Despite scaling back hiring, co-CEO says Canada Drives is in “a strong position.”
Vancouver-based online used vehicle retailer Canada Drives has secured an additional $10 million CAD in equity financing from existing investors, as the startup looks to keep its foot on the gas pedal.
Canada Drives did not disclose who invested the $10 million, though called them existing investors with “deep insights” into the company and the industry it serves. The startup’s existing investors include San Francisco-based Honor Ventures, Indiana’s KAR Global—which serves the global used vehicle wholesale industry—and Santa Monica-based Anthos Capital.
“We’re seeing growth even as you’re seeing those headwinds start to take place.”
-Cody Green, Canada Drives
Though it was provided by different investors, this fresh capital comes as an extension to the $40 million equity investment Canada Drives received from Goeasy in June. The latest financing closed in September, and comes at the same terms and valuation as the Goeasy investment, but Canada Drives declined to disclose the valuation. This funding brings Canada Drives’ total funding to $150 million.
The $40 million in funding was meant to fuel expansion into new markets across Canada and grow Canada Drives’ inventory, amid what has become a more challenging macroeconomic climate characterized by rising inflation, interest rates, and supply chain issues.
Despite these headwinds and tougher fundraising market conditions, Canada Drives founder and co-CEO Cody Green believes the startup is in “a strong position” to navigate this environment, citing its recent growth and the support it has from its partners.
“We’re seeing growth even as you’re seeing those headwinds start to take place, which I think is just a testament to the quality of the offering that we have, but we don’t have any concerns,” Green told BetaKit in an interview.
At the same time, Canada Drives has felt these headwinds. After closing its Series B round last August, The Globe and Mail reported in June that Canada Drives was initially hoping to raise over $100 million again this year, but fell short of this goal after several large investors retreated from the space.
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As The Globe reported, Canada Drives has reduced its hiring goals for 2022 in light of this recent change in fundraising market conditions: the company now intends to grow its over 700-person team to 850 this year rather than its initial target of 1,000 employees.
Canada Drives was far from the only Canadian tech company to adjust its staffing plans in light of market conditions. BetaKit reported in June that Toronto-based Clutch, a Canada Drives competitor, laid off 76 people (approximately 22 percent of its employees) to slow its growth and extend its runway, joining a growing list of Canadian tech startups to do so.
Asked if Canada Drives had made any layoffs, Green said the firm’s staffing levels “have largely stayed the same.” As to whether Canada to make any other cost-cutting moves in the near future, Green said that while the firm is always watching its business and responding to the market, Canada Drives has no other “imminent adjustments” planned.
With this extension, Green said Canada Drives has “enough runway to have us feel confident to keep executing on our business plan.”
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Canada Drives enables users to buy, sell, and trade-in vehicles through its platform. The startup buys, inspects, reconditions, and certifies all of the used cars on its platform, holding its own inventory. Canada Drives also connects users with financing options, and picks up and delivers cars directly from and to customers once purchased.
The used car sales sector Canada Drives serves has seen increased consumer demand and rising investor interest amid pandemic-fuelled vehicle shortages. According to Green, this environment has made it tougher for the traditional dealers it competes with and consumers to tell when vehicles will actually be available.
Given that Canada Drives buys cars, and the price of purchasing them has increased, Green said it’s “hard to say” what the net effect of this trend has been on Canada Drives’ business.
At the same time, the co-CEO said these conditions have led many prospective buyers to look beyond traditional dealers and towards platforms Canada Drives. According to Green, the transparency of Canada Drives’ platform, which gives users an exact price, claims to have no hidden fees, and notes whether the vehicle is in stock, “seems to really resonate” with the startup’s customers.
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Even amid the economic downturn, Canada Drives claims to have seen continued growth in Q3, with an 83 percent increase in year-over-year sales. The startup also grew its inventory by nearly a third on a quarterly basis.
Canada Drives first launched its platform in 2020, but as Green highlighted, the online vehicle retailer has “a long track record of understanding Canadian auto shoppers’ needs.” Founded in 2010, Canada Drives has been operating for more than a decade, originally facilitating auto financing before pivoting to retail.
“This step into full, end-to-end online car retailing wasn’t a zero-to-one for us—it was really just putting together all the skills that as a team been accumulating over the past decade,” said Green. “And I think that’s really showing itself in our ability to continue growing in a market where there are some headwinds.”
Canada Drives currently serves customers in British Columbia, Ontario, Alberta, and Saskatchewan, which the company expanded to in May, with an available inventory of more than 1,000 vehicles. Green noted that Canada Drives has plans to expand into a new Canadian market in the coming weeks, but declined to share which province specifically.
Feature image courtesy Canada Drives.
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