?
Vroom allows you to buy a pre-owned car online from anywhere in the U.S. with an exact, no-haggle price; 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, and leveraging huge amounts of data, Vroom is able to offer better prices and quality on a wider breadth of makes and models than elsewhere in the traditional industry. Vroom currently offers unprecedented variety, with 400 different makes and models and over 2500 cars for sale.
Rather than offering a vague appraisal, Vroom uses its proprietary algorithms and pricing data to make an exact offer, which is generally higher than consumers would get from a dealership or competitor. Vroom even offers vouchers that consumers can take to a dealership for their trade in.
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 and Houston facilities.
Vroom offers financing from more than 30 different lenders, bringing competition into the process for the first time and maximizing affordability.
What market you are targeting and how big is it?
The pre-owned car buying market is a $450 billion industry. 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 and all 50 states. But we are finding everyone is understanding the better way to buy a used car and turning to Vroom.
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 on average, and Vroom takes a much smaller commission on each sale than a traditional dealer. We are a high-volume, low margin business.
The company has now raised a significant amount of capital in a short time and has also achieved significant revenue, how does your role change now from a day to day and longer term perspective?
The continued support of our incredible board led by Chairman Bob Mylod, the vote of confidence from our existing investors and the addition of two new world-class investors to our capital base gives us the firepower we need to achieve our goal of becoming the largest pre-owned car retailer in the nation.
What was the funding process like?
Was a very positive experience, in a short timeframe with existing investors looking to increase their investment and new investors coming on board.
What are the biggest challenges that you faced while raising capital?
It is our Series E and went as fluidly as our other rounds.
What factors about your business led your investors to write the check?
We’ve seen rapid growth over the past year, generating over $1 billion in revenue this year. We’ve positioned ourselves to take advantage of the rapidly increasing consumer preference to purchase and sell cars in smarter, easier ways.
What are the milestones you plan to achieve in the next six months?
We will begin to roll out our product innovations that will soon include 100% digital paperwork and auto financing enhancements. I’m confident that we’ll establish Vroom as the pre-eminent brand and platform that will be consumers’ destination for car buying.
We will further expand fulfillment and operations, as well as increase marketing.
Where do you see the company going now over the near term?
Our strong revenue growth is driven by innovation that is leapfrogging the traditional car buying and selling process. Consumers will experience a seamless online experience – from buying, financing and selling.
Where is your favorite bar in the city for an after work drink?
Favorite bar in NYC may be our own kitchen, we always have moments to take a break and cheers one another.