Vehicle subscription startup Carbar has raised $16.8 million in funding, with Insurance Australia Group (IAG) acquiring a majority stake of the business.
Founded in 2016, Carbar was initially a vehicle marketplace, but expanded to include a try-before-you-buy model, and then launched its subscription model Carbar+, allowing drivers to hire motors on a month-by-month basis.
The startup raised $5.75 million in equity and debt funding in August last year. That funding was pegged for further testing in the subscription space, Carbar co-founder and chief Desmond Hang tells StartupSmart.
Since then, the team has grown its subscriber numbers and expanded into Sydney, he adds, although he’s tight-lipped about the startup’s revenue growth.
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Insurance giant IAG has now acquired a majority stake in the business, participating in this latest round alongside other investors, who have not been named.
The funding will be used to further expand Carbar’s footprint in Australia. The startup is gearing up for national expansion over the course of the next year or two, Hang says.
However, it is also looking at a “strategic pivot” that will see an additional focus on the B2B space, “providing subscription services to employees, or for trade vehicles”, Hang says.
“That’s a key focus for us for growth.”
It may have big plans, but expanding beyond Aussie shores is “not in the near horizon” for Carbar.
The founders are focusing on building a strong foundation here, first.
“At least in our home country, we’re the market leader,” Hang explains.
“With IAG behind us, that’s a very credible brand that we can leverage off.”
In this funding round, Carbar was looking for synergy with a strategic investor, Hang says. And IAG is “one of the best strategic investors we could have”.
The group isn’t a competitor, involved in trading vehicles or in the vehicle subscription space, but it does sit “adjacent to our industry”, he explains.
This could potentially allow the startup to bundle up insurance with its subscription program, Hang adds, “which is very good in terms of a complementary service”.
Hang sees vehicle subscriptions as “the next stage of a shaft in mobility”, he says, and one that will play a vital role in the automotive industry going forward.
“That’s where we saw the synergies with a strategic investor like IAG,” the co-founder says.
Carbar’s business model of offering retail and wholesale car sales as well as the subscription option was in line with IAG’s strategy, Hang explains.
“They understand the mobility space, and how people are consuming mobility options,” he adds.
Equally, the co-founder suggests IAG was won over by Carbar’s ability to bring digital capability to the “pretty traditional” automotive industry.
But, he also says the startup stands out because of its focus on customer service, and that was part of what attracted the main investor.
“Our focus on delighting the customers and providing that full end-to-end concierge service really got them across the line.”
“Someone will come knocking”
While Hang was looking to secure a strategic investor, he advises other founders not to focus on that outcome as a particular goal.
The startup journey is more about “being resilient and being able to trial and test your startup”, he says.
“And at the same time, really understanding the space you’re in and understanding and addressing the pain points of consumers.”
If you create a good business that is getting some traction among customers, you may not have to seek out a strategic investor. They’re more likely to find you.
“If you’re solving a pain point for someone and you’re creating hurt for your competitors, someone will come knocking,” Hang says.