This week, new and used cars marketplace Droom became the latest homegrown consumer internet startup to be achieve the unicorn valuation milestone. The Gurugram startup based raised the first tranche of a $200 million (about Rs 1,486 crore) pre-IPO funding round which valued it at $1.2 billion.
Droom expect to complete the $200 million round by the end of this calendar year, after which it aims to go public either in India or on the NASDAQ.
In an interview with TechCircle, Sandeep Aggarwal, founder and CEO of Droom Technology, the parent company that owns and operates the marketplace, spoke about about the recent surge of unicorns from India...
What is the timeline to close the $200 million pre-IPO round?
So, this is one of the largest funding rounds we are focusing on before going public. We have been very frugal, and we are operating this company with a long-term horizon... we thought we will raise this round in multiple closings and did the first one in the targeted timeline. And if everything goes fine by the end of this calendar year, we should be able to close the entire round.
How do you plan to deploy the capital you have raised so far?
First, I'm very happy to share that the company is no longer dependent on external capital. Currently, there are various business models to buy and sell automobiles such as physical automobile retailers which are also new age companies. Then there are online classifieds and there are online content players. But we are a pure-play ecommerce company. Within ecommerce, we are currently on a bulk of market share because there is no other player in this market who operates like us.
Our biggest allocation of new capital will be to deepen penetration in the top 100 cities in India. Doom currently operates in 1,105 cities. We are choosing 100 cities to deeply penetrate and grow our market share by 3x in the next two years.
Second is, after the pandemic, we are building more aggressively our last-mile service, Doom Velocity, rather than the buyer going to a seller, we will get the car to the buyer. So we are building a lot of infrastructure, warehouses, last-mile service.
Third, before Covid, we were expanding into Singapore, Indonesia, Thailand, Malaysia and we are pushing international expansion again.
And finally, we will keep on investing very aggressively in technology because we are essentially a technology play marketplace. As we get more capital, we will remain active on acquisitions. So far, we have done two acquisitions and we may close one or two more this year.
What are the growth projections for Droom in next 12-14 months?
We will exit the 2021 calendar year with a $2 billion-plus in GMV and around $65 million-plus in net revenue. And, for the calendar year 2022, I would probably stay away from projecting, other than saying that we should be able to grow to a minimum in three digits. We are also investing in loans and insurance and last-mile delivery. And this should substantially not only increase our GMV but also improve our monetization.
With respect to the IPO, the earlier plan was to list on NASDAQ. Now you are also looking at the Indian markets. Any specific reason?
So, we are now looking at the possibility of listing in India and I must acknowledge, from the time I created Droom till about 8-9 months ago, we never considered India as a possible listing destination because of a few reasons. We didn’t think that the Indian market had depth and we did not think that a new-age technology company's stock, which may be in hyper-growth but losing money, would be well regarded. We always had a plan to go public, but on NASDAQ. That's why the company is a Singapore holding company with a subsidiary in India.
But all that has changed now. The Indian stock market is doing very well. There are roughly half a dozen new-age companies, most of them have outperformed our expectations. The current flurry of IPOs is very, very encouraging. So, we started IPO work early this year and the team is following a dual track for the listing. Either a US listing or a listing in BSE, NSE, whichever is more attractive, viable for us, and whichever suits us better.
Tell us about some of the recent trends that you are picking up on the platform among car buyers.
I think the single biggest trend in our category is the acceleration of online adoption for the automobile. When I started Droom, only 0.1% of India's automobile market was transacted online. This number is still small, somewhere around 0.7% to 0.8% and, before COVID, we thought by 2025, this number will be 4%. But now we feel it could be 6%. So, let's say 0.8% online share of the $250 billion automobile market will be $2 billion currently. In 2025 this market could be $500 billion and 6% of its online size would be $30 billion.
We are seeing a massive acceleration of users because India, unlike the US, Western Europe, and Japan is a low trust market. So, buying an automobile online is not for the faint of heart. But we are seeing that change. The second thing is, because of the weak economy, more and more people are gravitating towards the used automobile.
Another trend, we think in coming years, is that combustible engines, traditional OEMs, and electric vehicle companies will use online distribution. Because from the time Henry Ford invented the assembly line until COVID, most of the new cars were sold to a dealership with a test drive, beautiful experience of organized retail. But we think that is also changing. In the last three months alone, we have signed up with multiple new OEMs who obviously will continue to invest in the physical resources and dealership, but they want to embrace the internet mode as well.