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Cape Town - CarZar.co.za, which has been making waves in the car industry, is now being backed by Vostok New Ventures - a Nasdaq-listed $725m investment company.
CarZar is an online car buying service with a presence in Cape Town, Johannesburg and Durban for the second hand auto-trade industry.
It has been disrupting the second-hand car market by introducing technology to an industry that has largely remained traditional. “We see technology being our key differentiator and main driver of growth. Additionally, we foresee territorial expansion in South Africa, introducing our services to even the smallest of towns,” joint managing director Fernando Azevedo Pinheiro told Fin24.
he said CarZar's service comes at zero cost to customers.
How it works
- Potential sellers can simply go onto the CarZar.co.za website, and enter their car's details; after which CarZar’s unique algorithm will generate an estimate for the vehicle’s selling price instantly.
- If the seller is happy with the estimated value, they can book a free inspection at one of CarZar’s Car Buying Centres or at their preferred location. Within 20 minutes, the inspector will make a final offer to the seller.
- CarZar then makes an instant payment and takes care of all the paperwork.
- In all, the process takes 30 minutes.
The young startup with 35 staff members was founded in 2016 by Pinheiro and Michael Muller. The CarZar journey started after they shared their bad experiences trying to sell their vehicles.
"I tried the dealership way once I decided to sell my first, beloved car. I took the vehicle to 8 dealerships and didn't get one single offer," Pinheiro told Fin24.
Muller, who was moving to another city at the time, tried to sell his car privately. However, the buyer made a way lower offer than originally agreed. "At the beginning he didn’t accept, but he was running out of time and needed to sell his vehicle. He decided to flag down the buyer and accepted the offer."
The duo then decided to draw up a business plan for a simple way of selling a car. They pitched it to Silvertree Capital who provided the funds for the business to start.
READ: SA vehicle trading start-up goes live
"One year later, CarZar has captured the interest of international investors," said Pinheiro, adding that Vostok New Ventures investment in CarZar is part of larger funding round.
Vostok New Ventures has also funded other successful online tech-brands including, BlaBlaCar, a long-distance ride sharing service; Gett, an on-demand taxi hailing service available in Israel, Russia, UK and New York City and babylon, an AI-driven digital healthcare company.
CarZar is also backed by a third undisclosed UK-based investor focusing on emerging markets.
Pinheiro attributed CarZar's success to a number of things.
"We have a good business model - it makes economic sense in the South African market. We have a diversified and multicultural team and lastly good execution, with clear performance targets that have already shown sustainability and growth."
Five tips to make a success of your tech start-up
Pinheiro also offered the following tips to other tech start-ups:
1) Choose a business model that makes economic sense in your target market. In the case of South Africa (or Africa in general), have a clear path to profitability in 2 years max (preferably earlier).
2) Be extremely lean with cost. Since access to obtaining capital on this continent is more difficult, you will need to prove that you can operate with low cash burn and still grow. This may call the attention of potential investors. Prove you have financial discipline and capital will only be used to grow the company faster, not to sustain burn.
3) Validate assumptions before scale. Before we invested money in developing technology, we used a very basic MVP to validate some of our assumptions about the market and the business model. When we were happy with the results, we started to spend.
4) Be resilient, but also have a clear idea of what expected success looks like, so you know when difficult times come, when it is time to persevere, pivot or abandon the idea.
5) Invest in recruiting the best resources, it will pay off in the long term strategy.
"South Africa has amazing potential," Pinheiro said. In his view incentivising entrepreneurism and creativity can serve as a solution to help bring down unemployment. "This can bring about a massive long term impact in this country."
Pinheiro added that more focus should also be placed on young people.
"The youth should be taught that creating jobs is more fun than to look for one, that with the right mindset, good ideas, and flawless execution you can build a great business and change the country."
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