Cazoo’s growth has been spectacular, even for a technology platform. British used car startup achieved unicorn status just months after launch in 2019.
Strong demand for used vehicles has helped create a 7 billion dollars valuation when Cazoo was listed via a SPAC on the New York Stock Exchange in 2021, making it one of the most valuable technology startups in Europe.
It was a milestone for the British car industry – and, indeed, for the rest of Europe, to which it sold cars – even though the company’s listing was on the other side of the Atlantic.
But Cazoo’s dream run didn’t last very long. In a complete reversal of fortune, the company lost well over 99% of its value (its shares are currently worth about $35 million) amid growing financial difficulties and is now gambling with bankruptcy.
Earlier this week, Cazoo said he was considering administration as an option, according to a SEC Filing. It sold its remaining stock of cars in March and is now considering changing its business model to continue operating.
This raises the question of whether Cazoo grew up too quickly or was simply one of many unibody left behind in the wake of the post-pandemic crisis.
Cazoo’s acceleration to the top
The British startup was founded by veteran entrepreneur Alex Chesterman, who also launched residential real estate platform Zoopla and video streaming service LoveFilm. Cazoo successfully raised funding from venture capital firms like General Catalyst and DMG Ventures to help it target a market with low digital penetration, Chesterman said at the time.
The startup aims to make car shopping as easy and accessible as online shopping for anything else. It delivered used cars and offered a 90-day warranty, which worked well for the company during the pandemic as people were confined to their homes.
Investors saw the success of Carvanathe American competitor of Cazoo, and wanted to enter the industry.
It was launched in the UK and, with the funds raised, financed its expansion across Europe.
Cazoo’s expansion also happened when the SPAC market was booming. But while its listing in 2021 was expected to further accelerate the growth of the British startup, things quickly started to go wrong.
Until 2021, the appetite for used cars boosted Cazoo’s business: in just the first half of that year, its vehicle sales soared by 400% compared to 2020. But the following year, the value of stocks (especially in technology) started collapsewhile the American stock markets are experiencing their biggest loss ever recorded in 2022 following the financial crisis of 2008.
Cazoo shares went into freefall. The auto retailer layoffs announced and plans to scale back its expansion this year. Eventually, much-needed funding began to dry up. Rising interest rates and inflation have only increased Even worse.
While Cazoo’s 2022 sales of £1.3 billion ($1.6 billion) rose 90% from the previous year, its losses rose 30% to 704 million of pounds sterling ($880 million).
Cazoo reported in December last year that it was short of cash and would need more capital to fuel its operations in the latter country. half of 2024. It also carried out a debt restructuring and appointed a new board of directors to review its options.
Despite the rollercoaster ride that Cazoo has endured, the British retailer is far from alone. UK hit fewer unicorns recently, in part due to slowing financing activity and falling valuations amid economic uncertainty. And a lot once unicorns in the United States, there are no more.
Cazoo may have come a long way, but he still has time to turn things around. It remains to be seen whether it will succeed in removing the considerable obstacles that stand in its way.
