In recent years, companies have emerged to let you rent your apartment, find a taxi or order dinner with the click of a button. As the on-demand economy evolves, Shift Technologies is hoping that consumers will be comfortable with buying and selling cars over the web with similar ease.
On Tuesday, San Francisco-based Shift, one of a handful of startups hoping to make the process of buying and selling used cars easier by using online technology, announced it had raised $50 million in a round led by Goldman Sachs Investment Partners. The company declined to disclose a valuation for the investment, but noted that it had raised nearly $75 million since its launch less than two years ago.
They are the primary financial institution in the world, said Shift cofounder and CEO George Arison of Goldman, which took a board seat in the deal. The big reason [we chose them] was because we wanted someone who understood marketplaces and financial services.
Shifts fundraising comes after various competitors, which also have car selling web and mobile applications, have increased their cash piles and presences in the market. In May, Los Altos, Calif. company Beepi said it was finalizing a round of funding that it said would be more than $300 million, while Vroom, a New York startup, raised $54 million in debt and equity in June.
While all the companies promise the same vision of higher earnings for sellers and cheaper prices for buyers by eliminating the costs that come with running brick and mortar car dealerships, there are slight differences. Both Beepi and Vroom take possession and title of a vehicle before selling and shipping them to eventual buyers. Neither offers test drives, and hope that a buyer trusts what they read and see online before making their purchase.
Arison, a former Google product manager, said he doesnt consider those companies as direct competitors because theyve taken the used car lot approach and ported it online. Shift, on the other hand, offers a different model where it inspects and tunes up automobiles before taking those vehicles on consignment and listing them on its own site and other marketplaces for sale. The company sets a base minimum amount that a seller would receive for selling a car, with any proceeds raised over this amount split 50-50 between Shift and the auto owner. (On average, the company said a seller makes about $1,500 more than a dealer trade-in.) Shift also offers test drives and has its so-called car enthusiasts drive vehicles on-demand to potential buyers within 45 minutes.
Were trying to disrupt the Craigslist experience, said Arison, referring to the large amount of transactions facilitated by the largely unregulated peer-to-peer selling site. These purchases already happen, but we want to bring in trust and give you confidence when youre buying.
Arison estimated that his companys opportunity is the $750 billion a year (revenue) used automobile sales market, with $250 billion of that coming through private party transactions. While the company said it will be operational in 20 cities by the end of the year, Shift is currently running in Los Angeles and the Bay Area. Based on available DMV statistics, the company was the second-largest seller of used cars in San Francisco in July, facilitating the transaction of 152 vehicles. Arison declined to disclose his companys revenue figures.
Currently the company breaks even on the sale of every car, said Arison, who said his startups goal isnt to make money off of marketplace transactions. Instead, he envisioned a world where Shift worked to provide various services to car owners whether thats changing their oil or brokering auto loans.
Those developments, however, may be months away for Shift and Arison, a serial entrepreneur who emigrated to the U.S. from the Soviet Union in the 1990s to attend high school. A former political consultant in his home nation of Georgia, he also cofounded Taxi Magic (now known as Curb), an Uber precursor that worked with cab companies to coordinate rides through mobile phones. Arison said he was ahead of his time when it came to developing his ride-sharing app and noted that he made plenty of mistakes, including the rejection of a term sheet from eventual Uber investor Bill Gurley.
Online dealerships remind me of the Taxi Magic approach, said Arison, before noting that his current crop of competitors have models that are easy to copy. I learned a lot from my previous experiences and have admired with Lyft, Uber and Airbnb have built with the marketplace model.
DCM and previous investors DFJ Venture and Highland Capital joined Goldman Sachs in the $50 million round.
- high school
- eat in
- auto loan
- used cars
- test drive
- mobile phone
- mobile phones