Cazoo
The Zoopla founder's online used-car retailer fell from USD 7 billion to administration in three years
- Founded
- 2018
- Closed
- 2024
- Lifespan
- 6 years
- Peak valuation
- $7 billion
- Became a unicorn
- 2020
- Country
- United Kingdom
- City
- London
- Sector
- E-commerce
- Founders
- Alex Chesterman
- Investors
- General Catalyst, Mubadala Capital, D1 Capital Partners, Viking Global Investors
- At its peak
- A valuation of about USD 7 billion on its 2021 New York Stock Exchange listing by merger
- Cause of closure
- Business model failed
What did it do?
Cazoo was a British company that bought and reconditioned used cars, sold them entirely online and delivered them to the door. Alex Chesterman, co-founder of Zoopla and LoveFilm, founded it in 2018 and it began selling in December 2019. It built its brand fast through sponsorship in football and many other sports. It expanded into Europe by acquisition.
Why did it shut down?
Online car demand surged in the pandemic, and in 2021 Cazoo merged with AJAX I to list in New York at about USD 7 billion. Yet it lost GBP 329 million in 2021, and the loss rose to GBP 704 million in 2022. One investor put gross profit at about GBP 100 per car in 2022. Demand and technology shares fell that year, and the company cut jobs and left mainland Europe. In December 2023 USD 630 million of debt was restructured, and in March 2024 it sold its stock of cars and became a listings site. Teneo was appointed in May 2024, with about GBP 259 million of unsecured debt owed to more than 10,000 creditors.
The story
After LoveFilm and Zoopla, Alex Chesterman found his third big idea in cars. He founded Cazoo in 2018 and began selling used cars online in December 2019. Within about 18 months it passed a billion dollars in value.
A deal with AJAX I in March 2021 put a value of USD 7 billion on the company. The pandemic had accelerated online car buying, and Cazoo spread everywhere: football clubs, darts, snooker, new countries and acquired European firms.
But as a used-car dealer it made very little. In 2022 revenue reached GBP 1.2 billion while the loss rose to GBP 704 million. Demand and technology shares fell the same year and the stock lost about 98 per cent. The company pulled out of mainland Europe, and Chesterman stepped down as chief executive in January 2023.
In March 2024 Cazoo sold its cars and became a listings site, and more than 700 people lost their jobs. Even that was not enough. Teneo was appointed in May 2024 and the parent went into liquidation. Its value had shrunk to a few tens of millions of dollars.
Lessons for founders
- About GBP 100 of gross profit per car cannot carry a national advertising and logistics machine. Fix the money per unit before you scale.
- Do not mistake pandemic demand for a lasting shift. When online car sales surged in 2021, the plan needed testing against the numbers of a normal year.
- If you close the companies you bought to enter new countries within 12 months, you have bought cost, not growth. Do not cross borders until the model at home makes money.
Sources
- British used-car unicorn Cazoo, once worth $7 billion, considers administration (Fortune, 2024-05-10)
- Cazoo: the rise and fall (BusinessCloud, 2024-05)
- Cazoo enters administration (Financier Worldwide, 2024-08)
- Cazoo racked up debts of over £260m as it collapsed into administration (City AM, 2024)
- Cazoo and AJAX I. A $7 billion SPAC merger (Tech.eu, 2021-03-29)
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