Nigeria’s Cars45.com has raised a $5 million Series A round, which the portal intends on using to improve its platform that buys, sells, prices and rates the condition of its previously-owned cars.
The Series A round of funding came from the Frontier Cars Group, a holding company whose backers include Balderton Capital, EchoVC, TPG Growth, and NEA.
According to Cars45 CEO, Etop Ikpe, Nigeria’s used-car market is a complicated one, “There’s so much mistrust, no vehicle history, and not much of a structured dealer network,” said Ikpe. “We’ve created something that changes all that, offering transparency, speed, convenience, and safety, in a highly frictional and opaque market.”
For car owner to post their vehicle on Cars45, they need to go through a thorough process. First the vehicle’s information is uploaded onto the site for a free quote. Then an appointment is scheduled at one of Cars45’s 13 inspection centers.
Then a multi-point evaluation follows, including engine, brakes, tires, and a road-test, at which point Cars45 makes an offer. If accepted, the company commits to wire payment to the owner’s bank account within 45 minutes.
After pricing and creating a digital service history, Cars45 offers the autos it acquires to a private network of buyers, according to Ikpe. The startup’s revenue model―for the moment―is largely based on “fees from that private network of pre-verified buyers” who gain access to Cars45 vehicles, he said.
Ikpe underscored the potential for the platform to build out other revenue streams around Nigeria’s used car market, including inspection services, financing, and online auto research akin to Kelly’s Bluebook.
As Africa’s online market continues to develop, startups are adapting digital business models to multiple facets of its largely informal economic space. Many IT ventures, such as Cars45, Jumia, and MallforAfrica, are pursuing Nigeria-first growth strategies before expanding to other markets. McKinsey Consulting projects Africa’s annual consumer spending will reach $2 trillion by 2020 and online sales $75 billion by 2025.
Data on Africa’s relatively small auto-industry indicate this spending could continue to favor used cars, which make up 90 percent of Nigeria’s fleet.
The above article was sourced from TechCrunch, and it can be read in its entirety here.
