Online used car startup Shift Technologies has tacked on another $40 million in equity funding, hired a new COO with Amazon and Enjoy roots and scaled up its engineering staff — all in the past several months — as the company aims to double its revenue this year.
The recent activity, along with what executives have told TechCrunch is a diligent focus on unit economics, is all directed toward a larger objective to take the company public sometime in 2021.
Shift, which is based in San Francisco, serves car buyers and sellers. The company, founded in 2013, has built a software platform that lets customers shop for cars, get financing and schedule test drives. Car owners can use the platform to sell their vehicle, as well. Shift says any car it buys must pass a “rigorous” 150+ point inspection.
Shift generated $135 million in revenues in 2018. The company is projecting revenues between $220 million and $240 million in 2019, Shift co-CEO Toby Russell told TechCrunch.
An IPO is an aspirational goal, but one both Russell and founder George Arison believe is achievable. They both pointed to Carvana, an online used car company that went public in 2017.
“Given Carvana’s trailing revenue of $350 million when they went public as a benchmark, we’d be well-positioned for IPO if we can hit $300 million to $400 million,” Russell said. “There’s nothing in stone yet, and IPOs depend on a lot of factors like market conditions, but that benchmark is where we’ll be positioning ourselves in the next two years.”
Carvana is often regarded as Shift’s closest competitor — although the two companies have distinct differences. Shift’s inventory is broader, allowing cars as old as 10 years on the platform and with up to 120,000 miles. Carvana focuses on newer cars between 0 and four years in age. Shift also emphasizes its test drives as a differentiator.
Shift’s biggest competitor is the traditional used car business, Russell contends. There are 35,000 new and used car dealers in the U.S., most of which are mom-and-pop shops, responsible for about 15 million transactions each year. Then there are private-party sales between individuals, Russell notes.
“This super-fragmented environment creates a lot of opportunity for growth for Carvana, Shift, Lithia, CarMax, etcetera, much like Walmart, Target and Amazon all grew over the last two decades,” Russell told TechCrunch.
New COO
To get there, Shift has hired a new COO, Sean Foy. The company also raised additional equity as it tries to hire more engineers and other employees and scale up its technology platform.
Foy comes to Shift from Enjoy Technologies, where he was head of operations. He was previously director of operations for Kindle, Fire, Echo and Amazon Devices working out of Amazon’s Lab 126 in Sunnyvale.
Shift is counting on Foy’s expertise to grow the business and leverage the technology platform, all while maintaining or improving the customer experience. In short, using technology to make it easier for the customer to buy or sell a car without making the process overly cumbersome or intimidating because of the technology.
“One of the things that Bezos (Jeff Bezos, Amazon CEO) used to say all the time when we were building Kindle was the technology should disappear, you should not get in the way of the experience of reading a book,” Foy said. “And it feels the like the same here; we don’t want this to be a technology-heavy process for the buyer, we want to stay as frictionless as possible so that we can attract more and more people onto the the site rather than going to traditional dealerships and giving them a much better experience. So it’s really about removing friction from the product.”
New funds
Shift announced in September that it had raised more than $140 million in equity and debt in a Series D round. The round, which consisted of about $70 million in debt and $71 million in equity, was led by automotive retailer Lithia Motors. Bryan DeBoer, CEO and president of Lithia, joined Shift’s board of directors.
An additional $40 million in equity has since come in, bringing the total raise of the Series D round to $180 million. This new capital brings Shift’s total financing of equity and debt to more than $300 million.
All of the new capital came from new investors, primarily large institutional investors, according to Shift.
Shift has already put some of that capital to work. The company said back in September it planned to invest in its technology platform and scale its engineering staff from 35 to more than 80 people by the end of 2019. As of early April, Shift employed 54 engineers. Another nine (all new graduate hires) will start over the summer.The company employs 450 people.