Welcome to another edition of The Friday 5 with Steve Greenfield, Founder and CEO of Automotive Ventures, an auto technology advisory firm that helps entrepreneurs raise money and maximize the value of their companies.
We’ve got a lot of deals to announce this week, so let’s dive right in.
Let’s start off with one of the hottest segments in automotive technology right now, online automotive retailers, who are benefiting from both a Covid accelerated consumer adoption of online car buying, and Carvana’s astronomical market capitalization, currently at about $45 billion dollars.
CarMax & Edmunds
First off, big news in the space coming late this week, as CarMax will acquire a remaining stake in Edmunds, the automotive research and vehicle-listings company. With CarMax’s previously announced $50 million minority stake, the total enterprise value of the transaction is $404 million.
The transaction is expected to close in June. Edmunds will continue to operate independently from CarMax after the acquisition closes.
CarMax, the largest used-vehicle retailer in the U.S., said the full acquisition will let the two companies speed up their respective efforts toward delivering an enhanced digital experience to customers, with CarMax leveraging Edmunds’ content and technology, and Edmunds benefiting from CarMax’s national scale and infrastructure.
I’ve mentioned many times on this show that we’re seeing a blurring of lines between retail and wholesale automotive. Now we’re seeing a blurring of lines between car retailers and third-party shopping sites.
CarMax said in January that it was investing $50 million to buy a minority stake in Edmunds in a move meant to bolster its omnichannel retail strategy.
The two companies have since jointly developed an online instant offer for sellers of used autos, among other initiatives, the companies said.
Edmunds, a private company, had unaudited revenue of $140 million last year. CarMax said it expects Edmunds’ net income to be immaterial to the company’s earnings in fiscal 2022, its current financial year, with potential for “significant” shareholder value over the long term.
Cazoo
Continuing the theme of online retailers, Cazoo, the Carvana of the UK, has announced that it will list on the NYSE after going public through SPAC Ajax I in a deal valued at $7 billion dollars.
The combination with Ajax I will raise about $1.6 billion in proceeds for the company, including $805 million in a cash trust from the SPAC and another $800 million from Ajax’s sponsors.
Remember that Cazoo only launch a year and half ago, and has 6k vehicles in inventory. Crazy times.
Clutch
And finally, in online retailing news, the Carvana of Canada, Clutch, has raised $60 million dollars in financing to continue with the expansion of its online car retailer platform across Canada.
The funding is comprised of $20 million in equity financing led by Canaan Partners, an early backer of Instacart and peer-to-peer carsharing Turo, and $40 million in debt from Upper90. Upper90 also participated in the equity portion of the round alongside Stephen Chau, the former head of product at Uber Eats, and previous investors BrandProject LP, Real Ventures, FJ Labs, and Global Founders Capital.
The announcement of the Series A financing comes less than one year after Clutch raised $7 million CAD in a seed round led by Real Ventures.
Plus.ai
In SPAC-related news, U.S. autonomous truck startup Plus said on Wednesday it had raised an extra $220 million from investors in an extension of a $200 million funding round in February, as the global auto industry looks to a driverless future.
Plus is also in advanced talks with a few special purpose acquisition companies (or SPACs) over a potential merger — and an announcement is expected within the next few weeks.
Baraja
Lidar companies across the planet are going public via SPAC, but Baraja isn’t in a hurry to go public. The Australian lidar maker has raised a $31 million dollar B round to continue the deployment and development of its “unique and ingenious” imaging system, led by Blackbird Ventures with participation from Hitachi Construction Machinery Australia, HESTA and Main Sequence Ventures.
Baraja’s lidar uses what the company calls Spectrum-Scan, letting physics do the hard work of directing the light. By passing its laser through a prism, different wavelengths of light go in different directions — and when it comes back, it takes the same path.
ChargerHelp!
If an EV charging station doesn’t send out an error or a driver doesn’t report it, network providers might never know there’s even a problem. Kameale Terry, who co-founded ChargerHelp!, an on-demand repair app for electric vehicle charging stations, has seen these issues firsthand.
Demand for ChargerHelp’s service has attracted customers and investors. The company has raised $2.75 million dollars from investors Trucks Venture Capital, Kapor Capital, JFF Freight, Energy Impact Partners and The Fund. This round values the startup, which was founded in January 2020, at $11 million post-money.
Baton
In the trucking industry, “dwell and detention” times are the enemies of efficiency, profits and drivers. More than two billion hours are lost each year due to dwelling, the time spent at a distribution yard or facility, and detention, the gap between when unloading or loading is supposed to begin and when it actually does.
Baton, a San Francisco-based startup developed out of 8VC’s incubator program, has developed a business that it believes will solve these long-standing problems for truckers.
Baton has raised $10.5 million dollars in their Series A round, and now has a post-money valuation of $50 million dollars.
The company’s name gives a hint at its business model. Baton is developing a network of drop zones, 24-hour facilities it has sub-leased from partners, that are located outside of busy urban centers.
Long-haul truckers can pull up and leave their loaded trailers at these drop zones. Baton then partners with local fleets of Class 8 trucks that will arrive at the drop site, grab the load and take the freight to its final destination.
The startup developed a software platform that coordinates vehicles, drop-zones, warehouses and local drivers through a single API. Customers also receive live automated updates via API as loads are delivered.
AsTech
Another week, and another acquisition by the tag team of Kinderhook Partners and their portfolio company AsTech. These guys are on fire.
This week, AsTech announced the acquisition of Red (EU) Ltd. and RED AUTOCENTRES LTD.
Financial terms of the transaction were not disclosed.
Red (EU) Limited is a leading distributor of aftermarket electronic devices designed to run diagnostic tests and calibration services on automotive electrical systems, and more specifically advanced driver-assistance systems (or “ADAS”).
Red Autocentres is a leading provider of automotive diagnostics, calibration and programming services for the collision and mechanical markets.
The combined companies will operate as Red EU and represent the eleventh add-on acquisition for asTech and Kinderhook’s 105th automotive-related transaction.
Red provides a complete suite of solutions for the service, maintenance, and repair, collision, and automotive insurance industries through diagnostic scan tools and automotive electrical system services. Services include local, car-side, and remote diagnostics along with sensor calibration, programming, and vehicle health support.
Companies to Watch
Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my monthly industry intel report, I showcase a few companies each month, and we take the opportunity here on the Friday Five to share some of those companies each week with you.
Today, our companies to watch are CarPay and InstallerNet.
CarPay
Our first company to watch is CarPay, which was founded in 2016 in Edmond, Oklahoma.
CarPay is a Loan Management Software for Buy Here Pay Here dealers. Carpay helps BHPH dealers manage their portfolio by giving their borrowers multiple options to pay, automating all reminders to their borrowers, and giving the dealers a suite of tools to keep their loans performing.
CarPay recently closed their Series A Round of funding, bringing the total raised to $9.9M. The round was led by AutoTech Ventures, with additional participation from Social Leverage, Amplify.LA, Pipeline Capital and FJ Labs.
The BHPH segment makes up around $100 billion dollars of America’s outstanding auto debt. Where Carpay comes into this asset class is in two ways:
First, Carpay’s Loan Management Software helps BHPH dealers manage their loan portfolios and keep delinquencies under control. It helps get late customers caught up and prevent others from falling behind, by making it easier for the borrowers to pay for and manage their auto loans themselves.
Second, Carpay Credit will then give these dealers a line of credit secured by their loan portfolio, so that they can stock their lot full of cars and keep issuing more credit to more of these consumers.
InstallerNet
Our second company to watch is InstallerNet, founded in 2006 by CEO Tony Frangiosa, and located in North Andover, MA.
InstallerNet is a leading technology and services company that provides fully managed installation ecosystem solutions serving the Automotive, Residential and Business verticals for over fifteen years through its proprietary WorkWize Platform.
InstallerNet’s vertically integrated approach allows them to extend beyond the core installation services and offer market analysis, field and lab testing, product logistics and API integration enabling their clients to effectively deploy their products and services nationwide.
InstallerNet has a nationwide network of trained and certified professionals to the end-user customers. Their automotive tech solutions support both DIY and DIFM consumers through their Fit Guides, Tech Guides and OBD Locators.
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So that’s your weekly Friday 5, a quick wrap-up of the big deals in automotive technology over the past week.
It’s an exciting time to be in the automotive space, with a ton of deals going on. Make sure you stay tuned in each week to stay up to date on the auto industry’s technology M&A activity. I’ll keep my fingers on the pulse of deals being done, so I can share updates with you.
If you’re an early-stage automotive technology entrepreneur looking to raise money, or an entrepreneur who wants to chat about the best timing and process to sell your company to achieve the best outcome, I’d love to discuss it with you at steve@automotive.ventures.
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