The Indonesian used car market is on the way to growth fueled by a number of trends: the increasing digitization in the sale of used cars; a greater variety of financing options; and the COVID-19 pandemic, which pushed the idea of private car ownership.
Brooman Indonesia-based auto finance startup that aims to help used car dealers operate more efficiently by applying the asset-backed loan model to their businesses — offering in-app trading between dealers and providing new financing for it — said Tuesday that it closed a $10 million pre-Series A funding round led by Openspace Enterprises.
Other investors, including MUFG Innovation Partner, BRI Ventures and its previous backers such as AC Venture and Quona Capital also participated in the final round. (Broom declined to comment on whether he or his investors have been affected by the unraveling Silicon Valley Bank crisis.)
The startup was founded when Pandu Adi Laras, chief executive officer (CEO) and co-founder of Broom, wanted to sell his car a few years ago, which he did because he needed money to renovate his house. However, the used car dealerships Laras visited told him that they could not afford to buy back Laras’ car due to limited cash in hand and working capital, and instead only offered a trade-in.
“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, according to Laras, was quite common at used car dealers in Indonesia, which is how he came up with the idea of Broom.
Co-founder and chief financial officer (CFO) Andreas Sutanto and Laras started Broom in 2021. The following year, it launched its flagship service, Buyback, to help used car dealers in Indonesia, many of whom lack access to capital.
“With buyback [car dealers] be able to optimize their inventory and accelerate sales, increasing their sales; With our app, they can easily manage the inbound and outbound flow 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 trading, making inventory management more efficient. The startup explained that Buyback is “not a loan per se, but more of a temporary sale, including a change of ownership. The dealers can then buy back their item at a slightly higher price.”
The latest financing, which brings the total capital raised to $13 million in equity, will enable Broom to diversify its product offerings and accelerate inventory turnover for Broom and its dealers. 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 wants to double its credit facility from outside lenders to handle more transactions.
Broom says more than 5,000 used car dealers, the main target audience, are now using his platform in Indonesia, contributing about 30.6% of new car sales in Southeast Asia. On average, the use of the Buyback platform has enabled dealers to increase their inventory size, sales and profitability, according to Broom. The company focuses on Indonesia, where the used car market is valued at $65 million expects to reach $70.3 billion by 2027. Broom has the opportunity to offer its solution to dealers and later direct customers.
Some automotive marketplaces, such as Carro, Carsome and OLX Indonesia cover direct customer trading and financing. Broom has tried to differentiate itself by strengthening existing dealers, which number more than 50,000 in Indonesia.
Broom’s technology plans include building an intelligence model for assessing the quality of cars.
The company employs 120 people.
“The used car market in Indonesia is huge, but fragmented and disorganized,” said Nobutake Suzuki, president and chief executive officer of MUFG Innovation Partners. “Broom is taking a new approach to developing asset-backed lending solutions that are more flexible, less expensive and more accessible, empowering the small dealers that dominate used car transactions in Indonesia.”