Aaron Tan is going places. You can get an entire car in less than five
minutes — with credit approval, with insurance, because we own the whole value chain. As the co-founder of a newly crowned unicorn
and one of Asia Pacific’s fastest growing start-ups, Carro’s CEO is now on the road
to an IPO. Some of my friends joke that I grew a horn
and stuff like that but, you know, honestly, it doesn’t mean anything. And with investors including Softbank getting
onboard, he has no plans to slow down. The question is, okay, now that we have reached
$1 billion, how do we reach $10 billion? How do we reach $100 billion? Carro, a play on the words ‘car hero,’
is a Southeast Asian auto marketplace designed to simplify car deals using AI technology. The company was founded in 2015 by college friends
Aaron Tan, Aditya Lesmana and Kelvin Chng. In June 2021, it achieved coveted $1 billion
unicorn status after securing $360 million in funding from big name backers such as SoftBank
and Indonesian-based fund EV Growth. The deal takes total funding to over half
a billion dollars and pits Carro alongside key competitors in an industry worth $50 billion and growing. But as CEO Aaron told me when we sat down
at his Singapore HQ, the journey has been long. 36-year-old Aaron’s entrepreneurial story
started when he was 13. I went on the internet in, I would say 1996,
and that was when I first went on the internet and I thought, hey, this is super interesting. And then I effectively went into the local
library and tried to understand how do you build a search engine. As a teenager growing up in Singapore, the
computer whizz would earn extra cash by building and selling websites. But it was later, while working as a venture
capitalist in the U.S., that he saw an opportunity to combine business prowess with his true
passion: trading cars. One of the things that I found super enjoyable
really is this whole buying and selling of cars. I think that’s one part of it. The interest in automotive. The second part of it is my training. When I was in the U.S. as a VC for many years,
I remember very clearly, I met all kinds of automotive companies – your Beepi, your
Uber, your DriveShift. What this shows me was the momentum in the
space. While the auto resale market was flourishing
in the U.S., the same couldn’t be said for Southeast Asia. It was famously opaque, with several middlemen
making it difficult for buyers and sellers to get the best deals. Aaron wanted to change that. So, returning to Singapore in 2015, he teamed
up with his classmates from Carnegie Mellon’s School of Computer Science to create an algorithm
that would do just that. I wouldn’t say that I tricked my co-founders
into founding the company together, but I think I sold the opportunity that this could
be much more interesting than whatever they were doing. You pulled at the emotional heartstrings,
I think. And I think one thing that I always give thanks
to is that my team tends to be very international from day zero. My co-founders Indonesians or Thais, so this
makes it a lot easier for us when we enter a market. We don’t have as much licensing issues,
tax issues, because we have locals fronting the market and that is extremely important
when you are in Southeast Asia. The trio was onto something. In a region with a vast and growing, digital-savvy
middle class, price sensitive consumers were increasingly opting for secondhand models. Euromonitor’s senior research consultant,
Justinas Liuima, explained. Expanding middle class combined with low car
ownership rates in Southeast Asia were really the main factors that stimulated new car sales,
and eventually this translated into a vibrant used car market as well. The new car market grew from three million
units in 2015 to almost four million units in 2019, and eventually these new cars, after
the period of five to eight years, they were entered into the secondary market. Carro capitalized on that demand, rolling
out its online offering for individuals and wholesale dealers across Indonesia, Thailand,
and Malaysia in the years that followed. Meantime, it added end-to-end financial services
like loans, insurance and aftercare. By 2019, inspired by Netflix and Spotify,
the company launched Singapore’s first car subscription service, allowing users to lease
a vehicle for a monthly fee, with tax, warranty, and maintenance all included. In subscription, what we saw was the changing
behavior of car ownership. Really the gap in the market was to look for
people that want that flexibility. And, more importantly, they actually want
to try out new cars. This has played very well for us for instance
in EVs, where people are like I actually do not know whether EVs are suitable for my lifestyle. Can I try this for six months, 12 months,
and you know we found a good gap in the market that way. Then, in 2020, the pandemic struck. But what was a major roadblock for many start-ups
turned out to be an opportunity for Aaron and his team. Concerns over hygiene and personal safety
sparked new demand for private transport options. And with borders closed and a global microchip
shortage limiting car production, used car sales surged. Covid has definitely helped accelerate our
whole digitalization internally and also externally, to the general public. One of the many things that we launched during
Covid was this Showroom Anywhere concept. The idea is very simple. We want you to be able to do a test drive,
or for that matter enter a car itself, without any key. Basically, without seeing a single human,
get into the vehicle, do your test drive if you need to, kick the tires, literally. And as you’re done, just swipe out and the
car will just lock. And then if you want to buy the car, just
go onto the website or the app, click buy it now and literally key in a few things,
and you can walk away with the car. As of March 2021, Carro recorded revenues
of $300 million, up 2.5 times on the previous year. The six-year-old start-up says it is now profitable. However, that growth comes against a backdrop
of growing scrutiny on the auto industry. Transportation accounts for almost a quarter
(24%) of global carbon emissions, of which road vehicles make up 75%. And even as governments and automakers make
plans to phase out traditional combustion engine cars with electric vehicles, many existing
gas guzzlers are simply exported to developing markets. New cars are more efficient, they pollute
less, and if the country relies on the used car sales a lot, it increases the overall
emissions, especially in the densely populated urban areas, and adds to the health concerns
in the long-term. Carro, for its part, says it is playing an
important role in the transition to greener transport methods. Our job is to reuse, our job is to enable
that recycling or the reusing of the vehicles in the shortest period of time. And the second part of this is that EVs is
a strong tailwind for us, because this encourages change. And for a platform like us we strive whenever
there is change in the market. Sustainability will continue to be one of
the many things on Aaron’s agenda as he sets out to list his company within the next
18 to 24 months. With regional expansion, AI developments,
and acquisitions all on the cards, one thing’s for sure -- it’s going to be an eventful ride. What needs to happen is that between now and
then, get the company ready, controls need to be in place, people need to be in place,
compliance needs to be in place. Only then can we then say that okay, we’re ready to go public 12 to 18 months from now.
