The Indonesian used car market is on a growth course driven by a number of trends: the growing digitization of used car sales; a greater variety of financial options; and the COVID-19 pandemic, which fueled the idea of private car ownership.
Brooman Indonesia-based auto finance startup that wants to help used car dealers work more efficiently by applying the asset-backed lending model to their businesses, offering in-app transactions between dealers and providing new financing to do so, said Tuesday it has closed a $10 million pre-Series A financing round led by Open space companies.
Other investors, including MUFG’s innovation partner BRI Ventures and its previous backers such as AC Venture and Quona Capital also participated in the latest round. (Broom declined to comment on whether he or his investors have been affected by the Silicon Valley Bank crisis.)
The startup was founded when Pandu Adi Laras, CEO and co-founder of Broom, wanted to sell his car a few years ago, which he did because he needed cash to renovate his house. However, the used car dealers Laras visited told him that they could not afford to buy Laras’ car back due to limited available money and working capital, and were only offering trade-ins instead.
“The traditional approach is more like opening mom-and-pop stores, where sellers have to wait for their inventory to sell. [to end customers]and then they can use the money to get new inventory to sell,” Laras said.
The problem was quite common among used car dealers in Indonesia, according to Laras, and that’s how Broom’s idea came to him.
Co-founder and Chief Financial Officer (CFO) Andreas Sutanto and Laras founded Broom in 2021. The following year, he launched his flagship service, Buyback, to help used car dealers in Indonesia, many of whom do not have access to capital. .
“With the buyback, [car dealers] you can optimize your inventory and speed up turnover, thus increasing your revenue; our app allows them to easily manage inflow and outflow and trade with other dealers in our ecosystem,” said Laras.
Buyback provides dealers with “short-term working capital through a temporary car sales service with a buyback option” and dealer-to-dealer trade, making inventory management more efficient. The startup explained that Buyback “is not a loan per se, but rather a temporary sale, which includes a change of ownership. Merchants can then buy back their item at a slightly higher price.”
(from left to right) Andreas Sutanto, Co-Founder and CFO; Pandu Adi Laras, Co-Founder and CEO; Summary by Claussen, COO. Image Credits: Broom
The latest financing, bringing the total raised to $13 million in capital, will allow Broom to diversify its product offering and accelerate inventory turns for Broom and its distributors. The company recently launched its first offline showroom where its dealer partners can showcase their inventory to more end customers. In addition to the equity financing, Broom secured a $12 million loan from DBS Indonesia and BRI last year. The startup aims to double its line of credit from outside lenders to handle more transactions.
Broom says that more than 5,000 used car dealers, his main target customers, now use his platform in Indonesia, contributing about 30.6% of new car sales in Southeast Asia. On average, using its Buyback platform has allowed dealers to triple their inventory size, sales and profitability, according to Broom. The company focuses on Indonesia, where the used car market is estimated at $65 million and is expected to reach $70.3 billion by 2027. Broom has the opportunity to provide his solution to distributors and then to direct customers.
Some automotive markets, such as Car, Carsome and OLX Indonesia, cover trading and financing of direct clients. Broom has tried to differentiate itself with the goal of empowering existing distributors, which number more than 50,000 in Indonesia.
Broom’s technology plans include building an intelligence model to assess car quality.
The team employs 120 people.
“The Indonesian used car market is huge but fragmented and disorganized,” said Nobutake Suzuki, president and CEO of MUFG Innovation Partners. “Broom is taking a novel approach to developing asset-backed loan solutions that are more flexible, lower cost and accessible, helping to empower small dealerships that dominate used car transactions in Indonesia.”
