Auto(matic) for the people*
Today is a big day for Frontier Car Group (FCG), a Berlin HQ’d company that Balderton first invested in in the summer of 2016. FCG operates consumer to business used-car marketplaces in emerging markets. Consumers take their car to an inspection point where it is valued and they can close a sale there and then; the cars are then auctioned to dealers, often in real time. The company has been commercially active for a little over 3 years and in that time has consistently over-delivered and set a new bar for execution excellence.
My journey on this started several years before our investment, when I met co-founder Sujay Tyle at F.ounders in Dublin. Sujay was at that time something like 17 years old. He had already at that point achieved more than most people do who were twice his age, and by the time we connected in 2016 he had graduated from Harvard, been on the ground floor at two other startups, turned his skills to the investing side of things and much more. He teamed up with Peter Lindholm (demon operator, previously building out subsidiaries of Milicom and Kinnevik) and Andre Kussmann (bringing the technical chops and some domain experience from Auto1). With this bench strength in the founding team, it was not a hard decision to participate in their seed round.
After the seed round, the team quickly went about finding local entrepreneurs in Mexico, Chile, Nigeria, Pakistan, Turkey and Indonesia who would come on board as Managing Directors for each country. They also set up a central team in Berlin where engineering, product, marketing and strategy would be coordinated. In short order by fall 2016 they had operations in each country up and running and were trading their first few cars through the platform. Shortly after that Balderton led their Series A.
Armed with the Series A money FCG was able to scale up rapidly in every market. We joined their Series B in late 2017 and they went on to close a Series C in the second quarter of 2018.
Today, in their 3rd full year of operation, the business now operates in 10 countries with 500 physical inspection points throughout cities in these countries. They are handling an annualised value of $700m in car sales through the platform and employ more than 1700 people. This has not been straightforward. The markets they are in have archaic documentation systems, opaque pricing, a lack of trust in used car transaction processes. FCG has overcome these challenges and provided transparency, trust and professionalism. They have built unique databases, car inspection processes, pricing algorithms and auction systems. They also enabled car dealers ways to scale up their businesses and generated substantial employment opportunities.
It can be hard to build operations in multiple countries, provide leverage through central technology and marketing teams, allocate capital by market, and maintain a strong sense of culture and community in the teams. Often things go wrong when you break through 100, then 200, then 500 employees and what worked before stops working. Doing this in 10 countries on every time zone you can imagine and scaling at a healthy clip makes this even harder. FCG have excelled and found a way to empower strong country leaders while making all markets part of the whole.
18 months ago, through the Series C round, we welcomed OLX (part of Prosus/Naspers) into the investor group and onto the Board. OLX operates leading classified sites across the world and the fit with FCG was clear. The partnership has been very fruitful and today OLX are announcing they are investing up to $400m in FCG, partly in primary capital into the company and partly into a tender process to acquire shares from other investors.
It has been an amazing journey working with the founders, their exceptional executive team and their tireless and passionate employees all over the world. Congratulations to the FCG team on reaching this milestone. We look forward to observing the next phase of their growth.
*Excuse the bad pun based on the exceptional R.E.M. album “Automatic for the People” released in 1992 which, of course, opens with the track “Drive”….
