Cazoo, the online used car retailer which became the UK’s fastest ever unicorn earlier this year, has acquired car rental service Drover as part of plans to expand its reach across Europe.
The deal, which was for an undisclosed amount, could indicate several things.
Four-year-old Drover has raised £30m to date, including £20.5m in July this year. That means Drover still had plenty of capital to play with — and its market (and the competition) is unlikely to have changed significantly since then.
If that was the case, then it’s likely Cazoo came calling — and paid good money.
“Car subscription is becoming a fast-growing space which we want to lead in,” Alex Chesterman, founder and CEO of Cazoo, told Sifted
Cazoo, which generated £150m in revenue this year, said it had planned to launch its own subscription service in late 2021, but that this acquisition will accelerate its plans to become “the Netflix of cars.”
That would have put Drover in a decent position to negotiate on price.
If Drover’s founders gave away the typical 20% of equity at their last fundraise in July, that would put the startup’s valuation at around £100m. Cazoo may have paid that much — and some.
Still, that may not have left Drover’s investors all that chipper. Target Global, RTP Global and Autotech Ventures, the three VC firms who co-led the latest raise, would’ve been hoping for a classic 10x return on their investment — which they definitely didn’t get. That said, they may have landed equity in Cazoo, which could be seen as an upside.
What happens next
Customers will be able to rent Cazoo’s used cars using the Drover subscription model — which sees customers pay a monthly fee for their car — as well as buy them outright in line with Cazoo’s existing model.
Drover’s CEO, Felix Leuschner (who will stay on in his role) says the startup currently has thousands of subscribers in the UK and a “fast-growing subscriber base” in France, where it launched earlier this year, through a partnership with BMW and Renault, who supplied the cars.
Drover’s 100+ team, which is based in London, Lisbon, Paris and Bucharest, will join Cazoo’s team of 800.
For Cazoo, acquiring Drover, which has already made steps to expand across Europe, will pave the way for it to do the same.
“We do plan to look to expand into Europe at some point next year and Drover has an existing business in France which is a natural place for us to start,” says Chesterman.
“The UK is the largest market in Europe for used cars. Each market has slight variations but car purchases remain one of the largest retail spaces and cars-as-a-service is taking off in all markets."
In Europe, Cazoo’s competitors include Auto1, the German used car online retailer which raised $300m this year, and Swiss company Emil Frey, which sells a combination of used and new cars.