Vroom raises $54 million to make buying a used car less horrible

Investors continue pouring cash into online car buying as companies keep trying to bridge the lack of trust between used-car buyers and sellers.

Max Taves Staff Reporter
Max writes about venture capitalism and startups while seeking out the new new thing to come out of Silicon Valley. He joined CNET News from The Wall Street Journal, where he contributed stories on commercial real estate, architecture, big data and more. He's also written for LA Weekly, Slate and American Lawyer Media's The Recorder, where he covered legal battles in Silicon Valley. Max holds degrees from Georgetown University and Columbia University's Graduate School of Journalism.
Max Taves
3 min read

After launching less than two years ago, Vroom predicts that its used-cars sales will reach $300 million this year. Vroom

Can $54 million make the used-car lot obsolete? Vroom is banking on it -- or at least trying to make buying a car a little less horrible.

The startup announced Monday that it has raised eight figures from investors, including former Denver Broncos quarterback-turned-car dealer John Elway, to expand its ability to buy, fix up, resell and then deliver used cars faster than competitors to consumers throughout the United States.

"People have compared the trepidation of car buying and the slough of negotiating to having a root canal," said Vroom CEO Allon Bloch. "The used-car salesman reputation is almost deserved."

Vroom said sales are booming, even if it won't disclose how many cars it has sold. However, the company reports its revenue doubled between November and June, placing the company on track toward $300 million in sales by the end of this year. Vroom projects -- or hopes -- that next year it will ring up $1 billion in revenue.

Vroom isn't the only tech company trying to shake up the buying and selling of used cars.

Monday's large investment in Vroom, which brings its total raised since it launched in 2013 to $108 million, underscores Silicon Valley's belief that there's room for one more place online to buy used cars. After launching in 2004, TrueCar, a site connecting car buyers with sellers, went public last year and was valued by the market at $639 million. Meanwhile, Shift raised $23 million last year from investors, while Beepi, another used car-focused startup, announced in May that it was raising $300 million, after collecting $60 million just six months earlier.

Car sellers, including online companies, have yet to bridge the lack of trust between used-car buyers and sellers, said Vroom's CEO, who argues that such a dynamic gives his company an opening in the massive marketplace. Americans sold 9.8 million used cars to each other in the first three months of this year, notes auto information site Edmunds.com.

Besides Elway, Vroom's other investors today include private equity firm Catterton, venture capital firm General Catalyst Partners and investment management firm T. Rowe Price Associates.

Vroom will buy almost anyone's car. But to help close the trust gap, Vroom says it inspects and reconditions all vehicles that it buys before reselling them. Vroom also gives customers seven days or 250 miles to drive their new-to-them cars and still return them for a full refund.

Unlike Vroom, many online car marketplaces such as AutoTrader.com and Cars.com don't sell cars but rather connect owners to sellers. Other competitors that sell cars such as Shift and Beepi all tout their extensive inspections of their inventories but do not refurbish used vehicles. Carmax.com, another used car marketplace, inspects and reconditions vehicles.

Vroom only has one plant to recondition and store its inventory -- a 22-acre lot outside of Dallas. To grow, Vroom wants to speed up deliveries to within 24 to 48 hours, so it will begin operating its own fleet of delivery trucks and will open plants near three or four American cities.

Vroom's CEO won't say where those will be, but he did offer a preview of what to expect when they're ready.

"Imagine a sea of cars," he said.

Update, July 27 at 3:44 p.m. PT: Corrects Carmax.com policy to note that the company both inspects and reconditions its inventory of used cars.