Online car dealer Vroom raises $95M to buy Texas Direct Auto

Vroom will also be opening a new 500,000 square foot facility near Indianapolis early next year

We buy everything online these days, it seems, from clothes to glasses to our Christmas gifts. Nothing seems to be off limits. So why not our cars too? That's the idea behind Vroom, an online pre-owned car retailer.

Vroom announced two big pieces of news on Wednesday: a big new acquisition, and a brand new funding round to fuel that purchase (no fund intended). First, the acquisition: the company has bought Texas Direct Auto, one of its competitiors in the online car retailer space, and also the number one retailer on eBay Motors.

Founded in 2002, the Houston-based Texas Direct Auto leverages proprietary RFID tracking and prioritization software that provides the framework for selling cars to consumers, dealers and dealer networks online. The company sells thousands of vehicles per month.

For Vroom, getting its hands on Texas Direct Auto will give Vroom a bigger inventory, and give it the chance to be the leader in the online car-buying space.

“We have always admired Texas Direct Auto’s capabilities and we’re excited to partner with them, especially considering their groundbreaking, RFID-led automated reconditioning process,” Allon Bloch, CEO of Vroom, said in a statement.

“Their continued innovation has enabled the most technologically advanced used-car operation to grow to an enormous scale. Now, with Vroom, this combined scale gives customers an expanded inventory of low mileage, professionally reconditioned cars, at great prices.”

For Texas Direct, becoming a part of Vroom gives it a chance to grow faster and larger than it would have on its own.

“Joining forces with Vroom is a natural way for us to continue to grow Texas Direct Auto – both brands and companies will be run as separate entities and will leverage each other’s strengths,” Rick Williams, co-founder of Texas Direct Auto, said. “We’re confident that this move will help us continue to be at the forefront of transforming the automotive industry.”

Going forward the two brands will co-exist and continue to operate online separately. Together, they will have 500 employees, with facilities in Dallas, Houston and Indianapolis.

To pay for this purchase, Vroom has received a new round of funding, raising $95 million in a Series C round. The investors in this latest round were not listed. 

The new comes less than six months after Vroom raised a $54 million Series B round of funding in July. This latest round brings its total funding to $168 million from investors that have included Catterton, General Catalyst Partners, T. Rowe Price Associate, Jeffery Boyd, Bob Mylod, John Elway, Steve Berrard, and the founders of Wix.com.

It is not clear much of that $95 million will be used for the acquisition, and a spokesperson for Vroom would only say that it would be a "large portion" of the funding, and that the transaction was a "mix of cash and stock."

Founded in 2013, Vroom allows customers to find refurbished, pre-owned cars online with the exact, no-haggle price, which also included all local taxes and fees. They order it for free delivery to their front door, anywhere in the country.

On the other side, selling a car on Vroom can be done from phone, just by scanning the car’s VIN, and submitting a few photos and details online. The seller receives an exact appraisal within minutes and will have the car picked the car up at their front door.

Vroom provides a 7-day money back guarantee, no questions asked return policy, and a 90-day bumper-to-bumper warranty, coupled with free shipping nationwide.

In addition to the purchase of Texas Direct Auto, Vroom also revealed that it will be opening a new 500,000 square foot facility near Indianapolis in early 2016.

(Image source: blenderartists.org)