Cazoo, the used car marketplace, has become the UK's latest billion dollar company in record-breaking time. It has raised an extra £25m in funding from venture capital firms Draper Esprit, General Catalyst and DMG Ventures, bringing total funding raised to more than £200m.
That's an impressive amount; the company was founded just 18 months ago — and there's not even any SoftBank cash in it.
It helps that founder Alex Chesterman is a serial entrepreneur; his previous businesses, property website Zoopla and film rental service LoveFilm, became household names.
What's more, despite throwing a few speed bumps Cazoo's way, the Covid-19 outbreak in the UK has left the business "ahead of where we expected to be", according to Chesterman.
Before Cazoo had even launched, Chesterman managed to raise £56.5m from investors including Octopus Ventures, DMG Ventures, Entrée Capital and Fred Destin — many of whom were also investors in one of Chesterman's previous ventures.
It wasn't exactly difficult to convince them to back his new idea, Chesterman told Sifted in September last year: “Of course it becomes easier, as it should. I’m an investor myself, and I’m much more likely to back someone with a demonstrated track record.”
In March this year, just after lockdown began in the UK, Cazoo raised another £100m in funding from DMG Ventures, General Catalyst, CNP, Mubadala Capital, Octopus Ventures, Eight Roads and Stride.VC.
Cars during Covid
Cazoo, which launched last December, says it has sold and delivered thousands of cars to date — and has seen "record sales levels over the past few weeks" (although it won't disclose exactly how many cars it has sold in total, or during the past three months of lockdown).
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"Covid has had an accelerating impact on a lot of digital delivery businesses — groceries and other sectors — and has been very positive for us," said Chesterman.
It hasn't been a smooth few months, however. "We had a very difficult period during April, when effectively things shut down almost entirely," said Chesterman. "We were unable to buy new cars — auctions and suppliers were closed — and unable to buy parts for the same reasons. It was not easy to move cars around from place to place."
When the business began retailing again in April, it focused on delivering cars to key workers. "We had a discount for NHS workers, and hundreds of people took us up on that," said Chesterman.
Meanwhile, at its refurbishment site in the Midlands, mechanics were able to keep working. "Even if you have two people working on a car at once, at different ends of it, they're socially distanced by the size of the product."
Cazoo also implemented extra safety measures for customers; its website currently notifies users that "All our cars have been thoroughly sanitised and all handovers take place at a safe distance for your safety".
Investors clearly feel that Cazoo's offer — enabling customers to buy a used car online (no need to visit a dealer) and get it delivered for free "in as little as 72 hours" — is fairly pandemic-proof.
And Chesterman thinks the outlook for the online used car market is looking rosier than ever. "[The used car market] is the single largest retail market in the UK — bigger than food in value, at over £50bn per year," he said.
Just as people have adopted online grocery shopping in droves, Chesterman hopes many will also have had a similar "lightbulb moment" with buying cars online. "I look at what consumers are saying about our service: 'Now I'll never buy a car any other way'."
This piece was updated on 23 June to include comments from Alex Chesterman.