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A global chip shortage, increased labor costs, and supply chain crises have led to a salient, stressful new reality for Americans looking to find cars at an affordable price.
That's how Caribou, an auto fintech company seeking to improve consumers' financial relationships with their cars, has become a unicorn.
Caribou, which today announced the close of its $190 million Series C that brings its valuation to $1.1 billion, is operating in a marketplace that many consumers don’t even know exists: refinancing cars.
Caribou CEO Kevin Bennett is seeking to change that through his platform, which was founded in 2016.
“I think there’s such a need to educate consumers around the fact this is an opportunity for them," Bennett told Yahoo Finance. "This is an opportunity to improve their finances, and it’s a straightforward one. We make it easy, and take care of the heavy-lifting.”
'Consumers are feeling more and more squeezed'
Caribou, which was incubated by QED Investors, saw massive growth throughout the pandemic in both its customer base and headcount.
Before COVID, Caribou had 40 employees. The company is currently closing in on 500. This growth is in response to the extent to which Caribou is filling a need that’s still expanding.
“Consumers are feeling more and more squeezed financially,” Rachel Holt, Construct Capital partner and co-founder and a Caribou board member, told Yahoo Finance. “Gas prices are at incredibly high levels, and Caribou is in an amazing position to help people manage costs, saving money easily and sustainably. I think the tailwinds behind this company could lead to pretty extraordinary growth in the next one to two years.”
The company's Series C funding, led by Goldman Sachs (GS) Asset Management, included a wide range of new investors — like Innovius Capital and Harmonic — and existing ones like Accomplice, CMFG Ventures, Curql Fund, Firebolt Ventures, Gaingels, Moderne Ventures, and Motley Fool Ventures. This Series C brings the funding that Caribou’s raised since its founding in 2016 to $175 million.
Holt got involved with Caribou through her work as a high-profile Uber (UBER) executive. She was seeking to solve a problem: Drivers were getting fleeced on their car payments, and Caribou was one of the few companies presenting a clear, streamlined solution. Ultimately, Holt joined Caribou’s board in 2020.
At that time, Caribou was still called MotoRefi but changed its name in 2021. The switch, Bennett said, was to reflect the ways the startup’s mandate had expanded. Why Caribou, then? Part of it was a simple linguistic alignment (that the first three letters spell ‘car’), though much of it was that the word sounds like the phrase “care about you.”
“There was this sense that it represented us, our culture, and the industry we’re in,” Bennett said. “It’s fun and it suggests that we want to build relationships. It certainly can apply to refinance, it can apply to insurance, and it can apply to everything we do in the future.”
Filling a need
Caribou’s rise comes at a time when the cost of owning a car in the U.S. has skyrocketed. Auto prices have soared, and car buyers have sought to offset these high prices by taking out longer-term loans with less-favorable terms.
The result? This year, the average cost of car payments hit a record-high of $644 monthly. In the U.S., car debt totals to nearly $1.5 trillion, up $84 billion year-over-year, according to the New York Fed.
“America has always been obsessed with their cars, but what we’re now seeing is a whole wave of people who need cars for their livelihood,” Ryan Moore, founding partner at VC firm Accomplice, told Yahoo Finance. “Auto plays a key role in people’s lives, and is this really fascinating snapshot into someone’s personal finance.”
When Caribou first approached him, Moore looked at the auto refinance market and saw lots of call centers, inefficiencies, and growth. His firm Accomplice takes a seed-led approach to investing, and Caribou is one of the startup’s that’s risen to the top, said Moore, who’s now also on Caribou’s board.
Caribou’s goal is ultimately to “help consumers optimize their finances around their car,” even as it takes the company beyond refinancing, Bennett explained. The company started its own auto insurance marketplace to this end.
Since consumers often find both financing and insurance tiresome or intimidating, it's an opportunity for Caribou to problem solve. If the company can make it easy for car owners to find their optimal refinancing and insurance offers, Bennett said, Caribou can become indispensable in saving them money on their cars, which is usually among an individual’s largest assets.
Though Caribou is looking to expand its product line, it doesn't necessarily intend to go beyond auto, he added.
“In the auto space, we’re very well-positioned to start thinking about products three, four, or five years out,” Moore said. “If you think about personal finance as a whole, it’s a category with a lot of well-funded competitors, but we can build a nice business in this particular vertical.”
Allie Garfinkle is a senior tech reporter at Yahoo Finance. Find her on twitter @agarfinks.