Online retailer Vroom has completed a $50 million Series E funding that brings the company’s total funding to $218 million.

The funding round — led by T. Rowe Price Associates — will be used to “drive accelerated growth,” the company said in a news release Tuesday.

Others in the funding round include new investors Altimeter Capital and Foxhaven Asset Management and previous investors L Catterton, General Catalyst Partners and Allen & Company.

“The reaction to both the ease of the car buying and selling experience, as well as the unparalleled quality of refurbished cars, has been overwhelming,” chief executive officer Paul Hennessy said in the news release. “For a company that is only 3 years old, we are just beginning to roll out our product innovations that will soon include 100-percent digital paperwork and auto financing enhancements.

“The continued support of our incredible board led by chairman Bob Mylod, the vote of confidence from our existing investors and the addition of two new world-class investors to our capital base gives us the firepower we need to achieve our goal of becoming the largest pre-owned car retailer in the nation,” he said.

Growth plans

As far as how exactly Vroom plans to use this investment for growth, Hennessy said the strategy can be broken down by a few different areas.

“First and foremost, I think geographic expansion, expanding our reconditioning facilities, our fulfillment locations beyond our Texas locations is probably job one,” he said in a phone interview last week. “We get close to consumers, we can turn the inventory faster, we can get it into customers’ hands faster. By doing that, ultimately, you improve the experience.”

Another item on the list: bringing up Vroom’s inventory level, which can give customers a broader choice, Hennessy said.

Additionally — “maybe even most importantly,” he said — Vroom has plans for offline, online and performance marketing to build both the brand and consumer awareness.

The fourth piece of the investment, he said, is to continue bulking up its workforce.

Platforms gain investment steam

Vroom anticipates generating $1 billion in revenue this year. Its lead investor in its latest round of funding (T. Rowe Price) is a household name.

Carvana, one of similar entities in the online car-sales space, announced a funding round of $160 million in August.

So what makes this type of business model so attractive to investors?

“I can’t speak for them, but what I’m hearing in our discussions and is evident in their interest is when there’s a brand or even a series of brands that are disruptive to an entire business model and actually executing well … when players like that come along, disrupting a static or older model, I think everyone sees upside because this could actually be the new way that people do business and we’re seeing that,” Hennessy said.

Consider the travel business, which is where Hennessy came from before joining Vroom earlier this year. In the late 1990s, travel arrangements were typically conducted through travel agents, he said. That model shifted in the 2000s with the emergence of online providers, like Orbitz, Expedia, Priceline and so forth.

“I think a lot of people see parallels between that business and what we’re embarking on here,” he said. “If you can serve up the right content, if you can serve up the right cars at the right price with a great experience, why wouldn’t you buy in this kind of platform? And again, people are.”

Of course, what Hennessy has found to be a big difference in the two spaces is the fact that the car market has physical inventory and the various logistics involved in moving that to the buyer.

“And the risk of experience that’s maybe in people’s minds, in travel, they’ve overcome that,” he said.

The customer knows exactly what he or she is going to get (more or less) when they book a hotel room online. “With the automobile, I think because of the history of used-car sales, there’s a question mark about what they may or may not experience. And I think people are pleasantly surprised when they go to Vroom and then just get an outstanding looking and outstanding quality car delivered when they want and where they want.

“So I think that’s something that we’re still working on as people move through the trust cycle, if you will, and I think as that trust builds with brands like ours and as we deliver excellence in delivery to our customers, I think that trust will accelerate, and then it will look much more like an online travel business.”

Online car-buying to become second-nature?

To take the travel parallel further, the use of online platforms to book travel is arguably second nature. Will that happen in car sales? Will consumers automatically think online platforms (i.e. Vroom, Carvana, Beepi, Shift, etc.) first?

“I think the question is about ‘when’ rather than ‘if,’” Hennessy said. “If you had asked me 20 years ago, would people be buying shoes on the Internet and not trying them on, you’d have to scratch your head a little bit.”

However, Zappos, Amazon and others are offering the chance for consumers to do exactly that, he said. Or, consider a more expensive retail item, jewelry, and you’re seeing much of the same thing.

“People get accustomed to a particular model, and when a new model comes along, there’s an adoption curve and then an acceleration of that adoption curve. And I expect the same thing here in auto,” he said. “And, by the way, that’s not me selling futures.

“We ship cars all around the country, every single day, and customers love it,” Hennessy said.

As to whether it will become second-nature, “Someday, sure. They’re already doing a massive amount of research online. So they’re really turning to ecommerce to get data. If we weren’t already there, I wouldn’t be as bullish as I am with the model. But since people are already shopping (online) and shopping multiple sites …and comparing prices, comparing features, comparing cars and colors, the very next step to press a button and have one delivered, it doesn’t seem like futures to me.”

Financing plans

Down the road, as Hennessy notes in the news release, Vroom’s plans include bringing “100-percent digital paperwork and auto financing enhancements.”

Auto Remarketing asked Hennessy what those will entail.

“We’ve got some innovations underway that take a heavily offline form-filled process and put it online and streamline it,” he said. “So, without getting into all of the particulars, imagine an environment where instead of having to write the same piece of information on four different forms, by collecting that in a mobile or web environment, we don’t need to have the customer fill out the same form several times.

“Because we connect to super-banks — I’ll call it the nation’s largest banks — we can do things like real-time decisioning, so the customers don’t have to wait for results,” Hennessy said. “And then we can actually then, ultimately, maybe even help them decide, based on what they can afford, which car might be best for them.  So, just taking any of the friction out of the loan process and streamlining that is obviously great for customers and great for Vroom.”