Used car marketplace Vroom nabs $254M to take its growth up a gear

There have been a lot of bumps in the road for startups building used-car marketplaces, but now one of the longer-standing of them has closed a major round of funding: a clear sign of the mileage left in this category. Vroom today is announcing that it has raised $254 million, a Series H that it plans to use to keep scaling the business, and specifically also to expand a product and engineering hub based out of Detroit.

The company’s platform has to date been used by more than 250,000 buyers and sellers, according to the company. It has some 3,000 vehicles listed at any time, covering some 400 makes and models. The Detroit hub opened in August 2019 and is a symbolic as well as practical location: it’s the center of the US automotive industry, making it a prime place for Vroom to recruit talent and build inroads in with carmakers and others.

This latest round of funding is being led by Durable Capital Partners LP, with participation also from funds advised by T. Rowe Price Associates, L Catterton and others that are not being named.

Vroom declined to comment on its valuation. For some context, it last raised money almost exactly one year ago, $146 million, which came in at a post-money valuation of $796 million, according to PitchBook. It’s not clear how much it has grown in the last year (we’re asking).

Vroom has now raised a total of $721 million since it launched in 2013. Previous investors have also included General Catalyst, Altimeter Capital and Allen & Co.

Vroom is led by former Priceline.com CEO Paul Hennessy, and the plan is to use the injection of capital to hire more employees, particularly for product and engineering jobs. Vroom said it expects in 2020 to “significantly increase” staff at its Detroit office.

“This new round of funding provides the necessary resources to further grow and scale our business,”  Hennessy said in a statement. “We are thrilled to receive continued support from investors and partners, reinforcing the Vroom model as a tremendous opportunity to bring about a fundamental and enduring change in the used vehicle industry.”

Indeed, more funding is critical in what is a capitally intensive business, and for Vroom itself, it’s a sign of how its restructuring appears to be paying off. Back in 2018, Vroom laid off about 30% of its staff after a failed attempt at building brick-and-mortar car dealerships, amid a time when we were seeing several other problems hit its competitors.

Vroom has focused its efforts since the layoffs on building out its leadership team. Vroom has added several executives in recent months, including Dave Jones, who spent over a decade at Penske Automotive Group and recently joined as its chief financial officer.

The lead investor here is notable. Durable Capital Partners is the new fund led by former star T. Rowe Price portfolio manager Henry Ellenbogen, and the firm has now started investing in earnest. This is the second investment its made in the wider transportation category, after taking part in a $400 million round for Convoy. It’s also invested in a fintech startup, Rapyd, which is moving into logistics now. All three of these investments have been announced in the space of a month.

Ellerbogen first became familiar with the company because T. Rowe Price made an investment in 2015.

“I’ve worked with the Vroom team for years and I’m pleased to announce that it is one of the first companies that my new firm is investing in,” he said in a statement. “We’re very excited to be a part of the future of automotive retail and support Vroom in its efforts to move the car buying and selling process online for consumers across the country.”

Vroom was part of a wave of online used marketplace startups that launched about seven years ago. Several of these companies have shuttered, while others such as Shift and Carvana have survived and even scaled.

Carvana became a public company in 2017 and its market cap is currently around $13 billion. In the meantime, others have waded into the field with alternative business models, such as Fair.com and its approach of “flexible” car ownership that looks similar to leasing (and these new players have faced their own challenges).

The center of Vroom’s business is an e-commerce platform that handles the entire transaction for buyers and sellers of used vehicles.

Vroom’s platform gives customers who want to sell or trade in their vehicles real-time appraisals, loan payoffs and at-home vehicle pickup. The company reconditions the vehicles it takes possession of and then includes them on its online catalog.

Buyers can get financing through a number of lending partners that Vroom has partnered with, including CapitalOne, Ally and more recently Chase. Once the sale is complete, Vroom delivers the vehicle directly to customers’ doorsteps in the U.S.

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Netflix earmarks $420M to fight Disney in India

Netflix may still not have a million subscribers in India, but it continues to invest big bucks in the nation, where Disney’s Hotstar currently dominates the video streaming market.

Reed Hastings, the chief executive of Netflix, said on Friday that the company is on track to spend 30,000 million Indian rupees, or $420.5 million, on producing and licensing content in India this year and the next.

“This year and next year, we plan to spend about Rs 3,000 crores developing and licensing content and you will start to see a lot of stuff hit the screens,” he said at a conference in New Delhi.

The rare revelation today has quickly become the talk of the town. “This is significantly higher than what we have invested in content over the past years,” an executive at one of the top five rival services told TechCrunch. Another industry source said that no streaming service in India is spending anything close to that figure on just content.

While it remains unclear exactly how much capital other streaming services are pouring on content, a recent KPMG report estimated that Hotstar was spending about $17 million on producing seven original shows this year, while Eros Now had pumped about $50 million into its India business to create 100 new original shows. (The report does not talk about licensing content expenses.)

Netflix, which entered India as part of its global expansion to more than 200 nations and territories in early 2016, has so far produced more than two dozen original shows and movies in the country and inked partnerships with a number of local studios including actor Shah Rukh Khan’s Red Chillies Entertainment.

Hastings said several of the shows that the company has produced in India, including A-listed cast starring thriller “Sacred Games” and animated show “Mightly Little Bheem” have “travelled around the world.” More than 27 million households outside of India, said Hastings, have started to watch “Mighty Little Bheem,” a show aimed at children.

Netflix, which is expected to spend about $15 billion on content globally next year, has never shared the number of subscribers it has in India. (It has over 158 million subscribers globally.) But the company’s financials in the country, where it employs about 100 people, have improved in recent quarters. In the financial year that ended in March, the company posted a revenue of $65 million and profit of about $720,000 for its India business.

The big, big, big Indian market

India has emerged as one of the last great growth markets for global technology and entertainment firms. About half of the nation’s 1.3 billion population is now online and the country’s on-demand video market is expected to grow to $5 billion in next four years, according to Boston Consulting Group.

But the propensity — or the capacity — of most of these internet users to pay for a subscription service remains significantly low. Most services operating in India today make vast majority of their revenue from ads. And others are making some changes to their model, too.

To broaden its reach in the nation, Netflix earlier this year introduced a new monthly price tier — $2.8 — that allows users in India to watch the streaming service in standard quality on a mobile device. (The company has since expanded this offering to Malaysia.)

Netflix competes with more than three dozen on-demand video streaming services in India. Chief among its competitors in the nation is Disney’s Hotstar. Hotstar’s content bouquet includes live TV channels, streaming of sports events, and thousands of movies and shows, many syndicated from global networks and studios such as HBO and Showtime.

The ad-supported service offers more than 80% of its catalog at no charge to users and charges 999 Indian rupees ($14) a year for its premium tier.

Among the licensed content that Hotstar — or its operator Star India — own in the country include rights to stream a number of cricket tournaments. Cricket is incredibly popular in India and has helped Hotstar set global streaming records.

In May this year, Hotstar reported that more than 25 million people simultaneously watched a cricket match on the platform  — a global record. The service, at the time, had more than 300 million monthly active users.

Commenting on the competition, Hastings said the next five to 10 years is going to be “the golden age of television” as “unbelievable and unrivalled levels of investment” go into producing content. “They are all investing here in India. We are seeing more content made than ever before. It’s a great export,” he added.

Disney+, the recently launched streaming service from the global content conglomerate, is set to be available in India and Southeast Asian markets next year through Hotstar, TechCrunch reported last month.

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