A Newly-Minted U.K. Unicorn Reflects On The Road To $1 Billion Status

Tom Leathes, chief executive, of newly annointed U.K. unicorn, Motorway

Motorway

Used cars have gone prime time in post-Covid Britain. Turn on the TV and you’ll see plenty of glossy creative promoting new cars from leading manufacturers but, equally, you won’t have to wait long before you come across ads inviting you to sell your own vehicle or buy pre-owned through an online marketplace. With second-hand sales booming, companies such as Cazoo, Carwow, Cinch and We Buy Any Car are flooding the airwaves with calls to action.

The growing presence of online car used marketplaces was underlined at the end of last year when Motorway – a VC backed marketplace – attained the coveted status of $1 billion unicorn, having secured a Series C investment of $190 million in a deal led by Index Ventures, ICONIQ Growth, with Latitude, Unbound and BMW i Ventures also on board.

“It’s dangerous to read too much into a valuation/funding milestone,” says Motorway Founder and Chief Executive, Tom Leathes. “But it was certainly a milestone for us. It was a moment where we could stop to consider how far we’ve come. But we are at the beginning of a journey.”

When I spoke to Leathes earlier this week, I was keen to discover what the journey from startup with three employees to unicorn with 350 people on the payroll has entailed and how the company has met the challenges associated with scaling up rapidly.

Connecting Dealers And Sellers

Motorway began trading back in 2017 with the aim of connecting dealers and sellers. The idea was simple. Sellers would post details of their cars online. Dealers would bid against each other to buy them. “Dealers get the cars they need, sellers get the best prices,” says Lathes. It was a tech enabled, used car marketplace.

Self funded for the first couple of years, the company raised $11 million in Series A Funding in 2019. Then the pandemic struck and the market began to change rapidly.

“The pandemic was an accelerant for us,” says Leathes. “We began to grow very quickly.”

The Used Car Boom

There were a number of factors at work. As experienced in other sectors, the lockdowns and restrictions imposed in the U.K. forced (or prompted) behaviors to change. Dealers became more willing to buy through an online platform and consumers found it a convenient way to sell. In addition, the used car market itself was booming. Thanks to a shortage of components, new car sales dropped and prices rose, encouraging an upturn in pre-owned sales. You could also argue that economic uncertainty played a part in boosting the second-hand market, as consumers thought twice before buying new.

Whatever the reasons, Motorway saw business booming. In 2021, the platform rang up transactions of $1 billion . Today, 5,000 dealers use the system.

Growth Challenges

So what were the challenges of rapid growth? Leathes cites culture. In the early days, the company had built a business based on service to both dealers and the car sellers. That was essential as both had to be persuaded to do things differently. A key element was human support, with operatives on hand to augment the automation of the platform. That meant a lot of direct contact between the platform, dealers and sellers.

Equally important, all staff were encouraged to respond to feedback from customers by honing the product and constantly improving the service. “The quality of service came from the team,” says Leathes.

The question was – and Leathes sees this as the biggest challenge – how could you replicate the early culture as the team grew? Finding the answer required thought. “We spent a lot of time defining our values and developing a set of guidelines,” says Leathes. “This in turn created a strong culture.”

More Expertise

Leathes puts a lot of emphasis on hiring not only the right people culturally speaking, but also bringing in skills to enhance the service and drive growth. Many of the people who were with Motorway in the early days are still there, but rising revenues underpinned by venture funding have created opportunities. “We have brought in more specialists – people who are the best at what they do. And we have also strengthened the executive team,” Leathes says.

As Leathes sees it, there is much more expertise in the company now. “The people who have joined us are far more knowledgeable about things than me,” he says.

The Funding Journey

Leathes and his co-founders – Alex Buttle and Harry Jones – were all entrepreneurs and made a decision to self-fund for the first few years to prove the concept.”When it came time to raise finance we proved we had the right unit economics,” he says.

When Covid pushed the business forward, Motorway brought in Index Ventures – a VC with experience of scaling marketplaces – and further growth led to the series 3 round. Leathes says proven product, strong usage and rapid growth meant investors were buying into an attractive business. Thus, the unicorn status is underpinned by strong fundamentals.

But the funding is – according to Leathes – enhancing Motorway’s ability to compete. “We have increased our engineering team to 130,” he says. “There is a lot of competition out there and the funding has allowed us to innovate. Our squad can solve really hard problems.” The funding is also helping to build the brand through promotion.

A Need For Focus

Where to next? Leathes sees scope for international expansion but not yet. With a 2 percent share of a market said by the Society of Motor Manufacturers and Traders to be worth around £79 billion, there is plenty of scope for growth in the U.K.. “We don’t want to distract ourselves,” he says.

And focus is important. “We believe strongly in doing one thing well. That one thing is being the best market for dealers to buy and sellers to sell. We’re going to double down on that.”

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