When Aaron Tan first launched his automotive marketplace, Carro, in 2015, he received backlash from car dealers — who thought he was just out to steal their lunches. So he changed his approach and instead of positioning himself as a disruptor, he established relationships with the dealers — while still developing an innovative approach to selling cars faster and better.
Today, Tan is about to join the ever-expanding ranks of poster boys and girls of Singapore’s vibrant startup ecosystem. Carro, recently landed an impressive US$60 million Series B round led by big-name VCs such as SoftBank Ventures, Insignia Ventures Partners and B Capital Group — giving the company a total of US$78 million in its war chest.
This is an important milestone for the three-year-old company, which has sold over US$250 million worth of automobiles to date; and Tan believes it will become a major player for automotive transactions in the region. Sure, in the span of three years, rival car marketplaces have either emerged but become more formidable, and even general classifieds companies like Carousell are entering into the game.
But Tan believes Carro has a unique proposition — it is a full stack car marketplace and not just a classifieds platform. Selling cars is quite different from getting rid of your unwanted comic books; it involves quite a bit of paperwork, including transference of title, warranty, bill of sale, etcetera. Carro wants to be the platform that handles all stages of the transaction, making the process more streamlined for buyers and sellers.
In an email interview with e27, Tan spoke about Carro’s founding story, the challenges he faced and his approach to business.
Here is the excerpt, edited for clarity:
What other businesses ideas were you mulling and why did you eventually settle on a car marketplace in Singapore?
I was looking at doing something in the proptech sector, honestly. As a Singaporean, my passions were really properties and cars. I ultimately went with a car marketplace primarily because of the market momentum of the industry (Uber, self-driving cars, marketplaces) as well as the fact that it was pretty much a blue ocean.
What were the challenges you faced when building Carro?
Attracting talent was the most difficult, it was hard to find people who were willing to take a pay cut, work longer hours while being bottled in an industrial estate.
We also realised that the industry was a very tightly guarded one, while we mostly had experience buying and selling cars, the experience of creating a marketplace from scratch focusing on automotive without connections was super difficult. It took us a long time to build it.
Lastly, as we started, we positioned ourselves as an alternative to dealers. The dealers hated us for that and refused to work with us on other products, as a result, they started badmouthing us and that hurt our business.
Over time, we managed to clear up the misunderstanding and rebuild our relationships. But looking back, positioning ourselves as an anti-dealer brand to start was a bad idea.
You have been building businesses since you were in your teens. So you had the luxury to make more mistakes than the average entrepreneur. What were some of the biggest ones you committed in the early days and what did you learn from them?
Underestimating competition and a value of your business. I started one of the earliest hosting companies and if I had hung on to that company, it would have been worth a lot more – I guess selling a company too early on doesn’t necessarily equate to good outcomes.
With an attractive space comes competition too — and we should never underestimate the competition. One of the things I learnt early on in business is never to underestimate competition; you tend to run faster if there is someone chasing after you from behind or vice versa — if you are chasing after the market leader.
You are also an experienced VC so you have been on both sides of the relationship. Do you think having an understanding of how VCs operate helped you to raise funds more effectively for Carro?
For sure, my roots in venture capital, having been in Singtel Innov8 since 2010 taught me a thing or two about navigating the complex fundraising environment in Southeast Asia. I was lucky that I have had a good relationship with most of the venture funds and that certainly helped with the fundraising process.
How do you decide which market to expand to? What is your thought process?
It is down to two data points, (1) how big is the addressable market in each of the countries in the region and (2) our likelihood of winning in each of these markets. If we were to score them from 1 to 10, the highest sum would be the market we should prioritise to enter into — i.e. a score of 10 means it is the largest market with an almost certain likelihood of us being the top player in the market.
Tell me a bit about the company culture in Carro. What kind of environment is the Carro workplace and how do you ensure employees are driven and working towards the same goal?
We are very hackish in our approach to solving problems. We tend to iterate through a problem really quickly by solving the problem from the ground up through tech solutions. If a solution works, we will double down and continuously improve the solution.
I think that is what happens when you have a team of former programmers/engineers leading the company. I like to think we are very numbers driven but do think we can be a lot better.
Overall if I were to summarize how it is like working for Carro, is that we are a startup and that means that it is a very fast paced workplace; and folks who thrive in fast-moving, high-velocity environments should join us!
What is your business philosophy? For example, do you believe in scaling fast or would you rather secure your home ground first?
We believe in scaling fast and winning markets. It is about being number 1 or nothing honestly – at least from a venture standpoint.
Car marketplaces have been springing up in Singapore over the last few years. Even broader marketplaces such as Carousell have launched their own version within their platform. How do you plan to compete with such companies, especially when Singapore is already a small and saturated market.
We try to think of each player as being different from what we want to do. We are what we term a full stack auto marketplace, a physical transaction actually happens with us, unlike other platforms.
We also like to think that the fact that we are part of the transaction is rather defensible, many of these ‘competitors’ would have to figure out regulations and ownership restrictions before they could even perform a transaction.
The execution of an eyeball/classified strategy is very different and that would further set us apart from our competitors; we don’t earn a dime from ad revenues and hence focus on the transactions and not the eyeballs.
It is also important to note that we are today in Indonesia, Thailand and Singapore. We do not just compete in Singapore; we think that it is important to establish the fact that we are a regional transaction marketplace and not just an in-country leader in the classifieds sector. We have no ambition to be the largest classifieds marketplace in the region.
What is your exit strategy for Carro?
I like to think that the business can be profitable and an enduring business. Our burn has gone down to almost nothing and we are tracking to break even. If we have a sustainable and good business model, we do not have to worry too much about an exit — it will come.
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