MotorExchange went live yesterday, and today the company announced an investment from VC Firm Canaan Partners. MotorExchange MD Vinay Sanghi told MediaNama today that after going live yesterday, the company tested 4-5 sellers and sold a few cars. MotorExchange has 27 employees. Both Sanghi and Canaan India MD Alok Mittal declined to comment on the amount of investment, and the stake picked up. Excerpts from our discussion with them, particularly on competition from eBay India, and how MotorExchange intends to differentiate its offering:
What are the pain points that your business is looking to address?
Vinay Sanghi: Today in the marketplace, there are two kinds of members for us – buyers and sellers. The sellers we are looking to address are those who are looking to sell in bulk: banks and finance companies who dispose Rs. 200-250 Cr of repossessed inventory every month. There is no mechanism for these sellers to sell at prices close to market prices. We’re looking to build a platform to give them access to a large number of buyers across the Internet, and a transparent marketplace. Buyers on our platform are principally automobile dealers. One of the big pain points is access to inventory for dealers.
How do you deal with dealers already having access to large number of cars through their own network?
Vinay Sanghi: Five years ago, the used car market must have been 400-500,000 cars, it’s around 1.5 million today, and 3-5 years down the line it will be 3-3.5 million cars. When the market reaches scale, then these informal channels don’t work. The platform will give him access to 200-500,000 dealers, instead of an informal network of 2-3 dealers. He needs a wider choice of brokers, and do it transparently. MotorExchange provides that structure.
How do you deal with duplication of car inventory online?
Vinay Sanghi: This is not an auto portal, it’s a transaction site. Vehicles are auctioned out to buyers. Buyers and sellers are members, and they pay a fees to become members. We do a complete KYC of the person. A seller signs a legal agreement and a form. The second check is that we want buyers want to be completely educated on the vehicle that they’re bidding on, with a certification. So people bidding know exactly what they’re getting, so the chance of duplication is zero.
We’re not going B2C at this point in time.
What is the money raised going to be used for?
Vinay Sanghi: The money will be used for partly building the technology; we’ve already launched yesterday, but there will be continuous work required for the next 2-3-4 years on enhancing the functionality. It will go into our operations, acquiring buyers and sellers. We’ve got a buyer team and a seller team, and a total of 27 people at present. We have outsourced our technology; the way we’ve spoken with our vendor is that we will transfer it internally over a period of time.
What are your targets in terms of registrations, revenues and profits?
Vinay Sanghi: We’re looking to tie up with large numbers, but we’re not ready to talk about targets just yet.
Alok, since the company is pre-revenue, how did you value them?
Alok Mittal: this company has a lot of value even before they get into revenue. There’s a stellar team behind it. Vinay has been in this business for a long time, having run the largest used car business in India (Mahindra First Choice). Revenues will follow. We’re not announcing the valuation or the investment amount, but the stakes are line with what you’ve seen us do earlier. It’s a Series A investment.
How long do you think this round of investment will last you? How much of the money will be invested in CarTradeIndia, and how much in MotorExchange?
Vinay Sanghi: it’s too early to say how long it will last us. CarTradeIndia has cashflow and is profitable, so our focus will be on building out the MotorExchange business.
How are you going to compete with eBay Motors India?
Vinay Sanghi: Part of eBay Motors India is B2B. It is primarily focused on Banking inventory disposal system. They’re not really in other segments, whether dealer inventory or corporate inventory. The other thing is that this is the only business we do that MotorExchange. eBay has other businesses. One of the big differentiators for us will be the certification product: the ability to certify vehicles and get buys to make educated bids is something which will be unique to MotorExchange. Certification is not trivial and essential. This business doesn’t scale easily if buyers aren’t making educated bids. Thats the way it works across the world. For eBay to build a certification product is not easy to do.
Alok Mittal: Having said that, other people will try what they want to try. eBay Motors has been a significant part of eBay business for six years now, and they don’t have certification so far. That’s the difference between having a focused business in one space and having a platform – eBay is a great platform, but the approach they have taken globally is not to go into specific verticals and offer custom offerings. I’m sure they can do it as well.