Pre-owned car marketplace, Zoomo, raises $5M in Series A funding from SAIF partners
SAIF Partners today announced an investment of $5M in Bengaluru-based startup Zoomo, a peer-to-peer platform for used car transactions. The investment will be used to strengthen their operations, technology and product leadership in their niche. Zoomo help patrons buy verified, pre-inspected cars from owners without going through a broker.
The startup was launched in December 2014 by Arnav Kumar, Aniket Behera and Himangshu Hazarika. Arnav and Himangshu are IIT KGP alumni. Arnav functions as the CEO and his previous roles include AVP Urban Touch and Deutsche Bank, while Himangshu function as the CTO, having previously worked at Bank Bazaar. Aniket, the COO, is an IIT Bombay alumnus and ex-Deutsche bank employee. The startup has a total team strength of 110 across Bengaluru and Mumbai for various roles. This includes a team of 30 automobile engineers and 20 in customer service support.
They aim to bring standardization in the fragmented pre-owned cars market by solving the dual issues of trust and pricing. They had earlier raised a seed round of funding from SAIF partners and utilized it to attain the market fit and perfect their 'city launch playbook'. Now, they plan to expand aggressively, launching one city every month. The cities in the pipeline include Delhi, Pune, Hyderabad, Chandigarh and Chennai.
Market size and competition
With dealerships in India currently unregulated to an extent, Zoomo estimates the market size of the used vehicle segment to be a $10 billion industry that is rapidly growing with about six million customers every year. Arnav added,
The Indian market is completely unstructured. There are no KBB or Carfax equivalents here, and there are no laws to regulate dealerships. Used car selling or buying doesn’t have to be a broken or frustrating experience that it is today. E-commerce is booming, but car transactions have remained opaque and non-standardized experience. Some liken it to a fish market. India’s motorization rate is 18 per thousand inhabitants. US’s motorization rate is 791, while Brazil’s motorization rate is 187. Used cars sales per thousand capita in India is 2.6 compared with the US (129) and Brazil (17.8).
Others in this sector include Cardekho, Cartrade, Carwale, horizontal classifieds majors, OLX and Quickr, and Sandeep Aggarwal-led automobile-focused classifieds, Droom. In June 2015, Truebil had raised $500K funding from Kae Capital and Anupam Mittal, while Cardekho had raised $50 million from Chinese funds in January 2015.
Coming to second-hand two-wheeler segment, there is CredR. But Zoomo aims to focus only on the car segment. Arnav reasoned:
People are more likely to buy second-hand cars because of the significant price difference. As soon as you drive your car out of the showroom, the value depreciates by 20%. On the other hand, people prefer not to sell their bikes even if they get a car and tend to keep it as a backup for short distances. But many prefer to sell their old cars once they buy a new one. So we consider bikes to be a weaker proposition.
How does it work
Buyers can access the platform, search for their desired car and price points and tweak the requirements through the filters based on their need, request for seller details and also for the quality check report of the vehicle. To get your vehicle listed on the platform, the seller's vehicle has to go through an inspection by the Zoomo team, who claim to do a rigorous 150-point check on every car they list. They have started inspector training programs and built internal products to reduce time to list on the platform. Arnav added:
Our inspection process is the most rigorous and standardized with no room for manual errors. The inspectors have an app and they make note of a variety of things such as an under the hood inspection, turning radius, and how the vehicle climbs a steep slope etc.
Zoomo follows a business model that seeks no commission or listing fees. Instead, it cuts out intermediaries, dealers and brokers, ensuring the best possible price to buyers and sellers. Users are offered services throughout the transaction process, including car shortlisting, establishing a fair price, inspection, paperwork, advance booking, loans, insurance, warranty, refurbishing, and post-sales support. Arnav confirmed that they are earning profits for every transaction and have been able to standardize the pricing, thanks to their pricing data model.
Zoomo completed 200 transactions in June in Bengaluru, and 100 transactions in Mumbai within six weeks of launching there. Their target is to reach 1000 transactions per month by October this year. The funding will be used to strengthen product, operations, and expansion. They are also in the process of rolling out their mobile app to reach out to a wider audience. The team has also observed a change in trend from classifieds/ listing sites to transaction platforms that provide safety nets for buyers and sellers, and they see this happening to cars now. Speaking on the investment, Mukul Singhal, Principal at SAIF Partners, said,
We are confident of our association with a promising platform like Zoomo. It solves the dual issues of trust and pricing while making transactions of used cars, and therefore, holds potential. By removing dealers and middlemen and ensuring that buyers and sellers get the best prices, we are certain that Zoomo will scale tremendously in the days ahead.