African automotive company Autochek has secured a $13.1 million seed round almost a year after raising $3.4 million pre-seed in November 2020.
The company, led by CEO Etop Ikpe, has seen astonishing growth in demand since launching in August last year, not just from a consumer perspective but also from its business and banking partners. And who else to lead the seed round other than pan-African VC firms TLcom Capital and 4DX Ventures — the same investors that had the conviction to lead the startup’s pre-seed round.
Other existing investors, such as Golden Palm Investments, Enza Capital and Lateral Capital, invested as well. First-time investors ASK Capital and Mobility 54 Investment SAS, the venture capital arm of Toyota Tsusho and CFAO Group, also participated. In total, Autochek has raised $16.5 million in two financing rounds.
When Ikpe spoke to TechCrunch last month, the company had just finalized the acquisition of Cheki’s businesses in Kenya and Uganda from Ringier One Africa Media (ROAM). The deal closed almost a year after Autochek bought Cheki Ghana and Cheki Nigeria to start its business.
Although acquisitions have made up all the company’s expansion strategy to this point, it did not take that route into the Ivory Coast — it partnered with CFAO Group to bring its marketplace to the Francophone region.
The expansion takes the number of African markets in which Autochek is present to five. Africa’s used car market is a $45 billion industry, where the vehicle penetration rate stands at a meager 5%. And because the market lacks transparency, lenders (mainly banks) have found it challenging to offer loans to individuals, commercial or ride-hailing drivers.
Autochek’s platform operates a marketplace-driven model with a focus on financing and after-sales. Its primary customers? Dealerships, banks and the end consumers (those who buy cars on the platform).
When a dealership signs up on the platform, Autochek assigns a workshop to commence inspections on the vehicles owned by the dealership. The assessments and some algorithmic checks on Autochek’s system help to give a sense of the status and condition of the car, determining whether it is in a state to be financed.
“That’s the big risk for the banks because they do not want a situation where they finance a car and the next day, the engine knocks,” said Ikpe explaining why Autochek goes through these processes.
After inspection, Autochek alerts all the banks on its platform that the vehicle is ready to be financed and moves it to the marketplace. Following an extensive review, the banks respond with their offers. The end-user then has a pool of financing rates from the banks to choose from and can apply to buy the car after Autochek develops a credit profile. The loan application process takes about 48 hours, down from an industry standard of 40-45 days.
Once sorted, Autochek supports the banks in disbursement and ensuring that the vehicle is registered, insured and tracked. Then the car gets fed into Autochek’s after-sales network, where it gets maintained for free whenever mechanical issues come up.
Autochek makes money by charging customers and banks a fee after a successful disbursement and commissions from dealerships.
“We’re not just there for the banks and customers at the point of disbursal; we stay with them throughout the lifecycle of the loan,” said Ikpe. “We’ve built that ecosystem using technology to stitch all these various verticals together so that at the end of the day, we can create more value with financing being our core driver within the platform.”
Last year when Autochek announced its pre-seed round, it had 12 bank partnerships. That number has increased to about 70 banks, such as Access Bank, Ecobank, UBA, Bank of Africa and NCBA Bank. These banks have processed more than 46,000 loan applications to date; this number was just 10 last November, the company said.
Initially, Autochek worked with only used cars. But the company has since launched a financing product for trucks and new cars. More than 1,200 dealerships use Autochek’s network and over 15,000 financeable vehicles are on the marketplace across all markets.
Ikpe asserts that introducing these new verticals came from the demand from its partner banks, who have been integral to where the company sets up shop on the continent.
But in some cases, despite seeming demand and the presence of a partner bank, Ikpe says Autochek has declined to move into new markets where it did not perceive potential at that moment.
Presently settled in West and East Africa, Autochek has its sights set northward and southward on the continent — Egypt and South Africa to be precise.
“We are speaking to a few partners around potentially how we can make entry and I think between now and probably Q2 next year, we would have kind of identified the best kind of product-market fit for those markets. But we expect that by Q3, we should have a presence in those markets,” said Ikpe, who was the co-founder and chief executive at Jiji subsidiary Cars45 before starting Autochek.
Ikpe’s drive and experience and Autochek’s blitzscaling growth are top of the list on why TLcom Capital re-invested in the one-year-old company, according to partner Andreata Muforo. For Walter Baddoo, managing partner at 4DX Ventures, it’s that the team has demonstrated “the talent, ambition, and domain expertise needed to build a complete end-to-end car ownership experience for customers.”
In Africa, Uber and Bolt dominate the ride-hailing space, leading most mobility startups to tackle vehicle financing and logistics problems instead.
Autochek and other vehicle financing startups like Moove and FlexClub have raised large sums of money, signifying rising investor interests in the space and a maturing competitive landscape.
In Autochek’s case, investors’ interest was such that Autochek closed at twice what it initially intended to raise. Frankly, for a business that deals with automotive tech in Africa, that speaks volumes. But then again, Autochek has a fintech element with its financing model. So, its large seed round does not come as a big surprise, considering how fintech dominates the African VC landscape and holds the record for the highest seed-stage investments from PalmPay, Kuda and PawaPay.
Like any startup, Autochek wants to be a market leader. It plans to inject the new capital into bolstering its auto loan processing platform, deepen its footprint in West Africa and, ultimately, leverage Toyota Tsusho’s vast retail network across 54 African countries to deepen its expansion further.