Clutch wants to be Canada’s largest online used car buying platform. The company, which was founded in 2016, just closed out a $80 million (CAD $100 million) Series B round that it will use to grow its team, expand its logistical capabilities and scale its inventory as it prepares to move into new Canadian markets.
“We want to be servicing 90% of Canadians by the end of 2023,” Dan Park, CEO of Clutch, told TechCrunch. “And that involves launching in a few more key cities across Canada. Cities like Montreal or Winnipeg are some of the larger cities in Canada which we will eventually go to.”
Clutch is among a small handful of online car dealers to hit the market in recent years, each one of them with a regional focus. Carvana and Vroom are the biggest players in the U.S., Cazoo is crushing it in the UK and Kavak in Mexico, to name a few. Clutch is headquartered in Toronto and services Alberta, British Columbia, Nova Scotia, New Brunswick, Ontario and Prince Edward Island, but plans to expand next year. By focusing its attention on the Canadian market, rather than on international expansion, the company is hoping to tee up a multi-billion dollar opportunity ahead of competitors like Canada Drives.
Clutch has sold thousands of used vehicles on its site, and currently has about 1,250 more in stock, according to Park. It has used past debt financing to support the acquisition of vehicles, which it sources from auctions, private sellers and fleets before it puts them through a rigorous 210-point reconditioning process during which Clutch mechanics ensure safety and good looks of the vehicle. The fresh car is then delivered directly to the end consumer on a flatbed in a way that Park says feels “as magical as possible – click a button and have a car show up in your driveway!”
This most recent financing round – which was led by D1 Capital Partners with participation from Flight Deck Capital, Canaan Partners, Upper90, Real Ventures, GFC, BrandProject and FJ Labs – will not only help Clutch grow its team from about 160 employees to over 250 over the course of next year, but also to build out the infrastructure and logistics network needed to scale. Clutch has a series of warehouses throughout Canada that it uses to store vehicles until they’re ready to be delivered, often as soon as next day.
“Building inventory and building a selection of vehicles that is wide and diverse is a massive focus for next year,” said Park. “We know that as much as you might be a fan of Clutch, if you’re really looking for that blue Subaru Outback with 50,000 kilometres on it and newer than 2018, and we don’t have that model in stock, the chances of you buying from Clutch are pretty low. We want to cater to as many Canadians as possible. And so building that inventory and building that selection is a big focus and indirect of use of proceeds as we think about next year.”
E-commerce is only one part of Clutch’s business model. About half its revenue also comes from its FinTech offerings like warranty, insurance and financing, says Park.
“What we’re trying to do here is really provide this streamlined experience and historically there hasn’t been a lot of vertical integration on that side either,” said Park. “If you can deliver not only a great car buying experience, you can offer this amazing ownership experience as well, which includes providing these financial products that you know can help the consumer, in some cases, rebuild credit, but also provide them with a better ownership experience from the vehicle.”
As Clutch begins to scale, it hopes to see improved unit economics. The most expensive parts of the business involve acquiring the vehicles themselves, as well as the logistics of getting a vehicle through the production process. Scaling further across Canada would help the company get efficiency on buying parts, delivery truck usage, lift utilization and other costs that can one day be amortized over more units.
Because Clutch is a used car marketplace, only a small fraction of its inventory are electric vehicles, but Park sees that changing in the coming years.
“We believe that our model is better suited to EVs,” he said. “EVs generally require less reconditioning. There’s 2,000 moving parts in a gas powered vehicle and there’s 200 in an electric vehicle and so naturally, this requires less maintenance.”
While many traditional dealerships rely heavily on parts and services to gain a key profit margin, that’s not where Clutch makes its money. Margins aside, when Clutch sells an ICE vehicle, Park did mention that the company, bless its heart, donates three trees to whatever area that car is being sent. Today, Clutch has planted nearly 8,000 trees, says Park.
via https://AiUpNow.com November 16, 2021 at 06:02AM by Rebecca Bellan, Khareem Sudlow,
