Posted on Thursday, Oct 1st 2015
A recent IBISWorld report estimates the online US car dealers market to have grown a modest 2.9% annually over the period 2010 through 2015 to be worth $24 billion this year. Compare this figure with the 9% growth rate delivered by the US Car and Automobile manufacturing industry’s growth during the same period. Another IBISWorld report pegs the total car and automotive manufacturing industry in the country to be worth $127 billion. Driving online sales for cars is obviously not easy, but Billion Dollar Unicorn player Beepi is working hard to turn that trend around.
Los Altos-based Beepi was founded in 2013 by Owen Savir and Alejandro Resnik. Back in 2011, Alejandro bought a used Jeep from a car dealership. Within two days, the car was overheating and needed to be towed back. He had to go through a legal battle with the dealer before he got his money back, but the experience nudged him to figure out if there could be an easier and a better way to buy and sell used cars. Thus, the idea of Beepi was born.
Within two years, the two set up Beepi, an online platform which connects buyers and sellers of used cars using a smart algorithm. Users don’t have to negotiate, test drive, or even look at the car as everything about the car is transparent. For sellers, Beepi just wants the basic details about the car being sold. They then send a mechanic to inspect the car and set the price, and it is added to Beepi’s inventory. Once a buyer is interested in the car and buys it, Beepi’s driver takes the car and drops the inspected and certified car to the buyer’s address along with a ten-day money back guarantee.
Their proprietary pricing algorithm provides a price based on the geographic market. Beepi has also completed the total process of a car sale by allowing customers to purchase cars online through bitcoin, direct debit, financing, or credit cards. In fact, they also take care of the paperwork, including title and plates so that the buyer gets the car at their doorstep without physically inspecting the car.
To sellers, Beepi guarantees that they will sell their car within 30 days for at least $1,000 more than what they could get at a dealership, or they will purchase the vehicle. To buyers, they promise that the cars are priced lower than the dealer advertised price. The price commitments include Beepi’s fee that they make from the sale. Beepis services are very location specific and they are currently based mainly out of the West Coast with presence only in Florida on the East Coast, while they offer their entire suite of services in Washington, California, Arizona, Texas, and Florida. In a few more states on the West Coast, customers can get cars delivered to them for a $999 delivery fee, but Beepi does not perform the DMV registration for them.
Beepi does not publish detailed financials. In a recent report though, analysts estimate that they ended 2014 with $100 million in annual revenues. They are expected to end 2015 with revenues of $350 million. While the revenue figures are impressive, it should be mentioned that Beepi includes the sale price of the car in its revenues as it takes ownership of the car before shipping it to the buyer. Net revenue figures are not known since Beepi’s commission rates are dependent on the car. They take a maximum of 9% of the sale price as their fee, translating to a maximum of $9 million in revenues in 2014 to a maximum of $31.5 million in revenues this year. Profitability figures are not known either. I find the accounting misleading, and as with many other Unicorns, the company is outrageously overvalued.
Beepi has been venture funded so far with $79 million raised from investors including AngelList, Comerica Bank, Gil Penchina, Philippe Suchet, Scott Bommer, Sherpa Capital, Yuri Milner, Brett Rochkind, Brian Sharples, Fabrice Grinda, Foundation Capital, Redpoint Ventures, Richard Boyle, Shervin Pishevar, Silicon Valley Bank, Tina Sharkey, Fabrice Grinda, Alec Oxenford, Jose Marin, Rough Draft Ventures, and TA Ventures. Their last round of funding was held in December 2014 when they raised $12.7 million at an undisclosed valuation. An earlier round in 2014 had valued them at $200 million. Reports suggest that the company is now scouting for another $300 million round that is expected to value them at more than $2 billion. Beepi plans to use the funds for expansion into other markets in the country.
A more reasonable valuation for the company would be $300 million-$400 million, definitely not $2 billion. In fact, given that the profitability of their business model is suspect, even those numbers are pretty high.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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