Earlier this year, Nigerian vehicle e-commerce startup Cars45 raised a US$5 million funding round to grow its platform, which buys, sells, prices, and rates the condition of pre-owned cars.
Cars45 is headed up by Etop Ikpe, previously of Konga and DealDey, and is working to formalise a sector of the automobile market which has been traditionally notorious for terrible experiences.
“We are easing the friction associated with selling used cars by focusing on three key areas,” Ikpe said.
The major area is pricing. “Through our proprietary pricing algorithm, we are able to standardise the prices associated with used cars,” Ikpe said.
Transparency is also key.
“We run online live auctions, which gives customers 100 per cent visibility into the price offers they receive for any car we inspect at our inspection locations,” he said.
Thirdly, Cars45 has a need for speed.
“On average it takes 30-45 days for consumers to sell their cars, we guarantee a price offer, or cash in the bank, in under an hour; once a customer visits anyone of our inspection locations,” said Ikpe.
The response to these benefits has been unanimously positive.
“Just like any great product solving a genuine problem, we’ve seen massive consumer adoption of our model and this justifies our rapid expansion in just 12 months. We’ve so far conducted over 10,000 inspections and auctions through our platform,” said Ikpe.
The funding has been central to this growth, but the abilities and experience of certain investors has also helped. Sujay Tyle is the 25-year-old CEO and co-founder of the Berlin-based Frontier Car Group (FCG), which invests in, develops, launches and operates used-automotive marketplaces within emerging market economies.
In the one year since its operational launch, FCG has already achieved an annualised gross merchandise volume of US$100 million through the launch of hundreds of purchase centres across markets such as Mexico, Chile, Turkey, Pakistan, Indonesia, and of course Nigeria, in the form of Cars45.
“Our vision was to reinvent how the used automotive sales sector operated in global emerging markets, by engaging with the best local talent and companies to help create the right infrastructure in which we could build marketplace platforms,” Tyle told Disrupt Africa.
“The automotive sales sector has traditionally proved flawed in every country. Despite growing consumer demand, there has been a lack of a centralised, trustworthy marketplace for people to buy and sell cars efficiently for a competitive price. These challenges are amplified when combined with the issues and lack of resources of emerging markets. Frontier Car Group was born to solve and fix them.”
The company’s growth has been significant, but Tyle said Nigeria – and Cars45 – has been one of its biggest success stories. The future of the tech space in the country, in his view, is very exciting.
“Young people are constantly adopting new technologies and more than capable of taking their know-how to new levels, with the right management and business structure,” he said.
“When you look at the latest US$40 million Series C funding round raised by Andela – training developers across Nigeria, Kenya and Uganda – it’s clear to see that pan-African tech ecosystems will fuel economic growth for the continent as a whole, especially when Western investors such as the Chan Zuckerberg Initiative are in on the ground floor.”
FCG’s experience is that startups on the continent suffer with issues such as restrictive access to the right infrastructure and facilities, which can be barriers to pan-African success.
“FCG is essentially a brick and mortar company empowered by technology – we match this infrastructure with an online system and strategy which allows startups to flourish without wasting time with bureaucracy and inefficiencies, and that’s what we want to bring to the companies that we work with, in Nigeria and beyond,” Tyle said.
“You find that most governments want to encourage entrepreneurship, but are often hamstrung by the problem of displacing traditional businesses. You currently see this happening worldwide with Uber and local taxi companies. This means that relationships between startup ecosystems and governance are still quite nascent.”
Ikpe believes FCG has been crucial in Cars45’s growth, with the company having adopted an extremely detailed study of the market and recognised the potential which could only be achieved through rapid expansion and excellent service delivery.
“To achieve this we needed to ensure we were adequately funded and this can be quite challenging for an Africa-based startup. The funding has been absolutely vital to the success we have achieved so far,” he said.
“Our strategy from day one was to ensure we had fluid information symmetry across the group, this enables us to learn and share best practices, and also identify scalable problem-solving solutions. We also have a concentrated number of people vastly experienced in scaling high growth ventures across any continent globally. With that sort of experience in place, we are able to recognise strategic opportunities and leverage global networks for hiring talent.”
Tyle sees FCG becoming more active on the continent as more and more investors pump money into African startups.
“As demonstrated by the likes of Andela, and our own our entrance and large financial investment into Cars45 in Nigeria, it is hopefully just the beginning of future investment in Africa, and we’re sure other investors will continue to put their capital, and expertise, into the continent,” he said.
“Having watched Cars45 develop into one of our leading brands, we’re confident there are other emerging markets across Africa that could also become expansive marketplaces – largely thanks to the talented people already on the ground. For us, it’s just about being able to identify the next potential success stories, and strike up partnerships in those talent hotspots.”