Deal focus: Spinny aims to be more than a marketplace

Used car buyers in India have several options. Online classifieds sites were the first haven for bargain hunters, followed by marketplaces such as CarDekho, Droom and Cars24 that sourced and verified vehicles through their own channels. To Ashish Kumar, a partner at The Fundamentum Partnership, neither model is appealing.

“They have pretty much no moats and it is easy to start such businesses. But either they don’t take a cut if they just list ads or they are dependent on sellers and dealerships that would rather sell to the earliest or highest bidder,” he explains.

Beepi, a defunct used car marketplace in the US, serves as a cautionary tale. It could not compete effectively against Vroom, a better-funded rival with a much larger selection of vehicles. Nor did it have the physical presence of a dealership like Carvana, which famously runs multi-story car vending stations.

Two Indian companies – Truebil and Spinny – are now following Carvana’s lead, building recognizable brands with an offline presence in order to overcome a potential buyer’s wariness of doing business online. They run their own dealerships in major Indian cities, allow customers to test-drive cars, and have a five-day, full reimbursement return policy.

“Truebil caters primarily to the budget segment. Spinny focuses on the premium pre-owned market segment where it is easier to establish trust,” says Kumar.

As prices are clearly listed on the app and the website, it removes the negotiation process - a fraught-ridden exercise commonly associated with buying a used vehicle. It also helps that Spinny offers a six-month warranty after the purchase and offers vehicle financing options backed by leading banks that gives the brand legitimacy. 

Fundamentum, an early-stage investor that specializes in writing large checks to help companies scale beyond their initial funding rounds, recently led a $43.7 million Series B for Spinny. The company, which runs dealerships in six cities, required more funding to expand its footprint and ramp up inventory. Not only does this involve renting more dealerships, there is also a need to hire mechanics to evaluate cars and service them in each location.

If Spinny succeeds in emulating Carvana’s example, investors can eventually expect to find an exit via the public markets. When Carvana listed in 2017, it had a market capitalization of $2 billion and annual revenue of $365 million. The company is now worth $7.7 billion and generated $1.9 billion in sales in 2018. However, it has yet to turn a profit.

“It’s difficult to scale the business both in terms of total transactions and revenue. But Spinny is willing to invest in building that relationship with the customer so it will start getting potential sellers of used cars on the platform automatically,” Kumar predicts.

Building a nationwide presence so they become a used car buyer or seller’s platform of choice is now the challenge for Spinny and Truebil.

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• Topics
• South Asia
• Technology
• Consumer
• Early-stage
• India
• TMT
• automobiles
• The Fundamentum Partnership