The Powersports market (jet skis, motorcycles, ATVs, etc) is expected to surpass $50M per annum by 2027. 80% of purchases in this market require financing. Octane is a point-of-sale platform that enables power sport dealers and brands to provide automated financing solutions to their customers to close transactions. The company’s end-to-end platform covers all aspects of the lending process from origination to closing. Initially, a marketplace to connect lenders and purchasers, Octane launched its own lending unit, Roadrunner Financial, in 2016. To support the end-to-end purchase experience for consumers, the startup also operates a number of content destinations that are focused on editorial content for Powersports enthusiasts. Octane is currently working with over 3800 dealers and directly with ~50 brands, supported by a team of 300+ that’s growing fast.
AlleyWatch caught up with CEO and Cofounder Jason Guss to learn more about the massive opportunity for financing in the Powersports market, the company’s strategic plans, latest round of funding, which brings the total equity funding raised to $192M, and much, much more.
Who were your investors and how much did you raise?
We have secured $52 million in Series D funding, bringing Octane’s valuation to over $900 million. Progressive Investment Company, a member of the Progressive Insurance group, led the round, with participation from existing investors Valar Ventures, Upper90, Contour Venture Partners, Citi Ventures, Third Prime, and Parkwood, as well as new investors Gaingels and ALIVE.
Tell us about the product or service that Octane offers.
Octane’s mission is to connect consumers with their passion, starting with our home market of Powersports (motorcycles, ATVs, UTVs, etc.). We do this by providing dealers, consumers, and manufacturers with products that support them throughout the consumer buying journey from online discovery to point of sale financing.
Octane reaches millions of enthusiasts through editorial brands like Cycle World and UTV Driver, helping consumers buy their favorite products by prequalifying them on dealer and OEM websites. Our team is revolutionizing lending in underserved verticals that account for tens of billions of dollars in annual transactions.
What inspired the start of Octane?
Octane was founded in 2014. We started with a simple goal to make lending better in overlooked markets. Our journey began by building a lender marketplace to streamline retail financing in the Powersports category. We quickly learned that while the $21B Powersports market was rapidly growing, the buying journey was broken beyond just financing. We elevated our goal to build an end-to-end buying solution including editorial content, consumer prequalification tools, instant full-spectrum financing, and digital deal closing. Our mission to connect people with their passion was born.
Since lending is involved in about 80% of Powersports purchases and about 80% of lending happens in the dealership, we focused on building a lending platform for dealerships and consumers first. In 2016, we launched Roadrunner Financial, a wholly owned-and-operated lender, to enhance the purchasing experience for customers by offering full-spectrum lending and expanding access to credit, and speeding up transactions through digitization and automation. Our product is growing quickly in the market and we now have 3,800 dealership partners.
With an anchor in dealerships, we expanded our scope to add value to consumers who are early in the buying cycle. In 2020 we acquired Cycle World and UTV Driver along with 5 other brands from Bonnier with a goal to inspire and inform Powersports enthusiasts across the nation. In the same year, we launched Octane Pre-qual, which enables consumers to instantly pre-qualify for financing on OEM and dealership websites, all with a soft credit pull. We help direct consumers to a dealership, close their loan, and complete their purchase.
We are growing dramatically because we make transactions faster and simpler to close for consumers and dealerships. We are the only platform to offer end-to-end purchasing benefits in the markets we play in.
Looking forward, Octane plans to enter other passion purchase markets and continue launching buying solutions and customer engagement tools while driving incremental growth for dealerships and OEMs. We define a passion purchase as a major discretionary purchase that brings people joy.
Most innovation and investment is focused on large, marquee markets such as small business, auto, homes, etc. We recognized that there is significant opportunity to provide innovative, tech-driven purchasing and lending solutions in underserved markets.
How has COVID-19 impacted the business?
We were very fortunate in how we fared during the pandemic. There are a few reasons for this:
- The Powersports market experienced increased demand due to COVID as discretionary spending was displaced from travel, restaurants, and hospitality towards major recreational purchases. In fact, the Powersports industry experienced double-digit growth last year.
- Our core customer base was not significantly impacted by COVID economically so consumer demand and loan performance remained strong.
- We have an experienced risk team and flexible proprietary loan origination system which enabled us to adjust underwriting to weather the changing environment.
- We focused on our OEM and dealership partners and their customers which enabled us to further strengthen our relationships and grow market share
All of this resulted in Octane growing responsibly throughout 2020 and put us in position to accelerate growth in 2021.
What factors about your business led your investors to write the check?
Our investors fully believe in our mission. Some of the factors that have led to continued support from our investors include:
- The exceptional people at Octane. We currently employ 335 employees; we’ve hired over 100 in the last year alone and continue to recruit top talent.
- We enhance the purchasing experience for customers by offering full-spectrum lending and expanding access to credit and speeding up transactions through digitization and automation
- Expected to originate over $1 billion in the next 12 months
- We have been doubling revenue annually with over $100M in revenue forecasted for 2021
- Both net income and operating cash flow positive
- Top investment-grade ratings of AAA and AA from KBRA and Standard & Poor’s, respectively, on certain of Octane’s outstanding Class A securitization notes
What are the milestones you plan to achieve in the next six months?
In the next six months, we plan to further Octane’s mission of connecting people with their passions by providing innovative discovery and research tools, responsibly increasing access to competitive financing, and digitizing and automating the transaction process. The new capital will be used to scale our buying tools for consumers shopping online, grow our family of 3,800 dealership partners and 48 OEM and brand partners – which include BRP, Suzuki and Triumph Motorcycles – and expand into other passion purchase markets.
With the enormous company growth, hiring will also be a priority for us in the near term as well. We are a remote-first workplace with offices in NY and Dallas and have grown our team by 50% in the last year, from 213 to 336 employees. Our executive team firmly believes in the value of investing in Octane’s people to drive long-term growth. With robust benefits like generous PTO, 401k contributions, and a remote-first work environment, as well as culture building programming like ‘Gift of the Month’, employee resource groups, team fitness, and meditation classes, and more, Octane continues to focus on making the company a great place to work.
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