Our Investment in Frontier Car Group

 

We’re thrilled to announce that we recently co-led a $22 million investment into Frontier Car Group (‘FCG’), a visionary company that in 18 months has become a pioneering force in Africa’s technology industry. Launched just a year and a half ago, Frontier builds and runs tech-enabled used-car marketplaces enabling people to buy and sell cars safely and efficiently for a fair price in top tier emerging markets like Nigeria, where the car-sales market is often unstructured and riddled with preventable complexities.

At its roots, FCG is a purpose-built technology platform that ensures the complex nature of the used-car marketplace is streamlined from start to finish. Like many emerging markets, Nigeria’s used car market is plagued by alarming incidents of unwitting buyers purchasing stolen cars or unscrupulous sellers offering undisclosed-as-previously-damaged vehicles. In a market where most people are more likely to purchase a car without ever owning a home, thus making the auto purchase the most significant financial transaction in their lives, Frontier Car Group, through its current operating subsidiaries VendeNosTuAuto (Chile), VendeTuAuto (Mexico), CarFirst (Pakistan), Ototrink (Turkey) and Cars45 (now Nigeria’s largest car buying service), is on track to revolutionize how used automobile sales networks operate in emerging markets around the world.

Prior to FCG, there has been little to no innovation in the used car industry in Africa’s largest economy.  Market-wide challenges have historically included a high level of fragmentation in the industry, lack of technology infrastructure to capture efficiencies, long lead times (14-30 days per transaction vs. 45 minutes-72 hours for Cars45), information asymmetry, and unpleasant bartering dynamics with in-person dealer negotiations. We are firmly of the view that organizing this very fragmented market while eliminating friction and unnecessary complexity should produce tremendous value and introduce market-wide trust infrastructureto all the local market participants, with the added benefit of creating more quality jobs in the local automotive industry and its adjacencies.

Currently, Nigeria’s used car market is extremely fragmented with 99% of transactions occurring on inefficient communication channels such as POTS, WhatsApp and BBM. Cars45 aims to solve many issues with the current model by sourcing verified cars from millions of individual consumers while selling quickly to a large, robust network of verified used car buyers.  The company operates a rapidly growing network of inspection centers where customers who wish to sell their cars can get a quick valuation, inspection, certification and decision within 45 minutes.  Cars45 offers an end-to-end technology solution that eliminates a very significant amount of friction in the purchase, sale and certification of used cars. In doing so, we have seen how much value is created for market participants while reducing the workload of, and generating revenue for, relevant government agencies. Even more significantly, the business opportunities generated by the injection of material liquidity into the marketplace are creating new jobs across the automotive industry.

Headquartered in Berlin, FCG ramped up its operations in a very short period of time and is now overseeing established high-growth businesses in Mexico, Chile, Turkey, and Pakistan, in addition to Nigeria. The team currently employs 200 people across its network and plans to continue expanding.

CEO and co-founder Sujay Tyle has proven himself to be an unstoppable force of nature and a monster fundraiser! Prior to founding Frontier Car Group, he was a partner at Kingsway Capital, a London-based emerging markets-focused hedge fund. Previously, he was on the founding team of Hired.com (a talent marketplace) as its COO, where he helped set a strong foundation for entering and operating in global markets. Sujay has shown time and again his talent for finding strong partners.  His intellect and natural leadership qualities were on early display as he was admitted to Harvard at the age of 15. As a recipient of the prestigious Thiel Fellowship, a member of the 2012 Forbes 30 Under 30 class and one of Goldman Sachs’ Top 100 intriguing entrepreneurs, the combination of Sujay’s impressive achievements and entrepreneurial acumen created a very potent attractant.

As one of our five key investment theses, we look for elite entrepreneurs powering tech-enabled products and services we call “lubricants,” that oil the frictions in our day-to-day lives. Sujay, along with his co-founders Peter and Andre, fit the bill and exemplify the conviction, tenacity and intellect we look for. Importantly, they have partnered with a team of elite local operators in diverse emerging markets. Cars45 CEO, Etop Ikpe, is one of the elite operators driving FCG’s meteoric growth and was, in no small measure, also key to our decision-making process for this opportunity. We had been thisclose to investing in him and his DealDey team and while that opportunity eventually did not materialize, we came away strongly impressed by his entrepreneurial and operational skills and his unique ability to get skeptics and believers to follow him. After he led the sale of DealDey to Ringier Africa, we told him that we would fund whatever startup opportunity he chose to pursue next. We are honored that we were FCG’s sole choice to be their Africa-focused institutional investor. This background is important because I will always be grateful to Etop, Sujay and Peter for sharing this opportunity at a time of great personal grief for me, thus helping me maintain some semblance of normalcy and sanity. As I repeatedly told Etop, who STILL can’t believe we got the deal done despite my personal circumstances, “We told you we would fund your next startup and we meant it.”

EchoVC+, our previously unannounced growth-stage vehicle, is excited to partner with Sujay, Peter, Andre, Etop and the entire FCG team to address one of the largest offline commerce opportunities in Nigeria and beyond. As an active Africa-focused local investor dedicated to funding high-octane entrepreneurs and concurrently attracting foreign investors to participate in the growth of local SME micro-economies, we see Cars45 as being representative of Nigeria’s, and indeed Africa’s, SME-powered digital infrastructure.

We look forward to working closely with Sujay, Peter, Andre and Etop as they continue their high-octane mission to improve automotive sales in emerging markets around the world.