AutoNation is the lead investor in an $146 million funding round for online car retailer Vroom, which officially announced the Series G round Tuesday.
T. Rowe Price, L Catterton, General Catalyst Partners, Fraser McCombs Capital and individual investors were also among those contributing to the round, Vroom said in Tuesday’s announcement.
The funds are slated for bolstering Vroom’s technologies and processes, ramping up customer acquisition campaigns and continuing to “build a world-class management team,” Vroom said.
“We are incredibly encouraged by this recent round of funding as investors, including those in the traditional auto retail space, continue to recognize that the Vroom model is the way of the future,” Vroom chief executive officer Paul Hennessy said in a news release. “We’ve proven we can deliver an excellent product and service to consumers across the country and we are now positioned for significant growth.”
Added T. Rowe Price portfolio manager Henry Ellenbogen: “Vroom continues to demonstrate progress towards truly disrupting this industry at scale.
“The fact that the largest auto retailer in the country is now backing Vroom speaks to the quality of the execution of the company’s management team and what we believe is the company’s ability to become much larger over time,” he said.
'Natural alignment' between Vroom, AutoNation
AutoNation had announced its piece of the investment in late October, saying it obtained roughly a 7-percent ownership stake in Vroom after a $50 million strategic investment in the online car retailer.
“We are excited about our investment in Vroom and the potential collaboration between our companies,” AutoNation chairman, chief executive and president Mike Jackson said in an Oct. 30 news release.
“With this strategic investment, AutoNation remains uniquely positioned to lead our industry towards the future of the consumer buying experience,” he said.
In a late November phone interview, Hennessy said Vroom wasn’t necessarily seeking out a large public dealer retailer to invest, saying that it was more so a case of there being “a natural alignment between the two organizations,” referring to AutoNation and Vroom.
“We’ve got great respect for what I call the traditional dealership model, and I think this investment underscores their support for what I would call an evolving ecommerce model,” he said. “And so, I think it validated our model and I think we were certainly excited about having someone as experienced in the automotive space (as) AutoNation make that investment.”
Asked if the investment included a partnership to where AutoNation would use the Vroom model, Hennessy said: “My view would be, when they’re logical areas that we can scale the Vroom model leveraging existing infrastructure of the AutoNation model, that’s something that we would probably explore together, but it’s not a contingency of the deal. It’s just something that I think makes a lot of sense.”
Upping the ante on marketing
Vroom recently worked with the Pentagram design firm to revamp its branding. It also brought in the Anomaly ad agency to create an integrated ad campaign that it has deployed in a few markets.
The Series G funding will help ramp up Vroom’s marketing.
“Now that we’ve got the business in really good shape — and that’s what our investors saw as well — now we’re ready to scale the business. And we’ll scale it by inviting more customers into the franchise,” Hennessy said.
“And that invitation is, of course, through a broad base set of marketing. We’ve been advertising nationally for a very long time, and this is really our first major inroad into TV and digital media. So, we’re really experimenting across a variety of content, a variety of distribution channels and then ultimately in a variety of different geographic locations.”
Vroom also recently brought on Dave Jones as its chief financial officer. Jones was with Penske Automotive Group for more than a decade. Other recent hires include chief supply chain officer Dennis Looney, whose background time with Office Depot and Home Depot, as well as chief technology officer Mitch Berg.
"Although Vroom has been bringing the car buying and selling experience online for years, the company is now ready to make a meaningful run at this $750 billion plus category,” Jones, the CFO, said in a news release. “I’m excited to join Vroom at a time when we have significant investment and talent on board and are ready to bring the business to the next level.”