1-year-old start-up on track to be profitable, eyes regional expansion
SINGAPORE, 3 September 2016 — Just over a year ago, Mr Aaron Tan left his job of five years in a venture capital fund to be on the other side of the fence — an entrepreneur.
Today, his start-up Carro — an online marketplace for people to buy and sell used cars without dealers — has secured more than US$6 million (S$8.16 million) in funding, facilitated more than 500 transactions, launched several new services including as a car workshop portal and is ready to take on new markets in Southeast Asia.
“When I was an investor, I learned that 90 percent of companies fail. But I took the plunge anyway because we always think that we won’t be among that 90 percent. And I want to do it now before I turn older, have too many commitments and can’t take that kind of risks,” said the 31-year-old founder and chief executive of Carro in an interview with TODAY.
The company was incorporated in July last year after Mr Tan observed that the automobile industry is “ripe for disruption”, with no “next generation car dealership platform” locally or in the region.
“There’s a clear lack of transparency in the space: you do not know who drove the car before and you do not know how much the dealer bought the car for, but you can be assured he’s making a lot of money brokering the deal. It’s very different from the property space because we know the commission the agents are getting,” said the former Infocomm Development Authority (IDA) scholar, who served his bond with Singtel’s venture capital fund Singtel Innov8.
Carro was thus born as a marketplace for sellers and buyers to transact directly with each other. When a seller engages the company to list his or her car for sale, Carro’s team will come up with a price analysis, inspect the car in detail, take photos and even audio clips of the engine sound before putting the car up for sale. Buyers can contact sellers directly and when a deal is sealed, Carro charges a fee of S$250 or 0.5 percent of the transacted price, whichever is higher.
The timing to launch the company was also a carefully calibrated one, as Mr Tan had noticed that companies with similar concepts in the United States and China such as Shift and Guazi were thriving and attracting the attention of investors last year.
“As a venture capitalist, I know that they would need capital by late-2015 or early-2016, which is why we decided to start a company in mid-2015 and everything went according to plan, pretty much. By late-2015, the companies fundraised,” he said.
“So the macro conditions were right in the sense that there was a lot of momentum, with so many investors interested in the space,” Mr Tan added.
Carro secured S$1 million in seed funding last year, and raised another US$5.3 million in Series A funds led by Venturra Capital in June this year. The one-year-old company has reached more than S$100 million in gross merchandise run rate and is on track to turn in a profit by the end of this year.
BEYOND USED CAR TRANSACTIONS
While Mr Tan’s vision for Carro is to replicate the in-person experience of viewing and purchasing a car online with the extensive photos and details posted on the platform, the company has also gone beyond just facilitating direct transactions between sellers and buyers.
In the past year, it tied up with financial institutions to offer loans on its platform, built an algorithm to estimate car prices, launched an online retail concept for car accessories as well as a portal where car owners can search for workshops based on factors such as location, services and ratings.
The expansion is part of the company’s strategy to be a one-stop shop for car owners, said Mr Tan, a computer science graduate. To support the expansion, Carro grew from a team of five – all former IDA scholars and schoolmates at Carnegie Mellon University – to about 30 staff today, manning the technology behind the platform as well as operations.
“We want to close the loop: You buy a car, you maintain it for a number of years and then you may decide to sell the car. It’s a loop and that’s why we did (the additional services),” he said.
The ambitions of the chief executive also extend beyond Singapore. Carro has set up an Indonesian entity and also plans to establish a presence in Thailand – chosen due to the sheer size of these markets.
“We looked at our company as a regional company from day zero, we’re not a Singapore-only company. Indonesia, Thailand are big markets, each of them has 300 million new and used cars transacted per year. Singapore is 100,000 cars per year so by default we are already constrained,” said Mr Tan.
“Singapore is a good place for us to build a foundation, understand what works and what doesn’t work. So our priority is to stabilise (our operations) in Singapore, make sure we continue to be the market leader and then move outwards and get growth elsewhere.”