The people who invested in Facebook and helped guide it into being an internet phenomena are now ploughing money into Autoquake.
They are confident they will be able to take it to a position of dominance in used car retailing.
Though the business has yet to pay Accel Partners a penny in profit, the success of the business – after 18 months of operating experience – looks phenomenal.
The first measure to examine is the growth: in its first three months at the end of 2007, Autoquake got 50,000 visitors online.
Today the number of unique visitors per quarter is 900,000.
In 2007, it sold 700 cars in the quarter.
This year that figure is nearer 4,000.
At present there are only distribution depots in Birmingham and Leeds.
But soon sites will be added in London and Bristol.
Ask Garry Hobson, chief executive of Autoquake, or Kevin Comolli, one of the two venture capital partners, what the secret is and they boil it down swiftly to transparency.
Research highlights 'ghastly' experience
Research showed at the outset that people buying a used car knew what to expect from the experience. Their common description was ‘ghastly.’
There is a natural suspicion of used car dealers, a lack of certainty about the condition of the invisible bits of the car and uncertainty as to what the ‘right’ price should be.
And the buyer is at a loss as to how to calculate value once the numbers are bundled together in a car/finance/part-exchange proposal.
The process is confrontational – several times over - as the customer progresses from one car lot to the next learning more about the market price.
Autoquake started by finding out what the customer needed, provided it and then built the business around it.
So successful has this been that the next Autoquake board meeting may consider where the rollout goes after the UK: Germany is a strong possibility.
Autoquake claims the prices of cars on offer are 16-17% lower than dealers’ prices. How do they do it?
It is so simple it seems strange that it has not been done before.
“The old formula was: lease company de-fleets through an auction; the car is bought by a dealer, who sells to the final customer.
"Now the chain is cut to three links: lease company; Autoquake acting for them on sale or return; final customer,” Hobson said.
“Previously, the margin was shared by three entities. Now it is two. The saving is the expensive margin required by the dealer, and the quite expensive margin taken by the auction house,” he said.
De-fleeting more profitably
The lease company is de-fleeting more profitably and is delighted.
The customer is buying for less and is delighted. Autoquake takes what it can – consistent with building a business as fast as it can.
Autoquake is just 18 months into the experiment. Accel Partners and its co-investor, Highland Capital Partners, will probably want to cash in within five years.
What do the customers get that has them returning in large numbers?
Key to it is the more than 50 photographs of each car which pick up all defects no matter how small.
The car gets a 120-point inspection and the results are detailed.
There is a stream of prices from Parker’s which gives the acceptable price range for any specific car.
But the winning hand is probably the unconditional money-back guarantee.
Once the buyer takes delivery, he has seven days to change his mind and get his money back (less the £57 delivery charge). No quibbles. No explanations needed. The number of refunds is well below 1%.
The transparency and the ease of use of the site are confirmed by the behaviour of users. Half the buyers put down a deposit on their visit to the website.
And a surprising number are comfortable with the finance application process. Initially, a third of buyers bought their debt from Autoquake through an online application. That has risen to 70% as a percentage of deposits taken.