Our Investment in Cazoo: Backing One of Europe’s Fastest Growing Start-ups

It’s hard to recall what life was like before the eBays and Amazons of the world existed, when e-commerce barely penetrated the consumer goods market. Today we are almost entirely reliant on online purchasing for all our needs, from books and groceries to big-ticket items like furniture. Despite the rapid shift towards online retail, the European automotive industry has lagged behind almost every other sector in moving away from offline commerce. Then Cazoo came along.

Since launching in 2019, Cazoo has transformed the process of buying a used car into a quick, seamless, and enjoyable online experience. Its platform provides customers a wide selection of used cars, transparent pricing, and a simple transaction that includes home delivery and returns.

Cazoo’s appeal with customers has been immediate: in 2020, the company’s first full year of trading, it generated sales of $225 million. This year, Cazoo is aiming to quadruple its revenues to almost $1 billion. As a Venture Capital investor with a decade of experience in the European tech ecosystem, I have found Cazoo’s growth to be astonishing, and I can safely say that it is one of the fastest growing start-ups in Europe.

On Friday, Cazoo will be listing on the New York Stock Exchange (NYSE: CZOO) through a special purpose acquisition company (SPAC) merger with AJAX I, less than two years after selling its first car online.[1] In light of this listing, I reflected on Mubadala Capital’s journey with Cazoo, which began in 2019 when we invested in the company’s Series B. We have followed on with an investment in every funding round since, increasing our commitment to the company despite the ebbs and flows in the market, largely brought on by the COVID-19 pandemic.

At Mubadala Capital, our mission is to partner with visionary founders whose companies are going to fundamentally disrupt large industries. In Cazoo, we saw a transformative company seizing on an opportunity to disrupt an outdated industry that was ripe for digital transformation. We recognize that building leading technologies and reaching scale takes time, but we are uniquely positioned to support companies throughout their growth — from early stage to IPO and beyond, through our access to various pools of capital across Mubadala’s global network.

We believe in the long-game, and we partner with founders for the long-run. We are humbled to have partnered early with Cazoo and know they have a remarkable journey ahead.

Partnering with Cazoo

While the potential for Cazoo may seem obvious today, at the time of our first investment in the company, only 1% of customers in Europe were purchasing cars online.[2]

So what led my colleagues and I to invest in Cazoo?

We started by taking a macro view of the European market for used cars. In the UK, we found a highly fragmented market where no offline incumbent had a market share in excess of 5%. In Europe, the market is estimated to be worth $700 billion, and at the time of our initial investment, it remained overwhelmingly offline.[3]

Having previously backed consumer-facing businesses, we understood the importance of offering a seamless online experience to consumers that would enable a change in purchasing behaviour from offline to online. Cazoo’s platform offered its users a beautiful and simple experience, with transparent pricing and the ability to purchase a car in a few simple clicks. We were convinced that consumers in the UK would trust this platform to make their car purchases online.

In addition to Cazoo’s attractive business proposition, we found a trusted partner in its Founder and CEO, Alex Chesterman.

Alex has a track record built on channelling frustrations around user experiences and markets and turning those into companies that go onto disrupting entire industries. His first company, LoveFilm, offered DVD rentals in the UK. It was acquired by Amazon in 2011 for £200 million. His second venture, Zoopla, allowed people to purchase homes online. In 2018, it was acquired by Silverlake for £2.2 billion. The successes of both LoveFilm and Zoopla speak for themselves and are why Alex Chesterman is the type of serial entrepreneur that investors trust and gravitate towards.

I knew Alex from my time working at Octopus Ventures, which was an investor in Zoopla. When I joined Mubadala Capital a few years later, I was re-introduced to Alex by Fred Destin at Stride, who led Cazoo’s Seed round. I remember vividly meeting Alex in his north London office back in September of 2019. In that meeting he shared with us his frustration with the current process of buying a used car in the UK. “The customer experience is broken”, “Negotiating with dealers is horrible” he shared.

I knew Alex would not rest until the experience of buying a used car in the UK improved. It took just one meeting with Alex for us to invest in Cazoo’s Series B in October of that year, ahead of the market launch of Cazoo’s website.

Six months later, equity markets collapsed by 25% in the face of COVID-19. Despite these market dynamics we remained undeterred from our commitment to founders, and when Alex chose to raise a £100 million Series C in March 2020, we significantly increased our commitment in Cazoo.

In late 2020, as Cazoo reached £100 million in revenue, a flood of investor interest led to the company raising a Series D financing round, in which we proudly participated. On March 29, 2021, Cazoo announced their bid to go public via a SPAC merger with AJAX I, which included an investment in the PIPE from another Mubadala Capital fund.

As a life-cycle investor with access to various pools of capital, we were uniquely positioned to support Cazoo throughout its growth trajectory. As multi-stage investors, we develop long-term partnerships with founders, supporting their journeys to fundamentally change entire industries.

The Road Ahead

It’s been incredible to witness Cazoo’s growth from zero to $225m in revenues in just 12 months. This kind of growth doesn’t happen every day — even in the VC world! Today, we celebrate Cazoo’s listing on the NYSE, but this is by no means the end of our partnership. For us, this is just another milestone in Cazoo’s impressive road towards the transformation of an outdated industry. As long-term investors, we will continue to support Cazoo in their plan to build a European champion.

Works Cited

[1] Cazoo, (2021). Cazoo to Become Listed on NYSE through $7.0 Billion Business Combination with AJAX I

[2] Armitage, J. (2021, May 21) “Boom in online car sales speculation sees Cazoo rival Cinch raise £1 billion from blue chip backers” The Evening Standard

[3] Cazoo (2021, August). AJAX I and Cazoo Announce Second Quarter Fiscal 2021 Preliminary Results for Cazoo