You might associate buying a car with life’s celebratory milestones - turning 16, getting a job that you need to commute to, expanding your family. Yet for such an important milestone - the car-buying process is one of the worst consumer experiences imaginable.
For most of us today, buying a car requires schlepping to a dealership where you spend hours negotiating and even more hours doing paperwork. If you’re at a used auto dealership you go through that process, and still don’t have peace of mind that the car you’re getting is what it is advertised to be. And if you don’t go the dealership route, you’re probably meeting up with someone from Craigslist in a McDonald’s parking lot. None of these options offer the trust, safety, or efficiency that consumers have come to expect in 2021.
When I met Dan Park and Steve Seibel, the CEO and COO of Clutch, I already believed in a new paradigm for car-buying. Having seen the success of Carvana, I understood that customers were craving a seamless online experience. What I soon realized was that Clutch was building exactly that - the premier vertically-integrated auto retailer in Canada. Unlike the US, Canada has had much less innovation within the auto industry for decades, lacking even a national dealership brand. I saw this backdrop as the opportunity for Clutch to be the much-needed “leapfrog” technology for the Canadian auto-market - with deeply vetted inventory, competitive pricing, financing and insurance options, home deliveries, and even a 100% money-back guarantee. Now that is a 10X better experience.
At Canaan there are several themes that we continue to look for in industry-defining companies: 1) Network effects that drive a winner take most outcome, 2) Managed marketplaces with a data advantage, and 3) Underserved categories that are operationally complex. Clutch fit the bill in all of these themes, which gave us even more confidence in the company’s ability to build a category defining brand.
1. Network Effects: When we invested in Instacart at the seed, we saw first hand how network effects could quickly become a moat that led to a winner-take-most market. As the growing supply and demand on the platform led to better match-rates and better inventory, the benefits quickly compounded to drive retailers, customers, and delivery workers to view Instacart as the premiere grocery delivery service.
The same dynamic exists at Clutch. As Clutch deepens their customer awareness and continues to offer the highest quality inventory, they increasingly become the go-to destination for used auto transactions. With expansion across Canada, that same winner-take-most opportunity arises for Clutch to provide the best possible experience to every Canadian customer who seeks it.
2. Managed Marketplace: Buying a car is a highly considered purchase - one that is the second largest single purchase for consumers, after a home. Given the importance of this purchase, it’s critical that Clutch takes control of every aspect of the transaction. Clutch’s white-glove approach of acquiring, inspecting, and reconditioning every car is highly reminiscent of one of Canaan’s portfolio companies, The RealReal, in the luxury goods sector. In both cases, unique and gently used inventory is authenticated, appraised, and sold to ensure the customer gets the absolute best quality and price. There is a secret weapon that managed marketplaces like these have: a proprietary data set that is aggregated with every transaction. In the case of Clutch, the deep understanding that they have on inventory features, consumer preferences, and pricing is instrumental in providing an end-to-end experience for customers that is unrivaled. And this data advantage only builds with time.
3. Underserved Categories: Canaan has a long history of tackling industries that are often overlooked because they are operational complex and filled with legacy incumbents. In fact - we’ve applied this approach to investing many times over within the automotive space specifically, with our investments in Turo and Aeva. At Canaan, we continue to believe that auto and mobility broadly are so core to people’s daily needs that it is a category that customers are willing to pay for when there is a 10X better experience. COVID-19 has only reinforced the importance of safe mobility for all consumers at accessible price points. While it takes a tremendous amount of work to build new infrastructure, technology, and consumer trust within the auto industry, it becomes a huge competitive advantage once you have done so. And Clutch is well on its way to doing just that.
I’m thrilled to announce that Canaan has led a $20M Series A round in Clutch. We partner with existing investors, Brand Project, Real Ventures, FJ Labs, and GFC. With this round, we are also excited to partner with Upper90 for a $40M debt financing. With Dan and Steve at the helm, I am inspired by the vision and opportunity ahead. Dan brings a wealth of experience after launching and leading UberEats for all of Canada. His expertise in expanding an operationally complex business across Canada (at hyper speed!) is unmatched. Steve had the vision for Clutch and has been instrumental in building the company from Day 1. His deep understanding of the auto market coupled with his analytical expertise have enabled Clutch to grow quickly and efficiently - a quality that I see as a major differentiator for this business.
Dan and Steve have built their team around a motto of “Being Clutch” a cultural ethos built on Trust. Being Clutch is about building a brand that customers can trust, and scaling a team that employees can count on and belong to. Dan and Steve bring not only a vision to build a premiere consumer brand, but they also intend to deliver an unrivaled customer experience and establish a lasting culture to achieve those goals. I couldn’t be more proud to back a team like Clutch.
To the entire Clutch team - welcome to the Canaan family!
For more on our investment, check out Dan's blog post and this piece in the Globe and Mail.