There have been a lot of bumps in the road for startups building used-car marketplaces, but now one of the longer-standing of them has closed a major round of funding: a clear sign of the mileage left in this category. Vroom today is announcing that it has raised $254 million, a Series H that it plans to use to expand a product and engineering hub based out of Detroit.
The company’s platform has to date been used by more than 250,000 buyers and sellers, according to the company. It has some 3,000 vehicles listed at any time, covering some 400 makes and models.
Vroom is led by former Priceline.com CEO Paul Hennessey, and the plan is to use the injection of capital to hire more employees, particularly for product and engineering jobs. Vroom said it expects in 2020 to “significantly increase” staff at its Detroit office, which opened in August.
“This new round of funding provides the necessary resources to further grow and scale our business,” Hennessy said in a statement.
This latest round of funding is being led by Durable Capital Partners LP, the new fund led by former star T. Rowe Price portfolio manager Henry Ellenbogen, which has now started investing in earnest. This is the second investment its made in the wider transportation category, after taking part in a $400 million round for Convoy. (It’s also invested in a fintech startup, Rapyd, which is moving into logistics now.)
Vroom declined to comment on its valuation. For some context, it last raised money almost exactly one year ago, $146 million, which came in at a post-money valuation of $796 million, according to PitchBook. It’s not clear how much it has grown in the last year (we’re asking).
Vroom has now raised a total of $721 million since it launched in 2013. This latest round also included participation from funds and accounts advised by T. Rowe Price Associates, L Catterton and others that are not being named. Previous investors have also included General Catalyst, Altimeter Capital and Allen & Co.
Ellerbogen first became familiar with the company because T. Rowe Price made an investment in 2015. “I’ve worked with the Vroom team for years and I’m pleased to announce that it is one of the first companies that my new firm is investing in,” he said in a statement. “We’re very excited to be a part of the future of automotive retail and support Vroom in its efforts to move the car buying and selling process online for consumers across the country.”
Vroom was part of a wave of online used marketplace startups that launched about seven years ago. Several of these companies have shuttered, while others such as Shift and Carvana have survived and even scaled.
Carvana became a public company in 2017 and its market cap is currently around $13 billion. In the meantime, others have waded into the field with alternative business models, such as Fair.com and its approach of “flexible” car ownership that looks similar to leasing (and these new players have faced their own challenges).
The center of Vroom’s business is an e-commerce platform that handles the entire transaction for buyers and sellers of used vehicles.
Vroom’s platform gives customers who want to sell or trade in their vehicles real-time appraisals, loan payoffs and at-home vehicle pickup. The company reconditions the vehicles it takes possession of and then includes them on its online catalog. Buyers can get financing through a number of lending partners that Vroom has partnered with, including CapitalOne, Ally and more recently Chase. Once the sale is complete, Vroom delivers the vehicle directly to customers’ doorsteps in the U.S.
Vroom has had success raising funds, which is critical in this capitally intensive business. But the company has hit a few speed bumps in the past several years. In 2018, Vroom laid off about 30% of its staff after a failed attempt at building brick-and-mortar car dealerships.
The company has focused its efforts since the layoffs on building out its leadership team. Vroom has added several executives in recent months, including Dave Jones, who spent over a decade at Penske Automotive Group and recently joined as its chief financial officer.