A south African car subscription startup, Planet42 who buys secondhand cars from dealerships and rents them to consumers on a monthly basis, has raised $30 million in stock and debt.
The investment, dubbed a bridge round by co-founder and CEO Eerik Oja, is a precursor to a larger Series A deal later next year. It has a $6 million equity component and a $24 million debt component.
What Does Planet42 Does ?
Despite its South African location, Planet42 has Estonian roots. Estonians Oja and CFO Marten Orgna started the company in 2017. In an interview, Eerik Oja stated that the automotive subscription model was intended to cater to private persons who are overlooked by South African banks when seeking vehicle financing.
The company claims to use proprietary scoring algorithms superior to traditional credit scores in assessing risk in underbanked customer segments.
The company has over 700 dealerships. And with its algorithms, customers can find out what budget suits them and choose new or pre-owned cars from Planet42’s dealerships network.
After that, Planet42 buys the car and rents it out to the customer on a subscription basis. Planet42 claims that of all the customers served so far, 89% would have had no other means of gaining access to a personal vehicle.
“We’ve gotten so good with our scoring that we can now enable the customers who couldn’t get bank financing to get a brand new car. We have figured out a way how to do it sustainably that we can put entry-level brand new cars in the hands of the same target market and customers who are unfairly ignored by banks,” the chief executive said.
Planet42 has offered over 7,000 cars to clients in South Africa, after raising a total of $50 million in equity and debt.
Planes42 funding Story
In June 2020, the firm raised $2.4 million in a seed round, followed by $10 million in loans from Lendable, an emerging markets-focused venture debt fund, in December. The fund increased its stake in the recently raised debt round to $20 million, with other investors filling in the gaps.
Naspers Foundry, the company’s early-stage investment entity, led the equity round with $3.4 million. Change Ventures, the main investor in Planet42’s seed round, as well as Startup Wise Guys, Martin and Markus Villig of Bolt, and Ragnar Sass of Pipedrive, are among the existing investors.
Planet42 plans fo their Newly Raised Funds
The startup is relying on expansion outside of Africa as one of its competitive advantages.
“We’re just not doing it right now, but we’re not ruling it out for the future,” Oja answered on whether Planet42 would expand into other parts of Africa. “However, the main reason is market size.
South Africa has like 25% of all the passenger cars on the African continent; that means that whatever market we go next in Africa will necessarily be smaller than South Africa. In South Africa, 1.1 million second-hand cars get sold and bought every year.
In Mexico, that number is 7 million. So the Mexican market is six times larger than South Africa. So we want to go for the really big markets.”
The company announced that it had purchased its first vehicles for clients in Mexico. Similar issues arising from transportation inequity abound in the country, where 63% of the population relies only on cash.
However, Mexico is one of the few nations where Planet42 aims to expand in the near future, according to Oja, who also stated that the firm has opened an office and hired two people.
By 2025, he said, the company hopes to have purchased over 1 million cars for its customers in both current and future markets.
Planet42 has also made progress toward becoming a carbon-neutral company, thanks to a wind farm project in South Africa’s Northern Cape. The car subscription company financed the farm for months with money from carbon offset credits.