The second-hand cars marketplace Motorway becomes the UK’s 37th unicorn after closing a $190 million investment round that values the company at over $1 billion. The 2017-founded company has now raised a total of $273 million to help it in its mission to introduce a “superior online experience” to what co-founder Tom Leathes calls the used-cars market’s “broken offline process”.
Motorway’s platform allows car owners to quickly value a vehicle, invite competing bids from dealers and potentially have it sold and picked up within 24 hours. The London-based start-up has already facilitated the sale of over 100,000 cars and has, its says, taken full advantage of what has been a period of “behavioural change driven by the pandemic, with both dealers and car owners increasingly seeking to buy and sell cars online”.
Motorway’s third-quarter sales saw gross transactions value worth $411 million, representing growth of around 300% on the same three months a year earlier. The company expects to reach $2 billion worth of completed sales over its digital platform by this time next year and currently sells somewhere in the region of 8000 cars a month.
The most recent funding round has been led by Silicon Valley investment vehicle ICONIQ Growth and VC firm Index Ventures. Venture capital is particularly interested in the used-cars market, seeing it as one of the last major consumer products to see its sales process go through a digital transformation.
Motorway competes with start-up rivals Cazoo and Cinch, who have both also attracted significant investment. Cazoo, founded by the serial entrepreneur Alex Chesterman (also behind Zoopla and LoveFilm), earlier this year listed in New York via a SPAC reverse merger is currently valued at around $6.5 million. The deal with the special purpose acquisition company that saw it raise $1 billion and take over its public listing valued Cazoo at $8 billion in August.
Chesterman estimates that online sales currently make up less than 2% of a UK and EU used-cars market worth £480 billion. By comparison, 52% of consumer electronics are now sold online and around 32% of clothing. He also argues that the result is a traditional used-cars market that offers a bad deal for consumers with offline processes inconvenient for both buyers and sellers as well as leading to opaque pricing and a lack of trust.
The size of the market should mean there is more than enough space for a handful of major digital players such as Cazoo and Motorway competing with each other, which should also benefit buyers and sellers of used-cars. Motorway will use its new cash injection to fund the addition of around another 130 staff to a current team of 250. The start-up has hired former Amazon UK executive James Wilson as its chief operating officer.