Aussie car-sharing platform Car Next Door has bagged $6.2 million in funding from South Korean auto manufacturer Hyundai, as it prepares for growth, and for a major shift in the transport industry.
Founded by Dave Trumbull and Will Davies in 2012, Car Next Door was one of the original sharing economy platforms in Australia, allowing drivers to lend their vehicles to neighbours who need a one-off set of wheels.
Now, it has about 150,000 borrowers on the platform, and about 3,000 cars in Sydney, Melbourne, Brisbane, Canberra, Perth and the Gold Coast.
As of the end of 2018, it was seeing 100% revenue growth, year-on-year, pretty much since it was founded, Davies tells StartupSmart.
And that translated to marketplace revenues of about $15 million per year, he adds.
This latest funding follows another recent raise of $1.8 million, from existing investors. But the co-founders aren’t done yet — they’re hoping to close another $2 million raise within the next couple of months, bringing the total funding this year to $10 million.
Car Next Door is “starting to hit some significant scale”, Davies says.
Over the past few years, the startup has also grown from 10 or 15 people to 35 in Australia and 40 in the Philippines.
“With that comes all the constant growing pains,” he adds.
“We’ve been through a lot of learning and I’m sure we’ve got a lot more to go.”
The founders have been focusing on making sure customer service remains up to scratch, and staying on top of all the systems and processes a large business has to stay on top of, Davies explains.
“It gets harder,” he adds.
“The last 12 months have been the hardest 12 months we’ve had.”
The vast majority of this latest funding round will be used on customer acquisition, and for continuing to develop the product, “which, in a lot of ways, is linked to customer acquisition’,’ Davies says.
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“The better the product, the more people use it, who go on to tell their friends.”
While the team has proven that Australia is a good market for a business like this to grow, “there is still huge amounts of low-hanging fruit”, he adds.
The more cars there are on the platform in any given area, the more attractive it is to borrowers. The more borrowers there are in an area the more attractive it is to car owners.
“We’re a network business,” Davies says.
“Our big focus is … expanding into more geographies in Australia, and getting denser and denser in the geographies that we’re in.”
As part of this, Car Next Door is creating a feature allowing car owners and borrowers to meet up and exchange keys.
Previously, cars had to be fitted with a device allowing borrowers to unlock them through the app. It made for good user experience, but meant cars had to be within an area a team member could reach.
Allowing people to meet and swap keys in person “makes it a lot lighter for an owner to list their car”, and allows people to list their vehicles anywhere in Australia.
“There’s going to be huge disruption”
It may seem unusual for a car manufacturer to invest in a business promoting car-sharing over ownership, and one dedicated to reducing emissions.
But, as far as Davies is concerned, having Hyundai on board could help both parties prepare for a whole new world of transport.
“I don’t want to speak for Hyundai,” he says.
“But, my view is that we are in a world at the moment where everyone owns their own car that they drive themselves.
“Sometime over the next five to 20 years, we’re going to be in a world where there are fleets of shared robo-taxis picking everyone up.”
The sector is going to shift, he suggests.
“There’s going to be huge disruption.”
For manufacturers to stay on top of their game, or in some cases, even to survive, they will have to be on the right side of the shift.
“Everyone knows that’s the way it’s going to go — it’s just hard to know when it’s going to happen or how long it’s going to take,” Davies says.
“They need to be working out how they can be the ones providing the shared, autonomous cars.”
A big part of this is getting across the sharing economy, and understanding what drives people within it.
Keith Noh, deputy general manager of the corporate venture capital team at Hyundai, says the motoring giant is investing “because we want to be part of innovation through collaboration”.
“The market is moving to shared mobility regardless of what Hyundai Motor’s strategy or will is, so it is clear that our best option is to pursue what customers want rather than what we might like in our ideal world.”
Equally, Davies notes that Car Next Door is “not partnering with Hyundai by accident”.
The deal is mutually beneficial.
“Just like Hyundai is looking to learn more about sharing, we’re looking to learn more about autonomy,” Davies explains.
In the long term, we will likely see a convergence of the sharing economy trend and the autonomous vehicle trend, he suggests.
“It’s going to come together in an extremely powerful way.”
In it for the long haul
When Davies and Trumbull founded Car Next Door, they had a vision that by the stage they’re at now, “potentially it would be a bit more relaxed”, Davies says.
“The opposite is true,” he adds.
“You end up with more responsibility, bigger problems to solve, way more complexity in the problems to solve, just because of the number of people.”
Specifically, in the early days, if they didn’t have the right level of customer support they needed, “we could all just jump on the phones” and switch up roles to get it covered.
At scale, that’s not something you can fix quite so easily.
In fact, Davies recalls telling an investor they had their customer service function down to a tee.
“He said ‘you don’t even really know what you’re about to get yourself into’,” the founder recalls.
“In hindsight, he was 100% correct in that.”
Ultimately, Davies says it’s very unlikely that founders will hit the initial forecasts they set themselves.
“You think they’re reasonable, but they’re probably not,” he says.
“Be ready to know that you’re going to be in this for the long haul,” he adds.
“Because of that, it’s really important to be doing something that really means something to you.
“You’re going to be spending a massive chunk of your life on this, and huge amounts of energy … so make sure that you’re doing it for the right reasons.”
For Davies and Trumbull, the mission was to have a significant impact on reducing carbon emissions. And having that as their main driver meant that when things got tough, they had a solid reason to push on.
“There were times when it didn’t really make a huge amount of rational sense to keep going,” Davies says.