INSUBCONTINENT EXCLUSIVE:
Frontier Car Group, the Berlin-based startup building used car marketplaces targeting high-growth, emerging markets, has picked up another
significant round of funding from a strategic backer also focusing on the same geographical opportunity.
Today, OLX, the online classifieds
division Prosus (the digital division of Naspers that listed earlier this year in Europe) announced that it would invest up to $400 million
in Frontier, in a mix of equity, secondary share acquisitions and existing business shares
The deal will include a primary capital injection of an unspecified amount, which OLX has confirmed to me values Frontier Car Group at $700
million, post-money.
In terms of business shares: OLX also said that it will be contributing its shares in a JV it had in place with
Frontier in India and Poland
Meanwhile, the secondary acquisitions — the shares are currently held by other investors, founders and management — are subject to a
The markets that Frontier operates in now include Nigeria, Mexico, Chile, Pakistan, Indonesia and the USA (where it acquired WeBuyAnyCar
last year), in addition to India and Poland.
Notably, even before the full $400 million amount is exercised (that is, after the tender
process is completed), an OLX spokesperson confirmed that first capital injection will make it Frontier largest single shareholder (but not
the majority shareholder), which essentially values the deal at less than $350 million (based on the $700 million valuation).
Today,
Frontier Car Group offers buyers and sellers a range of services: in addition to basic inventory listings, there are inspection reports,
financial, pricing guides, warranties and insurance
The plan will be to expand more services for one of the key players in the used-car space, dealers — via Frontier Dealer Management System
— more resale services (via OLX) and more CarFax/Blue Book-style pricing guides and other products.
Frontier sold about $700 million worth
of cars in the past year, triple its value of a year before.
As a point of reference, in May of last year, when the company raised $58
million, it had sold 50,000 cars to date and was on track for $200 million in annualised revenues
CEO and co-founder Sujay Tyle says the company has been on a growth tear.
&FCG has nearly tripled performance across every key metric since
the first OLX Group investment less than 18 months ago and has expanded to four new countries in that time,& said Tyle in a statement
&This is a testament to FCG team, the ripe market opportunity, and the results of early integration with OLX in our key markets
Together with OLX and Prosus, we are aiming to revolutionize the used car market in several emerging and developed economies by adding
trust, transparency and a comprehensive suite of services to all participants in the ecosystem.&
&Together with FCG, we are aiming to build
the leading global used car marketplace, offering a premium and convenient service to millions of car buyers, sellers and dealers,& said
Martin Scheepbouwer, CEO of OLX Group
&We&re in a unique position to accelerate the expansion of this platform worldwide
Our experience in India is a great proof of concept, where within the space of a year, our joint venture has already increased the number of
stores threefold, with car purchase volumes continuing to grow by 10% month-on-month.&
This is the second time that OLX has invested in
Frontier: In May 2018, Naspers invested $89 million in the business, an investment that came just weeks after Frontier had raised $58
million from Balderton, TPG and others.
The deal underscores the longtime trend of consolidation in e-commerce businesses — something
Prosus is also seeing played out in a completely different arena, that of food delivery.
The basics of the economy-of-scale principle, as
applied to used car sales, goes something like this: economies of scale makes a platform more useful (there will be more cars on it, and
less on competitors& sites); but it also potentially means that Frontier would be making more transactions, thereby more revenues overall;
and building and running more sales on the same platform improves the margins on the investment that gets made in building and operating
that platform.
Targeting P2P used car sales in emerging markets is a big potential business: In part because of the nature of those
economies, car owners are more likely to sweat out assets rather than go for buying completely new vehicles
OLX notes that combining the operations in Frontier footprint with those of the JV businesses that it is now taking over, plus OLX own
business in Latin America, Asia and Poland, results in a market where some 30 million used cars are sold annually, &more than double that of
