- Accel leads funding round, joining Balderton, Samos, Episode 1
- Carwow aims to take the haggling and schlepping out of buying
What would it take to put you in a new car today? Carwow, a U.K. website for purchasing vehicles would like to see the answer to that classic car salesman’s pitch become: “why, just a few clicks of a mouse.”
The company has raised 12.5 million pounds ($18 million) in new funding, it said Thursday, as it expands efforts to upend the traditional way of buying a new car.
Carwow, which says it has sold 400 million pounds worth of cars since 2013, wants to put an end to weekends spent traipsing around various dealerships looking for the best deal and haggling over price. Its model makes dealers bid for shoppers’ business. On Carwow’s website, customers choose the model and options they’re interested in and receive as many as five offers from U.K. dealerships. The buyer can then select a proposal and contact the dealership anonymously through Carwow to complete the purchase.
The average customer saves 3,600 pounds shopping through Carwow compared with visiting a dealership in person, according to the company. Carwow, which says it has about 1,000 U.K. dealerships in its network, makes money by charging dealers’ a fee based on the volume of purchases made through its site.
In the U.S., online car purchasing is becoming a crowded sector: Phoenix-based Carvana, Beepi, based in Los Altos, California, New York-based Vroom and San Francisco-based Shift are competing for pieces of the used-car market. TrueCar, a Santa Monica, California-based company that, like Carwow, seeks to give new buyers a haggle- and hassle-free experience, went public in May 2014 and had a market value of $540 million as of the close of Wednesday’s trading.
Carwow, which isn’t yet profitable, doesn’t have the financial horsepower of these U.S. startups, each of which has raised more money. But in the U.K., it has fewer direct competitors -- although there are a number of online car brokerage sites.
Accel Partners led the Series B venture funding round in London. Balderton Capital, Samos Investments and Episode 1 Ventures, which had previously invested in Carwow, also participated. Carwow had raised 4.6 million pounds in a Series A round in December 2014. The company declined to disclose its valuation based on the latest fundraising.
Carwow will use the money to boost its profile, including plans for a 6 million pound television advertising campaign, and to expand its network of U.K. dealers, said James Hind, Carwow’s chief executive officer and co-founder.
While Carwow has looked at moving into used-car sales and considered expanding into other European markets, it has no immediate plans to do so. Still, Fred Destin, a partner at Accel who will be joining Carwow’s board, said such expansion is possible in the future.
Destin said he decided to invest because it reminded him of U.K. property search site Zoopla Property Group Plc, another Accel investment that went public in 2014 and is currently valued at 928 million pounds.
“To me, this has a lot of echoes of Zoopla,” he said.
Just as Zoopla demystified the process of searching for house, Carwow is seeking to make consumers feel they are getting a fairer, more transparent price on a new car. And just as Zoopla worked with existing real estate brokers, Carwow has support from dealerships.
“It’s a consumer champion brand that tries to make consumers smarter but doesn’t screw over industry,” Destin said.
Destin also said he thought Carwow had solved tough product-design challenges: figuring out how to simplify the process of choosing a new car and selecting among the myriad options offered by manufacturers. Now the company has to focus on growth, he said.
“The machine is working and now it is about scaling,” he said.
Hind and co-founder Alexandra Margolis, now Carwow’s head of design, were friends from the University of Nottingham where in 2010, shortly after graduating, they started Carwow in Hind’s parents’ house.
At first, the company was only an aggregator of new car reviews, but Hind and Margolis started it anew as a car purchasing site, bringing in David Santoro as an additional co-founder and chief technology officer. The site still provides its own independent reviews and ratings of new car models to help customers decide among vehicles.
“We realized that buying a new car is a pretty crap experience,” Hind said. “And so we set out to improve that.”