This past December, all of us missed something important. A funding event. A small company that has been around for a while, and one that has built its entire existence around automobiles, raised $110 million. Several investors participated. Sequoia, Hill House Capital, Google Capital, and Axis Bank.
The money that came in was no meager sum. It represents a more than seven-fold increase from the company’s last significant fundraise—a comparatively tiny $15 million round in February 2016. With this latest round, the Jaipur-headquartered company has now raised $196.25 million, the second-highest amount in its industry.
What is the company?
If you haven’t already guessed, the company is CarDekho.
Its latest fundraising is no mean feat. It is the largest funding round in the online, everything to do with cars space since rival CarTrade’s massive $130 million Series E round in 2016.
Its importance all the more pronounced because unlike in e-commerce, food delivery or cab aggregation, investors haven’t been smitten by cars. Some predict cars will die, maybe not on the internet but in the real world; they may have you believe that the future of consumerism is a future minus cars.
But for now though, in 2019, in India, a bunch of investors has bet big on cars by putting $110 million in CarDekho’s hands. Our story is about what follows next.
Because it is not like CarDekho has found a new way to sell cars on the internet. No. That’s not it. It is also not like in the time that CarDekho has been around, it has taken the market by storm and towers over other players. No. CarDekho isn’t top dog in the businesses it does. Allow me to skew the line further. If you asked someone on the street where they go to look up cars—both new and old—on the internet, there’s a good chance they wouldn’t say CarDekho or CarTrade or Droom. They’d probably say Google.
Which leaves us with one important question. What’s the $110 million in CarDekho for?
It would be fair to say that CarDekho hasn’t been the most aggressive player in the auto marketplace business so far. Founded by brothers Amit and Anurag Jain, it began in the garage of their house. The name of the company—Girnar Software—stems from the name of the house, Girnar.
CarDekho began life as a car comparison portal, trying to digitize the vast amount of information in the auto ecosystem to help people buy cars. Once the platform gained some initial traction, its next phase of growth came through acquisitions. In 2014, the company acquired online auto marketplace Gaadi from the Ibibo Group, helping it build capability in the used car space. The following year, it bought Times Internet-owned Zigwheels to fit in automobile content.
CarDekho has made eight acquisitions so far, and company president Umang Kumar says that all of them have helped the company grow. Now, ten years on from its inception, CarDekho thinks it has everything it needs to succeed.
It is upping the ante on several fronts. Number one on its to-do list is establishing a significant presence in the lucrative consumer to dealer (C2D) segment, something that became clear when CarDekho acqui-hired Carbiqi, a small start-up in the same space, in November 2018. Carbiqi’s team is helping the company transition towards the C2D model.
Why the urgency to get into the C2D space? One word—money. The current C2D leader, Cars24, made Rs 670 crore ($94 million) in revenue in FY18. And while its losses did go up, its revenue marked a 60% year-on-year increase. Cars24 bought more than 100,000 cars across India since its inception in 2015. Since the auto transaction-led business in India is cash-flow dependent, Cars24’s operational revenues as listed in its financial documents reflect the total worth of sales made by the firm—Gross Merchandise Volume, a proxy for gross sales in the consumer internet world.
CarDekho wants a piece of this pie
CarDekho’s model is very similar to Cars24—a seller visits the website and gets an online inspection done. He gets a tentative quote. If she agrees with it, she goes to the store. After a physical inspection of the vehicle, the intermediary—CarDekho or Cars24—put it on an internal dealer portal for auction.
Highest bid wins, with CarDekho/Cars24 buying the car on behalf of the dealer. Monetization happens through a commission paid by dealers to intermediaries.