Car-sharing startup Car Next Door says its latest $2.3 million capital raise could help it increase its “key metrics” sevenfold, as it also hopes to take some smaller scale investors for the ride via equity crowdfunding.
The startup was founded in 2012 and provides users with a way to rent out their cars to other customers in an attempt to disrupt the car-hire space. Along with raising $2.5 million from Caltex Australia last year, the company also scored a $300,000 injection from Steve Baxter on Shark Tank in 2016.
The most recent Series B round, which saw the company raising $2.3 million from existing investors including Caltex and Investible, will be complemented by an equity crowdfunding raise conducted through Equitise. The company will target sophisticated investors with the raise, and is looking to fetch up to $1.5 million with a minimum of $500,000.
“Somehow we’ve always known [equity crowdfunding] is something we’ve wanted to do,” co-founder Will Davies told StartupSmart.
“We’ve had quite a number of users want to get involved with Car Next Door through investing in it, but we couldn’t let the share registry get too big.”
Equity crowdfunding is slowly stepping into the fore as a legitimate alternative for startups seeking funding, with platforms like Equitise, Birchal, and Sharequity already allowing sophisticated investors on the platforms.
However, it’s not just the sophisticated crowd Davies is interested in, with Car Next Door also intending to open up investment opportunities for retail investors once Equitise receives its financial services license over the next few months.
“Making it available to retail investors could be a really good option for Car Next Door in 2018. Equitise is a bit of a trial run, we’ll see how it goes on the platform and see what users are interested in what we’re doing,” he says.
“We think a platform like Car Next Door, one which is consumer-to-consumer, is a really good candidate for equity crowdfunding. By opening up equity to our users, we’re hoping to build extra loyalty and word-of-mouth for the platform.”
“Users who have a small stake in it are more likely to talk about it and tell their friends. It’s one part marketing, one part capital raising.”
Davies, who is joined at the helm of Car Next Door by co-founder Dave Trumbull, says the “vast majority” of the startup’s newly raised funds will be funnelled specifically for growth.
“We’ve got 50,000 users now, and this funding should get us to 700,000 users. We’re hoping to 7x most of the key metrics,” he says.
While the driving factor behind raising the funds was the current well-established state of Car Next Door, Davies does admit a small part was due to the fact the company’s money “was starting to get a bit low”.
“We were in a position to break even if we wanted to, but we figured we’ve got really strong platforms and processes so the bigger opportunity is to focus on growth and building out the market,” he says.
Providing to a number of new investors doesn’t faze Davies, who admits while he may have “many other weaknesses”, one strength is keeping investors up to date. Even if the company scales significantly with a number of new investors, Davies says he “can’t see” the workload increasing too drastically.
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Dominic Powell is a journalist at SmartCompany and a tech and music geek. When he’s not writing, you can find him reading or browsing record shops.
