Yahoo Finance Business interview: Alex Chesterman - the tech tycoon turned used car salesman on his final excursion
Sporting a sharp black suit, Daz-white shirt, incessantly chewing gum, and with an ombré-grey beard that he twirls into a point while talking, Alex Chesterman wouldn’t stand out flogging cars at your average motor dealership.
The suit, though, is more likely to be bespoke than Burton. Serial entrepreneur Chesterman might have reinvented himself as a used-car dealer with his latest venture, Cazoo, but he’s got a better track record than the average Fiesta.
He built up LoveFilm, then sold the movies rental business to Amazon for £200 million. Next was property site Zoopla, which floated in 2014 before being sold four years later to private-equity giant Silver Lake for £2.2 billion. Chesterman, who banked more than £100 million, was dubbed Britain’s most successful digital entrepreneur.
So he didn’t exactly have to rattle a begging bowl to raise cash for Cazoo, which aims to upend Britain’s £50 billion-a-year used cars market by selling vehicles entirely online and delivering them 72 hours later.
Investors hurled £80 million at the idea, “a European record for a pre-launch start-up fundraise”, he says almost sheepishly, before admitting he turned down considerably more. Backers include Octopus, the third time it’s put cash behind Chesterman, DMG Ventures, Stride and Entrée Capital.
It’s early days — Cazoo only went live in December — but in its first eight weeks, it sold £10 million-worth of cars. The only noise notification on Chesterman’s phone is when Cazoo sells a car. It chirps four times in our hour together; he claims that’s “pretty quiet”.
This time last year, Cazoo was Chesterman and one other; today there are 262 staff, most at a Euston HQ, the rest in overalls at Cazoo’s 55-acre Midlands site with 2000 used cars.
They’re bought at auction, off lease, or from private sellers. Chesterman’s crew soup them up then flog them “at the price we can sell at — people hate haggling; we’re not doing that”.
There’s a seven-day return policy, “instead of a dealership’s seven-minute test drive. If the car isn’t a fit, we’ll pick it up and give a refund.”
Chesterman makes buying a car sound like an Asos delivery, albeit that costs an average £12,500 (although there are pricey Maseratis and BMWs on the site too).
“The average Briton travels 70-plus miles to see a car they may not buy. We’re saying, do the whole thing online: it takes five minutes, we’ll deliver in a two-hour slot, like Ocado. What’s not to like?”
Well, for many, buying probably their second-most-expensive purchase blindly will seem risky. And traditional dealers are struggling: listed Pendragon is set to post an annual loss of more than £12 million. Giants like Tesco have entered and reversed out of the market.
Will Chesterman beat the odds? “Fifteen years ago, people said there’s no way anyone will buy clothes online,” he responds. “Eighteen months ago, people told me ‘no one will buy a car online’. £10 million [revenues] already says that’s not true.
“In 2003, every High Street had a video shop, by 2008, none did. My hunch is that, with cars too, people will ask why they ever did it the old way. Used cars are the biggest retail market in the UK — eight million sold a year, worth £50 billion. If we get a 1% share, that’s a £500 million business. And in my previous businesses, we’ve had double-digit market share…
“I’m not an innovator, just a copycat. With LoveFilm, I’d seen Netflix doing the same in the US. With Zoopla, I’d seen Zillow in the US. And with Cazoo, I saw a TV ad in the US for a used-car website, Carvana, [which floated in 2017, has a market cap around $9 billion and sold 165,000 cars last year] and wrote Cazoo’s business plan. I don’t have more expertise than anyone else.”
Chesterman’s no tech expert either — he even appeals to his kids for IT support: “I broke my phone yesterday and had to ask my nine-year-old to set up the new one because I couldn’t get it to work. I can’t write a line of code.”
But he’s a tech tycoon. At 50, he’s “trained” himself to need minimal sleep, working till 2am running his high-risk business (Carvana, is one of the US’s most-shorted stocks as analysts worry about its cash gobbling).
He’s battling the repercussions of Brexit — it hit the availability of “both talent and capital” in tech, he says, and when I ask if he’s been in contact with Boris Johnson, Chesterman archly responds: “no: I spend time with people I enjoy spending time with.”
Yet he’s back. “I’m too young to retire. My passion is finding stuff that’s broken and fixing it. Although I have promised my wife no more after this one.”
Chesterman’s always been industrious. He worked in telesales while a sixth-former at St Paul’s. He must have been one of very few students at the (now) £25,000-a-year school to put in a part-time shift? He shrugs: “I wanted to earn my own money.”
After economics at UCL — “I only went to please my parents” — he accepted a job at Goldman Sachs. “Then I bumped into a friend of my father’s, Robert [Earl] who was running Hard Rock and said I’d have more fun on his management programme in Florida. My plan was to defer Goldman for three months in the sun.
“First business lesson I learnt: a university graduate doesn’t get to dictate their terms to the largest bank in the world.”
He picked burgers over banking (“my parents weren’t happy”), and ended up managing Hard Rock Orlando, the “highest-grossing restaurant in the world, taking $1 million a week”. When Earl launched Planet Hollywood a year later, Chesterman was its first employee.
“I ran around the world opening new branches for 10 years, spending four days a week on a plane. Eventually I came back to London; I wanted to do my own thing.” He flew home with his American girlfriend, Angela, wooed despite “our first date being a burger that I got comped”, and they married.
In the capital, he launched a bagel shop in 1999. The late Michael Winner raved about Bagelmania’s peanut butter and sliced banana variety, but the nine-strong chain floundered. Phone shops, coffee shops, and Pret “were all fighting for the same sites. It became a real-estate play.”
Then came LoveFilm and Zoopla. He and his wife had two kids, aged nine and 13. “I wanted a third but my wife didn’t, so this is my third business child.”
His only splurge, he says, is “nice trips with the kids in school holidays”. There’s no fleet of flash sports cars at his Highgate home? “I’m not into that sort of thing.” Is his Range Rover his only car? “Yes. You can’t drive more than one at a time,” he adds drily.
Shutting down potential sale opportunities: definitely not your typical used-car salesman.
