Carro only became a unicorn in June, but cofounder Aaron Tan is already aiming for an 11-figure valuation—if he can fend off the competition.
Aaron Tan, cofounder and CEO of Singapore-based Carro, is in overdrive. The online platform for buying and selling used cars in Southeast Asia joined the unicorn startup club in June when it completed a $360 million funding round that boosted its valuation to $1 billion. Speaking by phone, Tan says Carro is just getting started: “The plan is to look to become a decacorn in the next few years, as soon as possible.”
But before he can hit that 11-figure milestone, he’ll have to contend with some tough competition. Probably the biggest threat is Carsome, the Malaysia-based used car platform that goes head to head with Carro in the same markets. It announced in July that it will partner with entrepreneur Patrick Grove’s Catcha Group to acquire Australia-listed iCar Asia in a $200 million share-swap deal (subject to shareholder approval). The combined company would have $1 billion in revenue and make Carsome Malaysia’s first tech unicorn and Southeast Asia’s most valuable online car marketplace, the company says. It’s also publicly mulled plans for a listing, possibly within the next 12 months.
Meanwhile, Carousell, a Singapore-based online classified marketplace, said earlier this year that it would “aggressively” expand its auto trading business with a consumer-to-business bidding platform and financial offerings such as auto loans.
Carro says it differentiates itself from the pack by adding AI to almost every stage of buying and selling cars, from using software to detect defects during inspection checks of cars sold through its platform to a bot for customer service. The six-year-old company has also been the most ambitious in adding fintech services such as car loans and insurance, though its plans to enter Singapore’s digital banking market were checked last year. A group led by gaming hardware maker Razer—which Carro joined—failed to win one of the licenses on offer.
For the moment Carro is building a strong base in Southeast Asia’s $55 billion used car market with more than 2 million active users, hitting a gross merchandise value of $1 billion in the year ended in March, the company says. It also says about 70% of the transactions are taking place outside of Singapore where the government has a zero-car-growth policy—a testament to the company’s staying power. Tan, 37, plans to use the recently raised funds to add the Philippines and Vietnam to Carro’s existing presence in Indonesia, Malaysia, Singapore and Thailand.
Carro is also no slouch in its financials. Revenue grew more than twofold year-on-year to $300 million. Tan boasts that Carro has a positive Ebitda for the second consecutive year (but doesn’t disclose exact figures). Other online auto marketplaces “have to try and figure out how to make money. Whereas we already figured out how to make money,” says Tan. “We’re just killing this.”
Through its in-house financing arm Genie Financial Services, Carro has underwritten over $350 million in car loans. “We’ve raised more than $150 million in debt financing facilities, which has been a huge achievement considering that general investments slowed down during the pandemic and banks are less likely to provide loans to startups,” he says. Carro has been “on the front foot” in the online used car market by solving customers’ problems and providing financial services, says Shane Chesson, cofounder of Openspace Ventures. The Singapore-based VC firm invested in Indonesia’s e-classified marketplace Jualo.com, which was acquired by Carro in 2019.
The pandemic has helped Carro, Tan says. Demand for used cars has grown as the pandemic and the global chip shortage has curtailed auto production. The popularity of used cars has been increasing, according to a report published last year by Singapore-based researcher Momentum Works, as people around the region have turned to more-affordable options. The relatively low car-ownership rate in Southeast Asia means there can be relatively high growth of secondhand cars off a low base.
“The billion-dollar mark is just the start.”
Tan says he’s been drawn to computers since his teens. He taught himself how to program and launched two startups, selling both so he could focus on his studies at Singapore Management University. He graduated summa cum laude with a bachelor’s in science, followed by a government scholarship to study in the U.S. It was during his graduate-school days that he developed a passion for trading cars, finding secondhand cars to sell to well-heeled buyers as a profitable sideline. The trick was understanding the value of a vehicle, knowing where to find the buyers and when to sell, Tan says.
After finishing a master’s in computer science from Carnegie Mellon University in 2010, Tan moved back to Singapore to work for Innov8, the investment arm of Singapore’s telecom giant Singtel. The next five years helped him to make connections within the VC community and understand investors’ priorities, he says. He headed the fund’s investments in Southeast Asia before moving to San Francisco with the firm, returning to Singapore in 2015.
The genesis of Carro can be traced back to Tan helping a former colleague find a used car online and finding little transparency in quality or pricing. In the U.S., on the other hand, used car dealer Carvana, launched in 2012 by billionaire Ernest Garcia III, had found success operating almost entirely online, offering its customers photo-heavy profiles of pre-inspected cars with history reports a click away. Seeing an opportunity, Tan founded Carro in 2015 with Carnegie Mellon classmates Aditya Lesmana and Kelvin Chng.
Carro’s success highlights Singapore’s efforts to transform itself into a regional startup hub. The city-state remained the world’s top technology innovation hub after Silicon Valley for a second year in a row in 2021, according to a global ranking by KPMG. “Singapore has a vibrant startup ecosystem which has enabled us to benefit from government support,” Tan says. Carro has pulled in more than $400 million from the likes of the Singapore government’s investment arm EDBI, as well as B Capital, Insignia Ventures Partners, Mitsubishi and SoftBank, among others.
But Tan, who added an executive M.B.A. from Tsinghua University to his belt last year, is thinking even bigger. He sees the company becoming the Amazon of cars and says Carro is in the process of closing more capital in the next month or two. He’d like to take Carro public in the U.S. although he doesn’t see taking that step for least another 18 months. “The billion-dollar mark is just the start,” he says.