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HomeFinanceBritish unicorn Cazoo flirting with chapter after a blockbuster run

British unicorn Cazoo flirting with chapter after a blockbuster run

Cazoo’s development was spectacular, even for a tech platform. The British used automobile startup achieved unicorn standing solely months after launching in 2019.

Excessive demand for second-hand automobiles helped ship a $7 billion valuation when Cazoo listed by way of a SPAC on the New York Inventory Alternate in 2021, making it one of the worthwhile tech startups in Europe. 

It was an enormous milestone for the British auto trade—and certainly, the remainder of Europe, to which it bought automobiles—even when the corporate’s itemizing was throughout the Atlantic.  

However Cazoo’s dream run didn’t final very lengthy. In an entire reversal of fortune, the corporate has misplaced properly over 99% of its worth—its inventory is at the moment price about $35 million— amid mounting monetary woes and is now toying with chapter.

Earlier this week, Cazoo stated it was contemplating administration as an choice, in line with an SEC submitting. It bought its remaining inventory of automobiles in March and is now contemplating altering its enterprise mannequin to maintain it going.

It raises the query of whether or not Cazoo grew too quick or was merely one of many many unicorpses left within the wake of the post-pandemic bust. 

Cazoo’s acceleration to the highest

The British startup was based by veteran entrepreneur Alex Chesterman, who additionally launched the residential property platform Zoopla and video streaming service LoveFilm. Cazoo managed to lift funds from enterprise capital companies like Normal Catalyst and DMG Ventures to assist it goal a market that had low digital penetration, Chesterman stated on the time.  

The startup goals to make automobile purchases as straightforward and accessible as purchasing on-line for anything. It delivered used automobiles and supplied a 90-day guarantee, which labored properly for the corporate through the pandemic as folks had been confined to their houses. 

Buyers noticed the success of Carvana, Cazoo’s American competitor, and had been eager to enter the trade.  

It launched within the U.Okay., and with the funds it raised, financed its growth throughout Europe. 

Cazoo’s growth additionally got here when the marketplace for SPACs was scorching. However whereas its 2021 itemizing was anticipated to speed up the British startup’s development additional, issues quickly started to go awry.

By way of 2021, the urge for food for used automobiles drove Cazoo’s enterprise—in simply the primary half of that yr, its automobile gross sales skyrocketed by 400% in comparison with 2020. However the next yr, the worth of shares (significantly in tech) started to plummet, with the U.S. inventory markets experiencing their biggest-ever loss in 2022 following the 2008 monetary disaster. 

Cazoo’s shares went into freefall. The automobile retailer introduced layoffs and plans to cut back its growth that yr. Ultimately, much-needed funding started drying up. Rates of interest and inflation inching upward solely made issues worse. 

Whereas Cazoo’s 2022 gross sales of £1.3 billion ($1.6 billion) had been up 90% from the earlier yr, its losses elevated 30% to £704 million ($880 million).

Cazoo flagged in December final yr that it was working low on liquidity and would want extra capital to gasoline its operations within the latter half of 2024. It additionally underwent a debt restructuring and appointed a brand new board of administrators to look into its choices. 

Regardless of the rollercoaster experience that Cazoo has endured, the British retailer is way from alone. The U.Okay. has minted fewer unicorns just lately, partly due to slowing funding exercise and decrease valuations amid financial uncertainty. And plenty of once-unicorns within the U.S. at the moment are no extra.

Cazoo might have fallen a great distance, nevertheless it nonetheless has time to show issues round. Whether or not it could possibly clear the appreciable roadblocks in its path stays to be seen.

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