With the recent Series B funding in its pocket, online automobile market place, Droom, has switched to high gear and is poised for growth through acquisitions as well as extending its footprint to the global markets.
While Droom declined to share the amount raised in the latest funding round, it is understood to have raised around $30 million led by Singapore’s BEENext and Japan-based Digital Garage. Of the total funds raised in the round, the company has earmarked almost 25 per cent for its international expansion. It is also eyeing a couple of acquisitions to help strengthen its operations.
Founded in 2014 in Sillicon Valley, Droom is incorporated in Singapore with offices in Gurgaon and Sillicon Valley. It distinguishes itself from the other auto classifieds websites by claiming to be a trade enabler and rather than adopting a lead-based model.
In an interview with DEALSTREETASIA, Sandeep Aggarwal, Founder and CEO of Droom, shares the company’s plans for international expansion and to acquire companies to strengthen its operations. Aggarwal is also the co-founder of one of the leading Indian e-commerce portals ShopClues.
Can you please elaborate on your plans to foray into the overseas market?
India is the third largest automobile market in the world, so we wanted to make sure that we got India right before we expanded internationally. Later this year we would like to expand to the southeast Asian countries like Singapore, Indonesia, Malaysia, Philippines, Vietnam and Thailand.
We will go in a phased manner, one country at a time starting with Indonesia. Then we will go one by one into other countries. We think what we are building has a global appeal. Last six months, we have been spending time doing market research, sizing, competition, market mapping of these six countries and the last three months we have been making a lot of changes to our technology, to make it more geography agnostic.
Will you deploy the current model that you have in India to the other countries as well?
Yes, like Uber or Airbnb or Tinder, these companies are present internationally but physically have a very lean presence. We are going to have a very similar model. We will have small teams in each country, probably one or two people in catalogue, one in business development, one in marketing and one in support. A four-five people team in each country is how we will expand.
Would you be interested in any kind of inorganic expansion?
This year we will be acquisitive, we will be acquiring companies. However, we will not be acquiring companies for geographic expansion. We will be acquiring companies for technology or for access to different categories or talent. For geography, we would like to expand organically.
Will these be Indian companies? Are you already in talks?
Yes, we are looking at Indian companies. We are constantly evaluating, we think this year we will be acquiring a couple of companies.
Are there any kind of gaps that you are looking to bridge?
It’s not gaps. There are three key areas for example if someone has done any work for pricing algorithm, someone who has aggregated the automobile services such as auto loans, insurance, warranty, or someone for talent acquisition. We will not acquire a company for revenue or geographical presence.
What sized acquisitions are you looking at?
We have a very strong culture, a very Silicon Valley-styled startup. So, we will clearly not acquire a very large sized company, where we can have an issue with cultural assimilation. We are thinking or small to medium sized companies.
Are you already in talks with companies for acquisitions?
Our team has been looking at various companies for acquisition in the last few months.
Have you earmarked any kind of investment for overseas expansion?
For overseas expansion, we don’t need too much of capital but we are earmarking roughly 25 per cent of the total funds raised in this latest Series B round for international expansion.
Would you look at separate portals for each country? Or regional languages?
We would operate in countries where internet is primarily in English. Each country will have it’s own app and website. So in India if it’s droom.in then hopefully in Singapore it will be droom.sg and so on, whatever is available.
By when will you start your overseas expansion, and by when do you think you would have these countries covered?
We have planned that by Q4 2016 to Q2 2017, we should be nicely available in entire southeast Asia.
What kind of revenue split are you looking at once you start international operations?
In calendar year 2017, we expect 15 per cent of our total revenue to come from international operations. By 2019, international revenues should account for 35 per cent of our revenue and by 2020, more than 50 per cent of our revenues should come from there.
Your final goal is to establish a global company? Are you looking at more countries for expansion beyond Southeast Asia?
Yes, if everything goes well, then in by second half of 2017 we will be in western Europe and in the first half of 2018 we will be in North America.
Europe and North America being developed markets, would have more competition?
The products we are building have global appeal, trust, transparency, pricing, convenience are the need for buyers and sellers. Some places trust has a high deficit and in some places convenience has a high deficit, but the tools we have built are truly global.
You have spoken about going beyond being an automobile marketplace, what are the other models you are looking at?
Beyond automobiles would be automobile services, and rental of services like renting a yacht, aeroplane, helicopter and luxury cars.
Would you want to get into cab rentals or self drive services?
There are a lot of companies for those like Uber and Ola, and we don’t want to compete with them. They have done a great job, but some of the vehicles that are less accessible we are a rental market place for them.
For your overseas expansion are you going to offer your whole portfolio of offerings?
Our core market will remain two-wheeler and four-wheelers, so every new region we expand into we will expand with our core offering. In the countries where two-wheelers are a bigger market than four-wheelers we will start with two-wheelers.
How do you view competition in the international markets?
In China and North America there is significant competition, but in other geographies its not as much.
You run on healthy margins in India right now, how will your international expansion impact those?
Margins will actually be higher. While we have a high gross margin, we charge very little, we charge 1.5 per cent for cars and 2.5 per cent for two-wheelers. In China and US, automobile market places are charging between 5-8 per cent. So when we go to those markets we can participate on much higher margins.
Does that give you pricing advantage as well?
Yes, that can probably help us to gain traction.