Online used-car unicorns Cinch and Cazoo gear up for funding boost
Two British online used-car startups are going head-to-head in a £10bn race to raise new capital as they look to cash in on a rapidly-growing sector.
Cinch, which is part of the private equity-backed Constellation Automotive Group, is in talks to raise roughly £500m of fresh funding from investors, Sky News reported.
The discussions could value the marketplace, which launched just five months ago, at around £5bn.
It comes as British tech entrepreneur Alex Chesterman closes in on a deal to take rival Cazoo public through a so-called Spac deal just 18 months after he started the company.
Cazoo’s tie-up with New York-listed blank-cheque firm Ajax I, which is likely to be announced next week, could value it at roughly $7bn (£5bn), according to the report.
The company is also expected to raise around $800m from a so-called Pipe [private investments in public equity] deal, where institutions buy stock directly from a company below market value.
The dual funding efforts mark the rapid growth of the online market, which is worth $700bn in Europe but currently accounts for just one per cent of all used-car sales.
Cinch forms part of Constellation, which was taken private in 2019 by private equity firm TDR Capital. It is the UK’s largest online car marketplace by supply of cars, and has posted sales growth of 200 per cent this year.
Cazoo argues it has a market-leading position in the UK, with more than 20,000 vehicles sold to date.
Both brands have pursued an aggressive marketing policy, clinching sponsorship deals with major sports teams.
Cazoo sponsors both Everton and Aston Villa football teams, as well as the new Hundred cricket format.
Cinch has sleeve sponsorship deals with Tottenham Hotspur and the England cricket team, and has also struck a deal to sponsor the Queen’s Club Championship in tennis.
Blank-cheque frenzy
Cazoo’s merger with Ajax I, which has not yet been finalised, would be one of the biggest Spac deals so far for a British business.
Chesterman, who founded LoveFilm and Zoopla, is being advised on the deal by Credit Suisse, Goldman Sachs and Numis, according to the report.
Any transaction valuing the company at £5bn would give Chesterman’s personal stake a value of around £1.5bn.
Daily Mail and General Trust, which publishes the Mail newspaper titles, would also hold a 20 per cent stake worth £1bn.
The Ajax I board is packed with major Wall Street and Silicon Valley names, including Instagram co-founder Kevin Systrom, Anne Wojcicki, boss of genetic testing group 23andme, and Square founder Jim McKelvey.
Cinch, meanwhile, has already raised significant sums of money, including a £300m round from unnamed blue-chip investors last year.
Sources told Sky News the funding could give parent group Constellation, which also owns Webuyanycar.com, a total valuation of £10bn.
Citi and Jefferies are advising Cinch on the funding round, which is set to conclude in the coming weeks.
A TDR Capital spokesperson declined to comment. Cazoo declined to comment.