BacklotCars Inc. has come a long way since launching just over two years ago as an online marketplace out to challenge the $100 billion-plus car auction industry.
As of this week, it has registered more than 7,500 users and surpassed $100 million in annualized transaction volume, the Kansas City, Missouri-based company says. And just before the holidays, it raked in $8 million in funding from several venture capital firms.
“This investment comes at a great time,” says founder and CEO Justin Davis. “We are growing rapidly in our existing markets and expanding our national footprint.”
More transparency in car sales
The marketplace company also contends that it’s using the internet to provide “a more transparent and easy way to buy/sell wholesale” compared with traditional offline car auctions. BacklotCars inspects each vehicle and posts details and photographs resulting from inspections. It also guarantees vehicle quality for buyers, who must register for an online account and get verified as a car dealer.
Buyers pay a per vehicle transaction fee ranging from $100 to $250. The marketplace also charges fees for the optional services of financing and transporting vehicles.
For sellers, who are mostly franchised car dealers and pay no fees, BacklotCars says it handles most of the chores involved in postings listings of vehicles.
A $100 billion market goes more digital
The company is far from alone in what is a growing market for online wholesale vehicle sales, according to the National Auto Auction Association. In its most recent market study, the NAAA said the auto auction industry, which car dealers use to buy and sell vehicles, reached $100 billion in sales in 2016 and noted that online auctions and related mobile apps were a growing trend.
Nonetheless, BacklotCars attracted more than six financial backers in its $8 million Series A funding round. Origin Ventures led the funding; other investors include investment firm Revolution’s Rise of the Rest Seed Fund, Pritzker Group Venture Capital, KCRise Fund, Royal Street Ventures and Chaifetz Group. Steve Miller, a partner with Origin, will join the BacklotCars board. BacklotCars also said this week it had received “an additional $10 million in an expanded credit facility.”
Davis, the BacklotCars CEO, founded the marketplace company while at 500 Startups, a provider of seed funding to startup businesses. He has also held multiple positions on vehicle wholesaling, including marketing manager for car auctions at Ally Financial Inc.
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