Second-hand car marketplace Motorway has raised $190m in new funding at a unicorn valuation as the used car market continues to boom.
The London-based company’s latest round was led by Index Ventures and Iconiq, and includes further investments from existing backers Latitude, Unbound and BMW i Ventures.
The company received early investment from Shakil Khan, cofounder of Prima Materia and early investor in Spotify, and secured a £48m round in June.
Khan has been backing the Motorway team since 2004 when he handed them a credit card with a £50,000 limit to support a previous venture.
Motorway, founded in 2017, operates a marketplace where car owners can upload their vehicles and car dealers can bid at a daily auction.
Semiconductor shortages and transport concerns
A crunch in the supply of semiconductors over the past year sparked a shortage in new cars, pushing the value of used cars up suddenly. The average asking price for used cars has jumped 15.2% year-on-year.
It’s also thought that the increase could be down to people’s worries over using public transport during the pandemic.
Folks are not super keen on just buying new all the time, but rather to sweat the asset and get more value out of it, from an environmental standpoint
Motorway says it saw a 300% increase in third-quarter sales, rising to $411m from $105m last year.
“The used car market has been very buoyant for the last three or four years,” Tom Leathes, CEO of Motorway, told Sifted in June. Leathes said activity had ramped up in the last 12 months owing to the pandemic.
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Danny Rimer, investor at Index, said the increased demand was also down to consumers’ sustainability concerns. “Folks are not super keen on just buying new all the time, but rather to sweat the asset and get more value out of it, from an environmental standpoint,” he said.
An industry on the up
Motorway isn’t the only European startup to benefit from the growing demand for used cars.
SoftBank-backed Auto1, a German used car dealer, floated earlier this year raising $2.2bn in an IPO. British startup Cazoo, a second-hand car retailer which was at one point the UK’s fastest growing startup, raised $900m from a SPAC merger earlier this year.
“The used car market is the single largest retail market in the UK — bigger than food in value, at over £50bn per year,” Cazoo CEO Alex Chesterman told Sifted in June.
Cazoo’s business model is different to Motorway’s. Motorway enables consumers to sell their own cars, using tools to help them photograph and upload their vehicles to the site, where dealers then bid on them. Cazoo, on the other hand, sources its cars from auctions and dealerships.