3 college friends have started a billion dollar business selling used cars
Aaron Tan goes places.
As the co-founder of a newly crowned unicorn and one of Asia-Pacific’s fastest growing start-ups, Carro’s CEO is now on the road to public listing.
And with the arrival of investors, including Softbank, he has no plans to slow down.
“The question is, now that we have reached $ 1 billion, how do we reach $ 10 billion? How do we get to $ 100 billion? Tan told CNBC Make It.
Carro – a play on the words “car hero” – is a Southeast Asian online car marketplace designed to simplify car transactions using artificial intelligence technology.
Founded in 2015 by Tan and his college friends Aditya Lesmana and Kelvin Chng, it achieved coveted $ 1 billion unicorn status in June after securing $ 360 million in funding. The deal brings the total funds raised to more than half a billion dollars and pits Carro against key competitors, such as Malaysian Carsome and Germany. Carmudi, in a growing $ 50 billion industry.
Yet, as Tan explained, it was a journey to get there.
Driven to succeed
The 36-year-old business story began when he was 13. As a teenager growing up in Singapore, the computer genius made extra money by building and selling websites.
But it was later, while working as a venture capitalist in the United States, that he saw an opportunity to combine his business prowess with his true passion: car trading.
“When I was in America as a VC for many years, I remember vividly meeting all kinds of car manufacturers – your Beepi, your Uber, your DriveShift. What that showed me. , it’s momentum in space, ”Tan said.
While the auto resale market was booming in the United States, the same couldn’t be said for Southeast Asia. It was deemed opaque, with multiple middlemen, making it difficult for buyers and sellers to get the best deals.
Tan wanted to change that. So, back in Singapore in 2015, he teamed up with his classmates at Carnegie Mellon’s School of Computer Science to create an algorithm that would do just that.
“I wouldn’t say that I tricked my co-founders into founding the company together, but I think I sold the opportunity that it could be a lot more interesting than what they were doing,” said Tan.
Tap into a rapidly changing market
The trio were on to something. In a region with a large and growing digital-savvy middle class, price-sensitive consumers were increasingly opting for used models.
“The expansion of the middle class combined with a low rate of motorization in Southeast Asia have been the main factors that have boosted new car sales, and this has ultimately resulted in a vibrant car market. opportunity, “Justinas Liuima, senior research consultant at Euromonitor, told CNBC. Do it.
Carro capitalized on this demand by rolling out its online offering for individuals and wholesalers in Indonesia, Thailand and Malaysia in the years that followed. In the meantime, it has added end-to-end financial services like loans, insurance and tracking.
In 2019, inspired by streaming giants Netflix and Spotify, the company launched Singapore’s first car subscription service, allowing users to rent a vehicle for a monthly fee, including taxes, warranty, and maintenance.
“What we’ve seen is the change in behavior of car ownership. In reality, the gap in the market was to look for people who want that flexibility. And more importantly, they actually want to try and try to. new cars, ”Tan said.
Navigate the pandemic
Then, in 2020, the pandemic struck. But what was a major obstacle for many startups turned out to be an opportunity for Tan and his team.
Concerns about personal hygiene and safety have sparked new demand for private transportation options. And with border closures and a global shortage of microchips limiting auto production, used car sales have increased.
“Covid has certainly helped accelerate all of our digitization internally and also externally, to the general public,” Tan said.
Among the various initiatives launched by the company was a contactless “Showroom Anywhere” concept, which allowed potential buyers to view and try out cars without any direct human interaction. Instead, they could access the vehicle in a public parking lot using a contactless QR code.
In March 2021, Carro recorded revenues of $ 300 million, 2.5 times more than the previous year. The six-year-old start-up now claims to be profitable.
The road to an IPO
However, this growth comes against a backdrop of increasing scrutiny of the automotive industry.
Transport accounts for almost a quarter (24%) of global carbon emissions, of which road vehicles represent 75%. And even as governments and automakers plan to gradually replace traditional combustion-engine cars with electric vehicles, many existing gasoline consumers are simply being exported to developing markets.
Carro, for his part, said he was playing an important role in the transition to greener modes of transport.
“Our job is to enable this recycling or reuse of vehicles as quickly as possible. And the second part of this is that [electric vehicles are] a strong tailwind for us because it encourages change. For a platform like ours, we strive whenever there are changes in the market, ”Tan said.
Sustainability will be one of the many things on Tan’s agenda as he prepares to list his company in the next 18-24 months. With regional expansion, AI developments, and acquisitions on the cards, one thing is for sure – it will be an eventful race.
“Until then, [we need to] get the business ready, controls need to be in place, people need to be in place, compliance needs to be in place, ”Tan said. “Only then can we say okay, we’re ready to go public 12-18 months from now.”
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