In September 2021, EVP was fortunate to lead a $3m investment round in CarClarity. We first got to know founder Zaheer Jappie in June 2020, only a few months after he had launched CarClarity to market.
Prior to meeting CarClarity, we had investigated Australia’s $36b auto finance market. We understood that the industry had seen little innovation since the early 2000s, and that there was a significant opportunity to improve the consumer experience of buying a car. As we got to know CarClarity, we quickly realised that In Zaheer, David and Luke, the CarClarity founding team represented that ideal mix of highly capable industry insiders going all-in to solve this problem. This Founder-Market Fit is an important element that we look for as investors.
We made the decision to partner with Zaheer in late 2020 and following some exceptional growth over the last 12 months, we are thrilled to invest once again in the more recent $3m funding round. Below I delve into a little more of the thinking behind our investments.
A new way to buy cars
Across North America, Europe and Asia, the car purchase experience has seen significant innovation over the last 5 years. A seemingly endless line up of unicorns have emerged with the likes of Cazoo, Carvana, Canada Drives, Cars24, Carsome and Jerry proving that consumers are hungry for a better way to purchase and finance their cars. Gone are the days of fronting up for negotiations at suburban car yards. Today, consumers hop online, select the new or used car of their choice, find the best finance option to meet their needs, and have the car delivered to their doorstep in a matter of clicks.
We see this movement towards transparent, quick and easy online transacting as mirroring broader trends seen across other consumer marketplaces. As A16Z's Andrew Chen illustrates, online marketplaces have developed over the last 20 years from simple listings and comparison websites towards end-to-end transaction models and managed services that simplify processes and add value for consumers. Markets as diverse as real estate (see Opendoor and Roofstock), art (see bluethumb and Masterworks) and travel (see Expedia and GetYourGuide) have shifted the entire transaction for big ticket item consumer purchases online once technology has standardised fragmented and difficult to compare offerings, and consumers have become comfortable purchasing online.
In the car space where finance is a commoditised product and the vehicles themselves are largely standard within individual models, there is an element of inevitability about this movement towards finding, buying and financing your car online. Improvements in industry technology stacks, and consumer comfort with ecommerce have created the necessary conditions for this new way of doing business to become a reality.
Carvana's S1 IPO documentation, lays out how consumer expectations are making it increasingly difficult for incumbent players to keep up in the auto market:
Against these challenges for incumbent players, consumers have voted with their feet in backing new disruptors to rapid scale. As of 2020, 17% of Americans and 13% of Australians identified “fully virtual” as the most preferred way to buy a car with these numbers only increasing in line with e-commerce penetration in other industries.
Australia left behind
By comparison to other geographies, Australia has seen negligible innovation in its automotive market. The consumer purchase and finance experience has been left largely unchanged since the early 2000s when online classifieds were first introduced by carsales.com.au.
The process still involves tramping up and down Parramatta Rd and equivalents to manually compare prices in car yards, or searching across thousands of listings on online classifieds sites. Consumers are then left to negotiate on car pricing with each dealership in an often pressured environment with scarcity of stock. They then typically negotiate again for a finance arrangement from the same dealership who sold them the car, with a limited option set of suitable loans. After this whole process, buyers are often left to wait a number of weeks before gaining finance approval only to go back to the dealership to pick up the car.
As consumers are demanding that more of the process shifts online, the role of dealerships is also narrowing. Australia's c.5,000 dealerships are significant players in the $36B car market, representing 39% of financing and the vast majority of new and used car sales. However, as research and price comparisons have moved online, the opportunity for dealers to add value is vastly diminished. As one dealer puts it:
"Customers increasingly research online and know what car they are interested in buying before visiting the dealership in person. Dealers no longer sell cars, they ‘price a deal'."
Enter The CarClarity Team
Zaheer founded CarClarity to bring trust, transparency and speed to this opaque customer experience. He started the business having seen how the auto industry was lagging against the innovation he was seeing in business and other personal loans from his time at Prospa and Plenti. As a car enthusiast, purchasing and selling several cars in his early adult years, Zaheer had also experienced the emotions of navigating the process a number of times. In a context where around 90% of car purchases in the local market are financed with a loan, the opportunity to improve a daunting experience for a significant portion of Australians was staring Zaheer in the face. He started building the business at night and on the weekends before leaving his job and jumping in full time.
Today, the CarClarity platform provides an intuitive online solution for consumers to obtain the best finance option for their car purchase from 30+ different lenders. Borrowers are matched with lenders with pricing and terms to suit the individual’s specific circumstances and then guided through an online application process. In addition to finance, CarClarity also facilitates the purchase of insurance, warranties and other aftermarket products, as well as vehicle trade in. Recently, the business has launched a car buying solution where consumers select the vehicle they wish to purchase and car dealerships bid to complete the transaction.
In the 18 months following launch, CarClarity scaled rapidly and has now facilitated more than $24m in loans for its 700+ customers. Perhaps more importantly, from day one, the business has delivered on its aims to be a trusted home for consumers to navigate their car purchase journey. Their reviews on Trustpilot represent best-in-class for a consumer product and stand in stark contrast to the typical perceptions of the "used-car salesperson".
This early success is in no small way due to the passion of the founding team for their problem space and their obsession with customer experience. Illustratively, it was a great sign for us as investors when we saw listed fintech incumbents come to tour the CarClarity office to see the team and hear from David about how to better run their customer-facing teams. Speaking to any of Zaheer, David or Luke, you immediately sense the passion and urgency with which they apply themselves to the simple goal of getting the best consumer experience into the process for as many of the c.4 million car purchases that happen in Australia each year as possible.
Looking forward
The latest capital raise provides Zaheer and the team with extra fuel to continue to innovate on customer experience across the car ownership journey. In essence this means continued product development to (1) further speed up and simplify the finance application process and (2) get the finance marketplace into the hands of further dealership and digital channels.
Over the longer term, the business is primed to thrive with the expected removal of the exemption that enables dealerships to provide car finance without a credit license. With the Government indicating its intention to follow the recommendation of the Financial Services Royal commission for the removal of this exemption, a solution will be needed to facilitate the 39% of financing that currently takes place through dealerships. CarClarity is well placed to step in as the solution of choice for dealerships as they navigate this new consumer and regulatory environment.
We’re incredibly proud to partner with Zaheer and look forward to the exciting years ahead for CarClarity.
In September 2021, EVP was fortunate to lead a $3m investment round in CarClarity. We first got to know founder Zaheer Jappie in June 2020, only a few months after he had launched CarClarity to market.
Prior to meeting CarClarity, we had investigated Australia’s $36b auto finance market. We understood that the industry had seen little innovation since the early 2000s, and that there was a significant opportunity to improve the consumer experience of buying a car. As we got to know CarClarity, we quickly realised that In Zaheer, David and Luke, the CarClarity founding team represented that ideal mix of highly capable industry insiders going all-in to solve this problem. This Founder-Market Fit is an important element that we look for as investors.
We made the decision to partner with Zaheer in late 2020 and following some exceptional growth over the last 12 months, we are thrilled to invest once again in the more recent $3m funding round. Below I delve into a little more of the thinking behind our investments.
A new way to buy cars
Across North America, Europe and Asia, the car purchase experience has seen significant innovation over the last 5 years. A seemingly endless line up of unicorns have emerged with the likes of Cazoo, Carvana, Canada Drives, Cars24, Carsome and Jerry proving that consumers are hungry for a better way to purchase and finance their cars. Gone are the days of fronting up for negotiations at suburban car yards. Today, consumers hop online, select the new or used car of their choice, find the best finance option to meet their needs, and have the car delivered to their doorstep in a matter of clicks.
We see this movement towards transparent, quick and easy online transacting as mirroring broader trends seen across other consumer marketplaces. As A16Z's Andrew Chen illustrates, online marketplaces have developed over the last 20 years from simple listings and comparison websites towards end-to-end transaction models and managed services that simplify processes and add value for consumers. Markets as diverse as real estate (see Opendoor and Roofstock), art (see bluethumb and Masterworks) and travel (see Expedia and GetYourGuide) have shifted the entire transaction for big ticket item consumer purchases online once technology has standardised fragmented and difficult to compare offerings, and consumers have become comfortable purchasing online.
In the car space where finance is a commoditised product and the vehicles themselves are largely standard within individual models, there is an element of inevitability about this movement towards finding, buying and financing your car online. Improvements in industry technology stacks, and consumer comfort with ecommerce have created the necessary conditions for this new way of doing business to become a reality.
Carvana's S1 IPO documentation, lays out how consumer expectations are making it increasingly difficult for incumbent players to keep up in the auto market:
Against these challenges for incumbent players, consumers have voted with their feet in backing new disruptors to rapid scale. As of 2020, 17% of Americans and 13% of Australians identified “fully virtual” as the most preferred way to buy a car with these numbers only increasing in line with e-commerce penetration in other industries.
Australia left behind
By comparison to other geographies, Australia has seen negligible innovation in its automotive market. The consumer purchase and finance experience has been left largely unchanged since the early 2000s when online classifieds were first introduced by carsales.com.au.
The process still involves tramping up and down Parramatta Rd and equivalents to manually compare prices in car yards, or searching across thousands of listings on online classifieds sites. Consumers are then left to negotiate on car pricing with each dealership in an often pressured environment with scarcity of stock. They then typically negotiate again for a finance arrangement from the same dealership who sold them the car, with a limited option set of suitable loans. After this whole process, buyers are often left to wait a number of weeks before gaining finance approval only to go back to the dealership to pick up the car.
As consumers are demanding that more of the process shifts online, the role of dealerships is also narrowing. Australia's c.5,000 dealerships are significant players in the $36B car market, representing 39% of financing and the vast majority of new and used car sales. However, as research and price comparisons have moved online, the opportunity for dealers to add value is vastly diminished. As one dealer puts it:
"Customers increasingly research online and know what car they are interested in buying before visiting the dealership in person. Dealers no longer sell cars, they ‘price a deal'."
Enter The CarClarity Team
Zaheer founded CarClarity to bring trust, transparency and speed to this opaque customer experience. He started the business having seen how the auto industry was lagging against the innovation he was seeing in business and other personal loans from his time at Prospa and Plenti. As a car enthusiast, purchasing and selling several cars in his early adult years, Zaheer had also experienced the emotions of navigating the process a number of times. In a context where around 90% of car purchases in the local market are financed with a loan, the opportunity to improve a daunting experience for a significant portion of Australians was staring Zaheer in the face. He started building the business at night and on the weekends before leaving his job and jumping in full time.
Today, the CarClarity platform provides an intuitive online solution for consumers to obtain the best finance option for their car purchase from 30+ different lenders. Borrowers are matched with lenders with pricing and terms to suit the individual’s specific circumstances and then guided through an online application process. In addition to finance, CarClarity also facilitates the purchase of insurance, warranties and other aftermarket products, as well as vehicle trade in. Recently, the business has launched a car buying solution where consumers select the vehicle they wish to purchase and car dealerships bid to complete the transaction.
In the 18 months following launch, CarClarity scaled rapidly and has now facilitated more than $24m in loans for its 700+ customers. Perhaps more importantly, from day one, the business has delivered on its aims to be a trusted home for consumers to navigate their car purchase journey. Their reviews on Trustpilot represent best-in-class for a consumer product and stand in stark contrast to the typical perceptions of the "used-car salesperson".
This early success is in no small way due to the passion of the founding team for their problem space and their obsession with customer experience. Illustratively, it was a great sign for us as investors when we saw listed fintech incumbents come to tour the CarClarity office to see the team and hear from David about how to better run their customer-facing teams. Speaking to any of Zaheer, David or Luke, you immediately sense the passion and urgency with which they apply themselves to the simple goal of getting the best consumer experience into the process for as many of the c.4 million car purchases that happen in Australia each year as possible.
Looking forward
The latest capital raise provides Zaheer and the team with extra fuel to continue to innovate on customer experience across the car ownership journey. In essence this means continued product development to (1) further speed up and simplify the finance application process and (2) get the finance marketplace into the hands of further dealership and digital channels.
Over the longer term, the business is primed to thrive with the expected removal of the exemption that enables dealerships to provide car finance without a credit license. With the Government indicating its intention to follow the recommendation of the Financial Services Royal commission for the removal of this exemption, a solution will be needed to facilitate the 39% of financing that currently takes place through dealerships. CarClarity is well placed to step in as the solution of choice for dealerships as they navigate this new consumer and regulatory environment.
We’re incredibly proud to partner with Zaheer and look forward to the exciting years ahead for CarClarity.