Prosus classifieds unit OLX Group will invest up to $400 million in Berlin-headquartered used car trading platform Frontier Car Group (FCG) and combine their operations across emerging markets.
In 2018 OLX’s venture arm invested $89 million in FCG, a start-up co-founded in 2016 by 26-year-old American CEO Sujay Tyle with emerging market specialist Peter Lindholm and chief technology officer Andre Kussmann.
That helped FCG expand from four markets to 10: Argentina, Chile, Colombia, India, Indonesia, Mexico, Nigeria, Pakistan, Poland and the United States.
“They have blown all my expectations out of the water,” OLX Group CEO Martin Scheepbouwer told Reuters. “So I said to Sujay, what more can we do?”
OLX will inject capital in exchange for new shares and a tender offer to buy out existing shareholders. The partners will also fold in their joint ventures in India and Poland.
It’s not clear what stake OLX will hold after its investment but it expects to be the largest shareholder.
FCG’s approach is similar to that of another Berlin start-up, AUTO1, which is backed by Japan’s Softbank Group .
FCG allows sellers to request a quick online valuation before bringing their car in to an inspection centre for an estimate that serves as the basis for an on-the-spot sale to a dealer or private buyer.
“That provides a superior experience for many people, especially in emerging markets where there’s a lack of transparency, a lack of trust and a lack of infrastructure,” Scheepbouwer said in an interview.
FCG employs 1,700 people and runs 500 inspection centres. The company has turned over $700 million in the past 12 months, tripling its revenue.
Tyle said FCG is “very much about how we can be the most trustworthy,” something that is especially important in countries where doing cash deals can be a dangerous undertaking.
Amsterdam-listed Prosus was spun out of South African Internet giant Naspers and holds a stake in Chinese tech giant Tencent.