Australia is emerging onto the online used car scene with Carma, a startup that just raised a $20 million (AUD $28 million) seed round from Tiger Global, a U.S. investment firm. Carma has been operating in stealth for the past nine months and said the funding enabled the company to recruit an executive team, develop its website, and establish its first inspection and reconditioning facility in Sydney.
Carma isn't the first online car dealership with a punny name: The startup joins the ranks of Carvana and Vroom in the U.S., Clutch and Canada Drives in Canada, Kavak in Mexico, and Cazoo in the U.K. They're all coming to fruition as the pandemic resulted in a shortage of semiconductors, which led to automakers being unable to meet the rising demand for vehicles. Increasingly, consumers want a contactless, frictionless way to not only search for and buy a used car, but also have it delivered to their doors -- a service companies like Carma are offering in their native markets around the world.
“We are convinced there is a massive opportunity to disrupt the used car industry in Australia by replicating an online, full-stack model that we see achieving success in the U.S. and globally,” said Griffin Schroeder, partner at Tiger Global.
Carma will open to Sydney customers first, but plans to expand throughout the state of New South Wales in the coming months and to Brisbane and Melbourne next year. The startup said it would begin another round of fundraising soon to support its accelerated expansion plans in 2022.
"Investment in the digital used car dealership space is very active globally, given the international success of the model," Carma co-founder and CEO Lachlan MacGregor said in a statement. "Having this significant backing from Tiger Global has been a fantastic vote of confidence in Carma and allowed us to move rapidly to build out an exceptional team, technology stack and physical infrastructure. We skipped the startup phase and were able to go straight to scaling up with a proven business model."
With this sizable seed round, Carma is gearing up to launch its online platform. The company currently has a fleet of 300 vehicles in stock, which it sources from private sellers, other dealers and auctions, but will shortly have over 500, according to a spokesperson for the company.
"Typically, our cars are under five years old, with less than 100,000 kms (62,137 miles), and with the latest features," a spokesperson for Carma told TechCrunch. "After we buy them, they undergo a thorough mechanical inspection, repair and reconditioning process in-house, before being photographed at our state-of-the-art facility in Sydney. We will only sell cars that meet our high standards."
Customers looking at cars on Carma's platform will be able to view 360-degree high-res imagery of the exterior and interior, with any flaws called out and photographed. The company says it will offer transparent prices and over-the-phone and online customer support. After a checkout process that can take as little as 10 minutes, the car is delivered to the customer's home, and they have a week to try it out. If they're not satisfied, they get their money back -- all standard stuff in this industry.
The Australian used car landscape is fragmented, and the online car buying space is somewhat limited to classifieds and Facebook Marketplace. Carma has no major competition to speak of, so it has a chance to corner the market while it's hot.