Finn raises $109M on a $658M valuation, taking its car subscription platform up another gear

Finn, a startup based out of Munich that operates a platform for new car subscriptions — an alternative to buying or leasing for those who want to drive new vehicles — has raised a sizable round of growth funding, money it plans to use to expand its tech and reach, with a move into more electric vehicles and cloud-based tools to manage its services. The company, which currently manages 25,000 subscriptions in Germany and the U.S., has raised €100 million ($109-110 million), a Series C that values the company at €600 million post-money ($658 million at current rates).

Planet First Partners, a European growth equity firm that says it focuses on sustainability, is leading the round. That emphasis on sustainability is translating into a goal at Finn to have 80% of its car inventory electric by 2028, from 40% today.

“The transition to electric vehicles is one of the major societal shifts taking place globally and is crucial in our move towards a more sustainable economy,” Nathan Medlock, managing partner at Planet First Partners, said in a statement. “With road transport accounting for around one-sixth of global emissions, electric vehicles are vital to decarbonize society.” He’s joining the board with this round.

Previous backers such as HV Capital, Korelya Capital, UVC Partners, White Star Capital and Picus Capital are also participating. It’s now raised about $250 million in equity, and it has raised some $1 billion in debt, offered on a rolling facility where Finn pays back sums based on cars it sells.

It’s been a very bumpy road for the car subscription market over the years. High-profile startups like Fair.com raised hundreds of millions of dollars before collapsing and ultimately pivoting. One of the bigger players in Europe, Onto in the U.K., filed for bankruptcy in September 2023. Cazoo, which snapped up a couple of car subscription companies in its growth strategy, has sunset that business in 2023 amid its own scramble to shore up finances to avoid its own failure.

The idea of car subscriptions is neat, but the execution is not. Boston Consulting described it as a “passing fancy — a product in search of demand.” That’s meant disastrous unit economics, and of course many unknowns as to who will, longer term, want to possess cars on subscription models. 

Maximilian Wühr, Finn’s CEO and co-founder, believes that his company’s relatively late entry into the market — it was founded in Germany in 2019 and expanded into the U.S., the only other market where it currently operates, in 2022 — has given it a better set of insights into what hasn’t worked for others, to help it avoid making the same mistakes.

Its formula is based around offering new cars — which make up about 97% of the company’s inventory, Wühr said — that are offered typically on subscriptions of around 12 months (longer than a rental, shorter than the average lease).

New cars are sourced directly from OEMs and it buys in bulk. It has around 350 different permutations of configurations that it offers to users, but it doesn’t give them any options to customize themselves beyond that. And it’s brokered deals in advance with car retailers to buy up the vehicles when subscriptions are finished.

Also, it sells both to individual consumers as well as businesses that will take on several vehicles for their workers, it doesn’t allow customers to use the cars for certain things, specifically ride hailing.

The vehicles are delivered all-in, with insurance, tax and technical inspection (but not maintenance) included in the monthly fees. There are a range of prices, but popular models go between €430 through to €1,200 per month.

That effort, he said, has led to the company reaching annualized recurring revenues of €160 million across the two markets (with the vast majority of that, €150 million, in Germany). While Finn overall is not yet profitable, he said that “the core product is profitable,” meaning the company has figured out unit economics that some of its less successful peers did not.

Today, there are already some strong currents of data science at play at Finn, used to help the company figure out what people are interested in driving and how much they are willing to pay for that.

It’s also already built out an e-commerce platform aimed at maximum efficiency. Car transactions online contend with the same issues with shopping cart abandonment that e-commerce retailers regularly face — too many hurdles to buying what they want online usually results in people changing their minds and leaving sites — so the company has optimized the process of looking up and buying a car.

“You can order the subscription in less than five minutes, and then within days it gets delivered to your doorstep,” he said.

The plan, Wühr said, is to create a deeper and more “seamless” experience in its app, for those already subscribing to cars, either to exchange vehicles for new ones, to contact customer support, to buy any extra services, and more. Support can be one of the most costly aspects of any service-based model, so it’s aiming to take the human out of the loop as much as possible, he said, to reduce that further.

“We want to make sure that the companion app is working really, really well for subscribers,” he said. “Whenever there is something related to the car, you basically won’t need to talk to a human being ever again.”

The company is trying to tap into the connected car evolution, too, although that is coming more slowly: Although the goal is to be able to have better diagnostics about how much its customers are actually driving cars, in real time, and to perhaps build services that they can use while being subscribers, for now Wühr said that not enough of its existing fleet has the facilities to manage that — and those that do typically all have proprietary systems — in any useful or cost-effective way for Finn to implement it.

Finn’s expansion to the U.S. is more recent, and that business is smaller and faces its own challenges, so one thing to watch out for is whether it manages to scale up there as it has in its home market. Wühr said that in Germany it has managed to build strong relationships with OEMs for sourcing vehicles, to the point that it’s covering more than 80% of the most popular makes and models in the market (comprised of 30 brands, he added). That’s not exactly the case in the U.S., he said, where conversations with OEMs have been slower to translate into deals.

“The U.S. is working really, really well from a consumers perspective, but it is a little bit harder to get to the right OEMs and just because you need more scale in the U.S., it makes it a harder market to kind of like get into,” Wühr admitted.

source

Leave a Reply

Your email address will not be published. Required fields are marked *